Bogle vs Buffett?

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by Fwellimort

John Bogle was more of a two fund portfolio. 60% US Market. 40% US Bond Market. However, note Bogle was also a S&P500 person until the US Market fund in Vanguard became available.

Buffett is also a two fund portfolio. He wanted 90% S&P500. 10% US Bond Market. as a legacy.

The US Market is about 85% S&P500 in market cap so S&P 500 and US Market has very similar returns. In fact, the 10 year comparison is 11.1% for S&P500 and 11.2% for US Market.

Since US Market contains mid caps and small caps, the US Market is seen as riskier than S&P 500. But overall, the returns in a long horizon should be awfully similar that it shouldn’t matter.

After all, if S&P 500 is about 85% of US Market, if S&P 500 crashes, then the US Market will crash too. So honestly, the correlation behind their returns are so awfully similar that one planning for retirement shouldn’t worry too much.

As for Bogleheads, well, they recommend a 3 or 4 fund portfolio. Bogleheads recommend international because the world is becoming more globalized and an international bond because the bond market is about 70% international. The Boglehead’s reason for international is for diversification. What if US stagnates? What is US hits a Japan or Greece or Spain? 1 country might screw up but the chance that the entire world screws up is rather small.

As for the International bond market, the reasoning behind it makes less sense. You buy bonds for stability, not to have a junk bond effect searching for the highest potential return. So I don’t really understand the reasoning behind the international bond market other than “it’s 70% of the world’s bond market”. I guess it’s also because Bogleheads believe the international bond market might be a bit less riskier than junk bonds while giving higher potential returns than US Bond Market as a whole. It’s a huge leap of faith for the bond market. While International equity market makes much sense, the International bond market to me… much less so. There’s no real benefits of international bond market outside higher potential return that comes with a higher potential downside (less stability). {Hence why many Bogleheads only prefer 3 fund portfolio over 4 fund portfolio}

Which is best and why? Thanks.

No one knows which one is best. It all depends on your risk tolerance.

A very aggressive portfolio is 110 – age = % of stocks. Generally, 60% bond 40% to 75% bond 25% for those who are near or at retirement. (because inflation is a thing and no one knows how long one lives)

Also understand Buffett can take more risks with 90% S&P500 because his family is financially well off. Even if the US Market crashes another ~60% like the financial crisis of 2008, his family is fine financially unlike you. So like I iterated before, it all depends on your risk tolerance (and how much wealth you have to the point a dip of 60+% for decades won’t matter in your lifetime).



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