Many of our readers may never have heard of John Bogle, and yet he was one of the most important figures in the investment industry over the past 50 years. For investment industry insiders he is the father of modern index funds. He died last week aged 89.
Bogle was the founder and CEO of Vanguard Investments, now the largest fund company managing nearly A$6.8 trillion. To put his contribution in context, Warren Buffett once said,
“if ever there is a statue erected to honour the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”
According to Forbes Magazine, Bogle is credited with saving investors around the world over $100 billion in fund fees by advocating investments in low-cost index funds. This is not to mention the lower fees being paid across the entire industry as a result of the fee competition Bogle helped create.
Bogle was one of the first people to identify that trying to beat the market was madness. If you pay a money manager to beat the market you pay – and you pay whether or not the manager succeeds. At the end of the day markets are a zero sum game – for one participant to beat the market, there must be someone losing.
Perhaps his biggest legacy was his commitment to investors. When he established Vanguard he did so as a mutual company, meaning the fund investors are the ultimate owners the company. Had he set it up as a private company he may well have ended up the wealthiest man on earth.
At Capital Partners, our investment portfolios are structured around Bogle’s index fund philosophy. Buy and hold, keep costs low, maintain broad diversification, and minimise trading and therefore taxes will all be familiar to our clients.
We are deeply grateful to a man whose life changed the world for the better.
Some of Jack Bogle’s great quotes:
On becoming wealthy… “Everyone is looking for the Answer, and there really isn’t an answer except save. Save more. Invest for the long term, get cost out of the equation, and get diversified to the nth degree.”
On investing…”I look at indexing as being simple and, sad to say, boring. Be bored by the process but elated by the outcome. In Vegas, it’s the opposite. You’re elated by the process, by the moment, but you’re bored by the outcome because you know exactly what it’ll be. The more you bet, the more you lose. Investing shouldn’t give you a rush.”