Vanguard investment boss optimistic about stocks

George Sauter helped make company largest mutual fund provider.

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