FIRST POSTED: 21 May 2007
I met with Jack Bogle during my visit to Vanguard. We have a very interesting discussion.
I presented to Mr Bogle a copy of an article written in The New Paper by Dr Money. He identified his three business heroes to be Jack Bogle, Warren Buffett and Bill Gates. I told Mr Bogle that he was listed as the first hero. He laughed.
Mr Bogle told me that he is now writing a speech to accept an honorary degree that is being conferred by a university. He will be talking about bond funds. Bonds now earn about 5% per annum, but a fund with a high expenses (comprising of sales charge, trading expenses and management fee) can take away as much as half of the yield, giving a net return of around 2% to 3%. He is furious about the poor return given to the end investors.
Mr Bogle told me that there is a requirement by Nasdaq that the terms of the traded product should be fair to the investors. He asked the questions (not his exact words), "Is it fair to give a product that takes away half of the yield? Where is the value to the investor? Does the professionals have a duty to give proper advice? "
I told Mr Bogle that a similar situation exists in Singapore, where structured products are being sold with high expense ratios (which are not disclosed). The end investors get a yield of 1% p.a. or lower after investing for 3 to 5 years.
3 comments:
After your meeting with Mr Bogle, is there any chance of Singaporeans having access to Vanguard's funds? I find local financial products disappointing with respect to the high expense ratios.
Vanguard is among the few funds that are highlighted as best for investors
by international fund managers.
TKL maybe able to help local investors who are interested.
The funds available in Singapore are really tilted against us.
Take the Prudential Monthly income Fund which promises a 5% yield annually, but they slap a 5% sales charge straight away, meaning for the first year your money earns zero income, and when your entry timing is unlucky, your investment would fall below your purchase price, thus incurring a double loss for you. All relationship managers at UOB Banks are actively pushing this Fund to their client charges. UOB clients, just be more careful.
It is indeed an honour to meet with John Bogle. Please try to see if there is a way to make Vanguard Funds available to the Singapore consumers. Sad to say, lots of Singaporeans still cannot differentiate a true "passively managed, low fee" index fund to that of a "actively managed, high fee" fund. Worse still, in the past, some used their CPF money to buy those actively managed funds.
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