If you haven’t gotten a dose of Jack Bogle wisdom recently, check out this full Business Insider interview transcript and this 16-minute CNN video interview. There is a lot of ground covered between them. Here are my selected notes:

S&P 500 dividend income reliability. Bogle seems to support the idea of relying on S&P 500 stock dividends to supplement Social Security:

The basic idea of retirement income is, to me, to get a check, two checks every month, one from your fixed income and one from equity account. And you want them to grow over time. Social Security is a cost-of-living hedge, and in the equity account dividends grow over time.

The record of the S&P 500 dividends is almost a complete up trend with only two big declines going back into the ’20s. One would be in 1930s — ’33 or ’34 — and the other is when the banks stocks eliminated their dividends, back in 2009. Those are really the only significant declines in the dividends.

Investors make a big mistake by thinking too much of the value of the account and not enough about the monthly income they want to get. We could have a significant decline in the market with dividends unchanged.

Here’s a chart of the S&P 500 dividend history via Multpl.com:

Helping investors improve their behavior. For example, 401(k) plans were not designed to be your primary retirement vehicle, and thus have a lot of flexibility built into them. However, this flexibility means a lot of people take money out of their 401(k) when they switch jobs or for loans that never get paid back. A similar thing when people chase performance:

With actively managed funds, people have big behavior problems. With funds that have done well, they put their money in, and when it has done bad, they want to take it out. The index fund always gives you the market return. It may be bad sometimes — it will be bad sometimes — but there’s just no evidence that active managers can win [long term].

Why you don’t see performance-based incentive fees for fund managers. I didn’t know about the SEC symmetrical rule:

The active managers have their work cut out for them. One thing they could do is put in an incentive fee. Get 10 basis points or five [0.10% or 0.05%], unless they beat the market. We’re paying people to beat the market when they aren’t doing it, and when you think about it, that doesn’t make sense.

They can put their expense ratio at 5 [basis points, 0.05%] and get another 1% if they beat the market by X. But they have to, under the SEC rules, be symmetrical. So if they lost to the market by 1%, they would be out of pocket. Managers, at least in this context, are not stupid. They know perfectly well they are going to lose that bet.

What happens if index funds continue to grow in popularity:

Right now I believe indexing to be about 22% to 25% of the marketplace. It’s not disturbing anything. Could it go to 50% and not disturb anything? I believe it could. All you’re doing is immobilizing X percentage of the shares in the market. The remaining 50% can trade away to their hearts’ content.

Could it handle 90%? I think it could, but we’re so far away from that, I don’t spend a lot of time thinking about it. The reality here, however, is that even if the market would reach a level of inefficiency, which everyone says then the active managers can win because then they can find underpriced stocks. [Laughs] It’s such a ridiculous argument it hardly bears refuting. The fact is, if the market is more inefficient, it would be easier for half of the managers to win and by definition easier for half of the managers to lose. Because every purchase is a sale and every sale is a purchase.

This is not a problem that I worry about very much. Markets stay relatively efficient because there continues to be big rewards for those that can figure out any small inefficiency, even for a short period of time. Those rewards aren’t going aways, so markets will stay efficient, and low costs will continue to matter.

As we stand today in early 2017, the performance of the US stock market since 2009 has been pretty impressive with only a few minor hiccups. I am not calling a market drop, but the best time to prepare is before an emergency or crisis occurs. Humans have a well-documented loss-aversion bias. We react to losing money much more severely than positive returns. Therefore, it is wise to remember that historically, the annual return of the S&P 500 index is negative approximately 1 out of every 3 years.

Here’s a histogram that organizes into “buckets” the historical annual returns of the S&P 500 Index* from 1825-2014. We see that negative returns occurred 29% of the time. Legend: DotCom bubble (grey), Great Depression (yellow), Housing bubble (blue). Source: Margin of Safety.

(* For periods before the S&P 500 existed, the S&P Market Index is used. Before that, I have no idea!)

Here’s a similar chart that shows the annual percentage change of the S&P 500 index from 1927-2016. I counted that 28 out of 89 periods were negative (31.4%). Source: Macrotrends.

We should expect and accept that negative returns will come 1/3rd of the time. The drops are part of the package. Just like having a hurricane, tornado, or earthquake preparedness plan, you should have a market drop plan. Do you have a cash cushion so you don’t feel the need to sell temporarily-depressed shares? Do you have a high-quality bond or cash allocation that you can use to rebalance and buy even more stocks when they reach lower valuations?

Instead of just looking at one year of returns, here’s an annual exercise that helps you look at the bigger picture. You may know the 10-year historical return of the S&P 500, but most of us didn’t just invest a big lump sum of money in 2007, and most of us don’t just invest in the S&P 500.

Investment benchmark. There are many possible choices for an investment benchmark, but I chose the Vanguard Target Retirement 2045 Fund. This all-in-one fund is low-cost, highly-diversified, and available in many employer retirement plans as well open to anyone with an IRA. In the early accumulation phase, this fund is 90% stocks (both domestic and international) and 10% bonds (investment-grade domestic and international). I think it’s a solid default choice where you could easily do worse over the long run.

Investment amount. For the last decade, the maximum allowable contribution to a Traditional or Roth IRA has been roughly $5,000 per person. (It was $4k in 2007, but has been $5k or higher since.) That means a couple could put away at least $10,000 a year in tax-advantaged accounts. If you have a household income of $67,000, then $10,000 is right at the 15% savings rate mark.

A decade of real-world savings. To create a simple-yet-realistic scenario, what would have happened if you put $10,000 a year into the Vanguard Target Retirement 2045 Fund, every year, for the past 10 years. You’d have put in $100,000 over time, but in more manageable increments. With the handy tools at Morningstar and a quick Google spreadsheet, we get this:

In this case, I would say that ending up with a gain of over $50,000 for every $10k annual investment is nothing to sneeze at. If you put in $20k every year, your gains would have been over $100,000. Some of that money was invested right before the crash in 2008, and some has only been in the market for a few years. Not every year will have turned out to be a great year to invest, but taking it all together provides a more calm, balanced picture.

Although I am not always successful, I’ve been trying to pay less attention to the daily, weekly, even monthly movements of the markets. Once every few months, I will update my portfolio spreadsheet and make sure that I am investing new money towards my target asset allocation, but that’s about it. That said, I do enjoy a good year-end review. Here are the trailing 1-year returns for select asset classes as benchmarked by passive mutual funds and ETFs. Return data was taken from Morningstar after market close 12/30/16.

Commentary. If anything, I think 2016 reminded us that although many people are paid essentially to make predictions, most of them aren’t very good at it. Indeed, the more important skill is explaining why things actually turned out the way they did in hindsight. That way, you have a reason to believe their next prediction…

As 2016 ended, I was a bit surprised to see that every asset class listed above had positive returns. Accordingly, most people who owned a diversified portfolio in 2016 had decent returns. The Vanguard Target Retirement 2045 fund (90% diversified stocks and 10% bonds) was up about 8.9% in 2016. My personal portfolio (overall 70% stocks/30% bonds) was up about 7.8% in 2016.

As I get closer to having to live off of my portfolio, I am increasingly focused on the amount of dividends, interest, and rental distributions that my portfolio gives off. (This is in the low 2% range.) I know that total return is more important, but seeing the cash come in makes me more comfortable. I like the analogy to an investment property. If you get a reliable $2,000 in rent coming in every month like clockwork, you care less about the market value of the house itself.