Jeff Sommer, New York Times business editor, profiles one of the ‘good guys’ of the much-maligned financial sector: 83-year old John Clifton “Jack” Bogle. Mr Bogle made history in 1975 by offering index funds to individual investors through Vanguard, the mutual fund company he founded.
[Jack Bogle] is still preaching the gospel of long-term, low-cost investing. “My ideas are very simple,” he says: “In investing, you get what you don’t pay for. Costs matter. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won’t be foolish enough to think that they can consistently outsmart the market.” ….
Burton Malkiel, the Princeton economist and author of “A Random Walk Down Wall Street,” says: “Index funds are so popular now that it’s easy to forget how courageous and tenacious Jack Bogle was in starting them. They were called Bogle’s Folly because all they did was replicate the returns of the market. But, of course, that’s a great deal. In the academic world many people saw the wisdom of this — but Jack is the guy who actually made it happen.” ….
While Vanguard is his baby, he has never had an ownership stake in it aside from the shares he holds in its mutual funds. Vanguard fund shareholders own the place collectively because he planned it that way.
“Strategy follows structure,” he says, explaining that with no parent company or private owners to siphon profits, Vanguard can keep costs lower than anyone else. That was always his goal. “The only way anyone can really compete with us on costs is to adopt a mutual ownership structure,” he says. “I’ve been waiting all these years for someone to do it, but no one has.”
One reason is surely that there’s no profit in it. Despite Vanguard’s size and success, Mr. Bogle is no billionaire.
Jeff Sommer, “A Mutual Fund Master, Too Worried to Rest“, New York Times, 12 August 2012.
Jack Bogle is known for his best-selling book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor (John Wiley, 1999). Although he was not born into financial wealth, intelligence and drive more than compensated. He attended a private prep school (Blair Academy) on full scholarship, graduating in 1947. He studied economics on scholarship at a private university (Princeton), and helped pay his way with earnings from part-time jobs. In his senior thesis for a Princeton degree, he described plans for a company that would become Vanguard. Twenty-four years later, the dream became reality.
Tags: personal finance
