But one of the ideas behind the 401(k) was, “you can do it!” You own it; you run it. And you’ve got millions of people out there saying, “I can beat the averages.” What do you say to that?

I say, don’t kid yourself, pal. Look, it’s so simple. We’re not like the kids out in Lake Wobegon. As investors, we are all average, and as investors, we all share the stock market’s return. It’s going to turn out to be 8 percent return, we’re all going to share 8 percent return, but only before costs are deducted. We all share the market’s return less the cost of the financial system. All those management fees and brokerage commissions and sales loads and God knows what else is thrown in there — the advertising that you see.

So if investors would just use index funds, and particularly the cheapest ones, they would, by definition, capture the market return, or almost all of it — 98 percent, 99 percent of it. …

The evidence is profound that mutual fund investors make terrible errors in terms of timing. They want to pour money into the stock market when it’s high, and they want to pull it out when the market is low. They make terrible errors on fund selection. They want to buy funds that have done the best, and then when they do the worst they want to switch out of them and get into something else that is then doing the best. All that shuffling around is a tale told by an idiot, full of sound and fury, signifying nothing but losses for the investor.

… Then another place we have really gone awry is we now offer people basically a nice little shotgun by which they can commit suicide: We have given them brokerage accounts, and you can run a brokerage account in your 401(k) plan. So you can then buy individual stocks and go back and forth and do all the insane things that so many investors do all the time.

So we have taken a system that should be simple — own the stock market and hold it forever; if you like bonds a little more as you get older, have more in bonds, and hold it forever — [and] now it’s pick and choose and select and move money back and forth, even to the point of where you can pick individual stocks and pick your company’s stock, which is a big part of the 401(k) problem, and issue; you can do that, too. It’s a system that really needs to be fixed, and badly.

This is from an interview over here Bogle also has a blog over here. (Hat tip Jonathan)