Van­guard in­vest­ment boss op­ti­mistic about stocks

Ge­orge Sauter helped make com­pany largest mu­tual fund provider.

Austin American-Statesman - - BUSINESS - By Mark­Jew­ell

The name Ge­orge “Gus” Sauter might not ring a bell for most in­vestors. But it prob­a­bly should, be­cause Sauter likely in­flu­enced how their re­tire­ment funds are in­vested.

As Van­guard’s chief in­vest­ment of­fi­cer, Sauter has been in­stru­men­tal in guid­ing the com­pany to be­come the largest mu­tual fund provider and one of the in­dus­try’s fastest-grow­ing firms, de­spite its size.

He joined Van­guard in 1987, just as in­dex fund in­vest­ing was be­gin­ning to catch on, and just over a decade af­ter Jack Bogle founded the com­pany. Bogle be­came an out­spo­ken ad­vo­cate for in­dex in­vest­ing, the no-frills ap­proach of own­ing all the stocks in a mar­ket in­dex. It’s a way to min­i­mize costs by avoid­ing the higher fees charged by pro­fes­sional stock-pickers who fail Ge­orge Sauter says stocks should pro­vide rea­son­able re­turn over next decade. to beat the mar­ket more of­ten than not.

Sauter ex­panded both the in­dex and ac­tively man­aged mu­tual fund line­ups at the Val­ley Forge, Pa.-based com­pany, and led its move into ex­change-traded funds in 2001.

In June, Sauter, 58, an­nounced plans to step down at year-end.

In an re­cent in­ter­view, Sauter dis­cussed his ca­reer and his out­look for the mar­ket. He’s op­ti­mistic about stocks.

Here are ex­cerpts from the in­ter­view:

We’re al­most at 2013, but what’s your out­look for the stock mar­ket, say over the next 10 years?

The best pre­dic­tor of fu­ture re­turns is what you’re paying for earn­ings. And val­u­a­tions

now are quite rea­son­able. (Eds note: Stocks in the S&P 500 are trad­ing at an av­er­age of about 14 times earn­ings over the past 12 months, be­low the 10year av­er­age of about 15). So stocks are a bit cheap, and you can ex­pect a rea­son­able re­turn over the next decade — maybe 6, 7, 8 or 9 per­cent a year, some­thing in line with the

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