Advice from the index-fund mastermind
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How much to pay
What's the highest expense ratio that one should pay for a domestic equity fund?

Don't-miss insights:

• History of the index fund • Simplicity is key • Switching to indexing • Costs add up • How much to pay • Bogle's portfolio • Money market investing • ETFs vs. index funds • Investing for everyone

I'd say three-quarters of 1 percent maybe.

For an international fund?

I'd say three-quarters of 1 percent.

For a bond fund?

One-half of 1 percent. But I'd shave that a little bit. For example, if you can buy a no-load bond fund or a no-load stock fund, you can afford a little more expense ratio, because you're not paying any commission. You've eliminated cost No. 2.

One of the ironic things about this is if you want to eliminate turnover cost, the third cost I mentioned, it's like rolling off a log -- it's the easiest thing in the world: Buy an index fund.

If you buy a no-load index fund, with an expense ratio of, say 0.15 percent a year, you've taken that typical 2 (percent) to 3 percent cost and reduced it by about 95 percent a year. And it's there for the taking. In the long run it's really quite certain, because the data show us that only about 5 percent of the managers will outperform the market over an investment lifetime.

Bogle's portfolio

Do you own any actively managed funds?

I'm largely indexed, 85 (percent) to 90 percent in my equity funds, but I've hung onto some of my, what I call "legacy funds" that I'd been investing in over the years that I was running Wellington Management Co. That would include Wellington Fund, Windsor Fund, Explorer Fund, Primecap Fund, other funds like that. I've owned them, and they're going to give me more or less a market return because they're very diversified, but that's 20 percent of my funds and I don't intend to change that.

I should say that on the bond side, in my retirement plan account, which is my largest investment -- because I never owned Vanguard, which is sad to relate because I'd be a billionaire, multibillionaire -- but I don't own that, so my retirement plan is my largest investment, and in my personal account I own 100 percent municipal bond funds, which are very indexlike in their nature.