RIP Jack Bogle
Last week the world lost one of its great thought-leaders. John "Jack" Clifton Bogle, founder of Vanguard and highly influential crusader for investors’ rights, died in Bryn Mawr, PA, on January 16th at the age of 89.
There have been no shortage of accolades and amazing quotes about the legacy of Jack Bogle from heavy hitters in the finance industry. One of my favorites is by Warren Buffet:
“Jack Bogle has done probably more for the American investor than any man in the country.”– Warren Buffett
I completely agree with Buffett's sentiment! I began reading about Vanguard and Bogle when I first got interested in investing in the 1990s. Back then the Motley Fool website had a very active community of die-hard personal finance enthusiasts that went by the group name "LBYM" (Living Below Your Means). That's where I first encountered the world of "Bogleheads". I think it's safe to say that no other mutual fund leader has their own groupies, but Bogle does! They call themselves “Bogleheads” and are dedicated to his principles of low-cost, long-term investing.
Bogle launched Vanguard as an independent company in 1975, which is when he started to challenge the industry’s prevailing orthodoxy that price was a signal of quality and to embrace low-cost investing. He set up Vanguard as a mutual company. Similar to a consumer cooperative, the firm is owned not by private shareholders who seek to maximize their own profits, but rather by its fund investors. Those fund investors earn higher returns as Vanguard drives costs lower. In 1977, Vanguard also went “no-load,” eliminating the sales commissions and all middlemen on its funds.
It was Bogle’s insistence on integrity that steered Vanguard clear of the scandals that have often roiled the mutual fund industry. At Vanguard, Bogle paid himself well but not extravagantly. He drove a Volvo station wagon, vacationed in Lake Placid, flew economy class and haggled for discounts at hotels.
The way Bogle described investing — truly good investing — was to almost put a moral spin on it, with an undeniable truth and clarity that resonated with me then (and still does). I was immediately taken by his approach to markets and investing and have been investing with his approach ever since.
He was an early and vocal advocate of many of the topics so popular now. Bogle almost singlehandedly made index funds—which hold virtually every security in a given market—an easy and popular option for both institutional and individual investors. He created the first mutual fund tied to an index in 1975. While he was a fierce advocate of low cost investing and index funds, he once said he’d rather invest in a low cost active fund than a high cost passive fund.
Many registered investment advisory firms (RIAs) like mine have built practices based on Bogle's philosophy and the premise of his investing ideas. We use his approach to set ourselves apart from traditional Wall Street brokerage firms – which have historically ignored index products largely due to the fact that Vanguard doesn't pay kickbacks to their platforms.
In a speech in 2005, Nobel Prize-winning economist Paul Samuelson praised Mr. Bogle’s creation of the retail index fund as equal in importance to “the invention of the wheel, wine and cheese, the alphabet and Gutenberg printing.”
His drive to cut fees made him a bit of an iconoclast in the tradition of Henry Ford of Ford Motor, Sam Walton of Walmart and Michael Dell of Dell Inc. — all leaders who built successful companies selling directly to the consumer at affordable prices.
It has been said that no one ever, before or since, has done more for the individual investor than Jack Bogle. He had an enormous impact on the finance industry and on my life and chosen career path. Luminate Financial Planning was founded on his principles and ideas. To quote Jason Zweig of the Wall Street Journal, with Bogle’s passing, "American investors have lost the fiercest advocate they may have ever had."
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