This week, the founder of Vanguard and investment pioneer Jack Bogle passed away at the age of 89. If you don’t know the name, you should – anyone who’s put money into index funds has benefitted from his groundbreaking ideas.
Bogle launched the first index fund for ordinary investors. In doing so, he pulled the rug from beneath the accepted idea that the stock market was the sole preserve of professional stock pickers. He believed stock pickers make average returns, that professionals have no real claim to superiority and that the stock market is something anyone can benefit from.
Born John Clifton Bogle in The Great Depression-era New Jersey, he became one of the greatest men in the history of investing. As a young man, Bogle won a scholarship to Blair Academy, and went on to study at Princeton. His thesis caught the attention of Walter Morgan, the founder of Wellington, and by 35 Bogle was executive vice-president. In the 1960s, while at the helm, a merger with Boston mutual fund company Thorndike, Doran, Paine and Lewis turned bad, but he emerged from the ashes with Vanguard.
Bogle’s idea was simple – that instead of trying to beat the index, a fund should mimic its performance, aiming for higher returns in the long run, but with lower costs. The approach is now so commonplace that it’s easy to forget it was once an innovation. While other firms had already started cheap funds tracking stock market indices, they were aimed at pension funds and insurers, not ordinary people.
It wasn’t always plain sailing – Vanguard’s first fund was a failure, but today, the renamed Vanguard 500 is an investment giant. A pioneer in more ways than one, Bogle structured Vanguard to be owned by its investors – a surprising move in an industry used to channelling profits to its key figures. He believed that funds “should be operated in the most efficient, honest, and economical way possible”.
Bogle retired in 1999 – in the same year, Fortune Magazine named him one of the four investment giants of the twentieth century and his book ‘Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor’, now considered a classic, became a bestseller. In 2017 he predicted that passive investing could eventually account for 90 per cent of the equity market. In his words “the math will never let you down”.
There can be perhaps no greater endorsement of Jack Bogle’s work than this, from the great watcher and waiter Warren Buffett.
“If a statue is ever erected to honour the person who has done the most for American investors, the hands down choice should be Jack Bogle… he helped millions of investors realise far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Jack Bogle began an investment revolution that shook up the industry and benefited millions. It’s something our clients still benefit from today.