Bogle or Belfort? The Wolf of Wall Street on investing, indexing and ETFs

Allan Roth said that Jordan Belfort and he agree in ways he had not expected

Allan Roth

wolf of wall street

Jordan Belfort, better known as the Wolf of Wall Street, has a new book out entitled The Wolf of Investing – My Insider’s Playbook for Making a Fortune on Wall Street.

Some of his new conclusions were astonishing to me as they were quite consistent with my beliefs and those I and others have written about over the years in ETF.com.

Given the title of the book about making a fortune, I assumed Belfort would be promoting buying the right stocks and getting rich quickly. Yet, in many ways, Belfort summarises my investing strategy for the past 35 years and my writing for the last 20. The strategy of simple, focused, low-cost index mutual funds and ETFs, with occasional rebalancing, wins the game.

Belfort is now a fan of indexing. Rather than pitching penny stocks, crypto and NFTs, much of this book is about indexing.

Belfort recommended cap weighting indexing. He is not even pitching factor-weighted or inverse-levered ETFs. He pitches market cap-weighted ETFs, namely, S&P 500 index funds.

Belfort noted that market cap weighting causes the index to be more representative of the broader market. He criticises the DOW 30 for ignoring the importance of smaller, faster-growing companies but, curiously, does not address why he recommends the S&P 500 500 over a total stock market ETF with nearly 4,000 companies.

Jordan Belfort gives mutual funds edge over ETFs

Belfort on ETFs versus mutual funds. Belfort first stated that mutual funds have a slight advantage over ETFs. He notes that mutual funds can be bought in fractional shares and have dividends automatically reinvested whereas ETFs cannot.

Though this might have been true years ago, it is generally not today. Ultimately, Belfort said it comes down to expense ratios, minimum required investment, other products offered, and the track record of the fund.

Belfort on asset allocation and rebalancing. Not only is he advocating indexing, he gives reasonable advice on setting and maintaining the asset allocation. It should be based on goals, time horizon, risk tolerance and current financial situation. Belfort recommends occasional rebalancing but not too often. 

Belfort on junk bonds. “Why the hell would you want to have junk bonds in your portfolio?” Belfort writes. He notes the purpose of bonds in the portfolio is to hedge against risk and junk bonds are more similar to stocks. Belfort shows a chart of the worst annual loss based on stock/bond allocation between 1926 and 2012 (not a typo).

Belfort calls the SEC inept. Belfort still says the game is rigged. I agree; the SEC is too cozy with Wall Street though it is less bad than the CFP Board.

Belfort criticises financial gurus. He calls CNBCs Jim Cramer “a one-man wrecking crew to the average investor”. That is actually one of the nicer things he has to say about Cramer. He warns the reader about the hazards of financial infotainment. 

Belfort claims to be a fan of the late John C Bogle. Belfort writes “Jack Bogle has done more for the average investor than everyone else on Wall Street combined”. I could not agree more.

Though I had the privilege of personally knowing Jack Bogle for the last 16 years of his life, I had been singing his praises long before that about how he changed my life and the lives of millions of other individual investors for the better. No one in the investing world was of higher character than John Bogle. 

Conclusion: This book is actually a stockbroker’s dream 

While I agree with the majority of Belfort’s conclusions, the data and, to some degree, the logic are dead wrong. The inaccuracies will make it child’s play for even a broker salesperson to show his client why so much in this book is wrong and discredit the arguments for index investing.

For example, I mentioned the stock-bond allocation table only going through 2012. The book, published on 31 October 2023 ignored the 2022 return where losses were often twice that of the table. Is Belfort just being lazy? Considering when the book was released, why didn’t he include dates through 2022?

Then there is outright incorrect information such as noting a 15% long-term capital gains tax at the highest incomes when it is actually 23.8%, including the investment income tax. There is a chart showing investor returns falling far short of the S&P 500 without giving dates or sources that looks eerily similar to the discredited Dalbar studies.

To me, what discredited this book the most was the following excerpt about the late John Bogle:

"In fact, right before he passed away, he was asked by a journalist if he had any regrets about the way he structured Vanguard insofar as how much more money he would have earned if he had retained ownership for himself. To that, Bogle quickly replied in his own inimitable words. “I’m currently worth $80m, which is far more than I can spend in any ten lifetimes. So who gives a {expletive}*?”

My scepticism stems from the fact that it was not in his character to talk about his net worth nor had I ever heard him use profanity. I requested the source for this quote but Belfort’s media group did not provide it.

I asked Bogle’s longtime assistant, Mike Nolan, as well as Bogle’s son, Andrew, and they did not know of this interview. Nolan said:

"I think it is almost impossible that Bogle would have talked about his net worth in an interview, and the profanity would have been out of character, too. He was always very private with the specifics of his net assets. He wrote broadly about how some industry participants had amassed great fortunes that were much larger than his (such as in [his book] Enough.), but I cannot imagine he would have spoken with that level of specificity."

I made multiple requests to Belfort’s media team that resulted in several responses and a couple of conversations.

They agreed to provide sources I requested on the data and the quote but, even after extending deadlines, none were provided.

I would recommend Belfort read John Bogle’s book, Character Counts.

This article was originally published on ETF.com

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