‘T-bill and chill’: why Jack Bogle’s ‘lazy’ investing strategy is making a comeback

Boring investing is making a comeback.

With the meme stock rally in the rearview mirror and yields rising, individual investors are rediscovering the philosophy made famous by Vanguard founder Jack Bogle. The father of market indexes preached cheap, passive investments that grow in size over the years. Fans call themselves “Bogleheads” and the strategy “lazy” investing.

They are well positioned for the current market. According to DataTrek, timing has proven difficult this year, as eight days are responsible for all of the S&P 500’s gains. Higher interest rates have put severe pressure on technology and growth stocks that have dominated retail traders’ portfolios during the pandemic. GameStopthe original meme trade, is down about 85% from its all-time high.

Dan Griffin, a self-described Boglehead from Florida, said he was watching the meme stock rally with amusement. Current market conditions are proof that his “tortoise” investing approach is the right one for building long-term wealth, he said.

“It’s a little bit of revenge,” Griffin told CNBC. “I’m happy to be the boring investor, I’m happy to be the tortoise. Although sometimes the hare wins, more often than not the tortoise comes out ahead.”

Christine Benz, director of personal finance and retirement planning at Morningstar, said investors are currently leaning toward higher returns to capture value — another core tenet of the Bogleheads.

“Bogleheads invest for the very long term. The idea is that you put money in your account and just add to it, without touching it or looking at it for the next 30 years,” she said. “The meme stock phenomenon seemed so focused on being incredibly connected to your portfolio and monitoring your investments — I see the Bogleheads’ philosophy as antithetical to all of that.”

Real estate agency Robin Hoodonce synonymous with day trading, is seeing a similar turn toward higher returns and longer-term thinking.

The company launched retirement accounts this year, offering 3% back on cash as it tries to diversify away from falling trading costs. Robinhood co-founder and CEO Vlad Tenev told CNBC that investors have turned to cash, money market funds and bond ETFs. He noticed more chatter in the Bogleheads Reddit group, compared to the infamous Wall Street Bets.

“One of the really interesting things we’ve seen in recent months is Robinhood being mentioned and discussed on these traditional passive investing forums like Bogleheads on Reddit,” Tenev said. “People are building long-term portfolios on Robinhood, taking advantage of the better economy and the tools to do that.”

Bond ETFs are one way retail investors have tried to capitalize on rising interest rates. The SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) was the third most purchased name last week the Invesco QQQ Trust (QQQ) And SPDR S&P 500 ETF (SPY), according to Vanda Research. It was the largest single-day net inflow into the ETF since the company started tracking it nearly a decade ago.

‘It is clear that income-seeking retail investors are benefiting from the new high interest rate regime, which has been missing from the investment landscape since pre-GFC. [Great Financial Crisis] years,” Marco Iachini, senior vice president of Vanda Research, said in a note to clients. “Some call it ‘T-Bill and chill.'”

In fact, younger investors are exposed to fixed income compared to their older counterparts. In its annual survey, Schwab Asset Management shows that millennial ETF investors have 45% of their portfolio in fixed income – compared to 37% for Generation ETFs, compared to 40% of baby boomers.

While it’s far from a meme stock, the move into fixed income can still be risky.

The iShares 20+ Year Government Bond ETF (TLT), has seen $19.8 billion in assets flood this year, according to BlackRock. If interest rates rise, funds like TLT will suffer because bond yields move inversely to prices. That’s been the case this year, with TLT down about 50% from its record high. On the other hand, if interest rates fall, bond funds should perform better.

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