Did Bogle really fail in Japan

Water Cooler
#1

So someone raked Mr Bogle over the coals for index investing and how that would be a miserabl failure in Japan. Maybe true. Here are the numbers, assuming you started buying the Nikkei 225 index 30, 25, …, 5 years ago, DCA’ing 10,000 yens/dollars/euros in it. Note that for most of this time, your money in yen would earn zero in bank.

Bottom line, you got wiped out when the crash started after 1996 (roughly), but you did OK in the last 10 years. Not a disaster considering S&P and others.

Months # Shares Value on 5/1 Total Return 60 57.21743 801412.5511 33.57% 120 103.8836 1455039.216 21.25% 180 154.6896 2166650.889 20.37% 240 188.651 2642329.117 10.10% 300 215.3918 3016871.684 0.56% 360 249.788 3498639.947 -2.82%

#2

If the alternative was real estate, then Bogle saved them a lot of headaches.

#3

I’m big in Japan.

#4

Not as big as David Hasselhoff is in Germany.

#5

Depends on the asset allocation… most likely, any prudent Japanese investor would’ve had bonds, commodities, and international equities in the mix and it probably wouldn’t have fared so bad…

#6

The argument brought up by the OP completely misrepresent’s Bogle’s position.

Bogle’s main argument is that the alpha generated by actively managed funds is not correlated from one period to the next among managers. In otherwords, it does not persist and is effectively random. Therefore, a person invested in a passively managed fund will outperform someone in an actively managed fund within the same asset class over the long term due to reduced fees, transaction costs and taxes. There is no evidence in the initial argument that actively managed equity funds as a group outperformed passively managed equity funds over that same period.

It could be argued that strategic asset allocation would have allowed investors to outperform a straight equity allocation in Japan. But Bogle is not saying asset allocation should not be actively managed. In fact, I believe he would make the point that strategic allocation rather than creating tactical alpha within an asset class through active management is the way to go. Passive fund groups such as vanguard offer a myriad of funds to create exposure to other asset classes either directly or through derivative exposure, particularly with respect to fixed income.

So again, not sure how Bogle got “raked over the coals” given that time and the direction of the industry seems to be ruling in his favor.

#7

^Wow. That’s two posts in less than a week. Maybe the prodigal son is returning!

#8

Well, Black Swan pretty much settled this.

Does the OP have the data for real returns?

I seem to recall there was some deflation and the yen went through the roof over the last thirty years.

#9

I was responding to an AF poster who said, in another thread, that Bogle had failed in Japan. He was referring to investing in indexes as opposed to individual stocks, not your overall allocation to equities. I don’t think Bogle failed in that regard.

Still, your point is valid, I should show data on how active strategies faired as compared to a passive DCA into the Nikkei 225. I don’t have that data.

#10

Black Swan!!!