A Few Personal Thoughts in Remembrance of John Bogle

As I mentioned briefly on Wednesday, Vanguard founder uber-guru John Bogle passed away this week at the age of 89.  To commemorate his passing, here is a fitting tribute to the man courtesy of yesterday's edition of the AAII news.  Stay warm on this bitterly cold weekend. 



Sat 1-19-19 John Bogle AAII Investor Update

A Few Personal Thoughts in Remembrance of John Bogle  

Thursday, January 17, 2019

As you have likely heard, Vanguard founder John (“Jack”) Bogle passed away yesterday. He was 89. Bogle not only founded the mutual fund giant Vanguard, but his influence on the world of investing will be felt for generations to come. This week, I’m going to share some of my thoughts and memories of him. If you had the chance to meet him, see him speak or were influenced by him, let us know. We may compile your response with those of other AAII members into a future commentary.  

I was among those fortunate enough to have both met and talked with Bogle. Meeting him almost didn’t happen. I was invited to join Bogle for breakfast in 2010 while we were both at the CFA Institute’s Annual Conference, but I didn’t get to hear the voicemail with the invite until after the fact. A few years later, I got a second chance to meet him, this time at a Morningstar Investor Conference. We spoke for a few minutes and agreed to talk further after he finished the book he was then working on. The following spring, I interviewed him for an article in the AAII Journal.  

While I didn’t know him well (my correspondence with him was infrequent, but Bogle did respond whenever I reached out to him), I had the sense that he was slowing down. For instance, he turned down an invitation to speak at our 2015 AAII Investor Conference because it meant traveling from Pennsylvania—where he lived—to Las Vegas. (He told me that “it’s just no longer on my agenda to take substantial airline trips,” but graciously recorded remarks for us to play at the conference.) Bogle suffered his first heart attack at the age of 31 and underwent a transplant at age 65.

I am one of the many people who has benefited from Bogle’s career. It’s not because I’m a long-time shareholder of the Vanguard 500 Index fund (VFIAX) and other Vanguard funds, but rather because of what he’s done for the entire investment industry. Bogle reduced costs by lowballing fund fees and then cutting them even more. He also proved how important systematic approaches to investing are. Part of the reason passive investing works so well is the limited role human decision-making has. A set list of stocks meeting specific criteria is established and the portfolio manager follows it—ignoring other influences. Low-cost, systematic approaches are hard to beat. The large number of fund managers who have been unable to beat the long-term returns of Vanguard’s index funds is proof of this.

For all of Bogle’s success, it was not always the case. He was fired. His first index fund, First Index Investment Trust (which is now the Vanguard 500 Index fund), was derided as being “un-American.” It was also referred to as “Bogle’s Folly.” In the 1970s, not many in the financial industry believed at the time that Bogle would succeed at his index investing endeavor.

Decades later, The Wall Street Journal describes Vanguard as the second-largest asset management company in the world. Some fans of Bogle refer to him as “Saint Jack.” A fan club even exists, the Bogleheads. Most exchange-traded funds (ETFs) are index funds. BlackRock, State Street and others realize a large amount of revenues from their index funds. Even Fidelity—long known for its active funds as well as active manager Peter Lynch—is in the index game, having fairly recently launched zero-expense-ratio funds.

There was more to Bogle than just Vanguard. He was married for more than 60 years. He was also charitable, helping to lead the rebuilding of the Blair Academy in New Jersey (a boarding school he attended) and helping to build the National Constitution Center in Philadelphia among other things.

One of my favorite quotes from Bogle has little to do with index investing. Rather, it has to do with advisers and is something I often refer back to when I speak to investors about working with a planner or an adviser. The comment came at the end of the interview I mentioned previously and appeared in the July 2014 AAII Journal:  

I’ll close with a little story from an investment adviser I talked to some years ago, out in Milwaukee. He said, “Look, Mr. Bogle, I know you’re right. You could just stand there and do nothing, put 65% in the stock index, 35% in the bond index and never change anything. So I tell my client to do that, and he comes back a year later and says ‘What do I do now?’ and I say, ‘Nothing.’ And he comes back a year later and he says ‘I didn’t do anything last year, not one change. What do I do now?’ The answer remains, ‘Nothing. Do nothing again.’ And he comes back again a year after that, it’s now the third year, and he says, ‘What should I do now?’ I again answer, ‘Do the same thing. Nothing.’ Then the client says, ‘What do I need you for?’” The adviser asked me, “How do I answer that question?” I said, your answer is, “You need me to keep you from doing anything.”