Tags: bonds | ETFs | stocks

John Bogle, founder of The Vanguard Group Inc., believes stocks will outperform bonds over the next decade and turn in an average annual return of 7%. Just don’t invest in stocks through exchange-traded funds, he advises.

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The fact that investors can trade the funds intraday leads to poor decisions such as buying high and selling low, Bogle said at the Bloomberg Portfolio Manager Mash-Up in New York. He also objects to the proliferation of ETFs because it makes it more difficult for investors to choose the right funds.

Of course, part of your job as an advisor is to counsel clients against emotional investment decisions and frequent trading, and to choose the funds that are right for them. But as more individual investors choose ETFs, the cumulative effect of increasing trading activity may impact overall results.

In the meantime, Bogle said he believes bond yields will remain fairly low and stock should benefit from a strengthening U.S. economy over the next 10 years, perhaps with some “bumps along the way.