John Clifton Bogle, who died in 2019 at the age of 89, may not have been a household name in Ireland, or even in his native country, the United States. But he was a true legend in the world of investing.
Better known as Jack, Bogle founded the investment company Vanguard in 1975. That same year he also introduced the first index fund for ordinary investors. They called it “Bogle’s folly” at the time, and commentators doubted it would ever take off.
But Bogle stuck to his guns, and index funds eventually changed the face of investing. As for Vanguard, it’s now one of the largest investment companies in the world, with over $5 trillion under management.
Jack Bogle could have been one of the wealthiest people on the planet. But he chose a mutual ownership structure for Vanguard, which instead of enriching shareholders, drove down costs for investors.
Millions of people are considerably better off today than they would have been without him. Bloomberg estimates that, over the last 45 years, Bogle has saved Vanguard investors $175 billion in fees. Add to that the money he saved for customers of other firms that lowered their fees to compete with Vanguard, and the total must run into trillions.
To quote the financial blogger Morgan Housel, Bogle is the biggest undercover philanthropist of all time.
But perhaps Jack Bogle’s biggest legacy is his intellectual honesty. He told investors the truth — that low-cost index funds are the best way for most of us to invest.
In The Little Book of Common Sense Investing, he wrote: “Simply buy the entire stock market. Then get out of the casino and stay out. “This investment philosophy,” he went on, “is not only simple and elegant. The arithmetic on which it is based is irrefutable.”
Bogle is perhaps best known as an advocate of low-cost passive investing. “The iron rule of the financial markets,” he once said, “is reversion to the mean.” Simply by the law of averages, there will always be active fund managers who have outperformed the market in the short term. But, over the long term, only a tiny fraction of them are able to beat it after you factor in the costs of using them.
Yet Bogle also liked to remind people that fees and charges aren’t the only reason why investors fail to achieve their goals. They are often undone, he warned, by their emotions and by acting on impulse. Investors, he said, need to put their emotions to one side, have rational expectations for future returns, and avoid changing their strategy in response to market noise.
Jack Bogle’s honesty and professional integrity didn’t exactly endear him to Wall Street. In one of his later books, Enough, he wrote: “On balance, the financial system subtracts value from society.”
But, towards the end of his life he repeatedly expressed a hope that things will change, and that the financial industry will one day become a profession.
“No matter what career you choose,” he urged readers of Enough, “do your best to hold high its traditional professional values, in which serving the client is always the highest priority.”
Bogle then quoted the English Quaker William Penn, founder of Pennsylvania, the state he loved and lived in: “We pass through this world but once, so do now any good you can do, and show now any kindness you can show, for we shall not pass this way again.”
Jack Bogle may have gone, but his legacy lives on. He truly was the man who changed investing for ever.