In the wake of the meme stock surge and amidst rising interest rates, ordinary investors are turning to the timeless wisdom of Jack Bogle, the father of index investing. The "Bogleheads," Bogle's followers, embraced his philosophy of passive, low-cost investments that increase steadily over time. These investors, often referred to as "lazy," adhere to a tortoise-like strategy, emphasizing the long-term prosperity of slow and steady growth.
DataTrek's report revealing that just eight days accounted for all S&P 500 gains this year highlights the challenges of timing in the current market. Tech and growth stocks, once the darlings of retail traders during the pandemic, are now grappling with the impact of higher interest rates, with the original meme trade, GameStop, witnessing an 85% decline from its peak.
Florida-based Boglehead Dan Griffin finds vindication in the market's recent developments, stating, "It’s a little bit of vindication. I’m happy to be the boring investor, I’m happy to be the tortoise. While the hare does win sometimes, the tortoise more often than not, is going come out ahead.”
Christine Benz, Morningstar's director of personal finance and retirement planning, notes that investors are now seeking higher yields, aligning with another Boglehead principle. "Bogleheads are investing for the very long haul — the idea is that you’re putting money into your account and just adding to it, maybe not touching it or looking at it for another 30 years," she explains.
Surprisingly, even Robinhood, once synonymous with day trading, is shifting its focus towards larger yields and longer-term strategies. The company has introduced retirement accounts and offers 3% cash back to diversify away from falling trading expenses. Vlad Tenev, the CEO of Robinhood, has noticed a shift in investors' focus away from Wall Street Bets and toward long-term portfolios with an emphasis on better economics and tools.
Retail investors are turning to bond ETFs to track rising interest rates, with the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) emerging as the third most-bought name last week. Vanda Research notes that income-seeking retail investors are capitalizing on the new high-rate regime, a trend not seen since the pre-GFC years, humorously dubbed 'T-Bill and chill.'
Interestingly, younger investors are showing a greater appetite for fixed-income exposure. Schwab Asset Management's annual research indicates that millennial ETF investors hold 45% fixed income in their portfolios, compared to 37% for Generation X. Despite their allure, fixed income investments come with their own set of risks, as BlackRock's report of a $19.8 billion increase in assets for the iShares 20+ Year Treasury Bond ETF (TLT), which has seen a 50% decline from its record high this year, demonstrates.
In a post-meme stock era, the resurgence of Bogleheads and the renewed interest in passive, long-term investing reflect a growing sentiment that, in investing, the tortoise often outpaces the hare.
