I’m declaring today “Jack Bogle Day”, not just because I watched the webcast celebrating Bogle’s 65 years in the financial services industry, but because he deserves it.
Bogle is famous for two innovations:
- He started the first index fund (Vanguard 500), enabling individual investors to make the market return. This puts us way ahead of the average individual investor.
- He created a true mutual fund, where the investors own the fund and are the #1 priority. The fund is trying to make money for you, not from you.
Structure – an actual mutual fund – “put the investor first”, operates at cost
Strategy – focus on funds that are low cost, V500 started 1975. Saw 2% gap between investments and what investor profit was. Took about 20 years to take off.
Predictability – “costs go on forever”, 20% better
Personal rules – almost fully indexed, but some index-like where index funds don’t exist.
His Worst things about the Stock Market:
- There is sales turnover of 25% to 250% /year in the stock market – paying higher short term capital gains rate.
- Mutual Fund redemptions are around 8%/year to 25% – “that makes no sense, nada, nil”
- Average Expense Ration in $2 Billion industry was .6 %, now active managers charge .88%, even though we should get the benefit of the now $16 trillion industry
- Most funds are owned by financial conglomerates vs. privately held corps and officers – trying to serve 2 masters doesn’t work – get best return for shareholders OR best return on capital for owners of company. “no man can serve 2 masters”
His Advice:
- Start to invest now (start early, save often)
- Continue as you have the money – increase savings when income increases, get to 15%
- Increase the amount you invest over time
- Don’t peek – every day or every month lookers made less than yearly reviewers
- Use some muni bonds
Jack Bogle is passionate about helping the individual investor and built the world’s largest mutual fund. His approach is simple, and straightforward and has endured and proven itself.
There are alternatives:
“Each business day, three new mutual funds are born and one existing fund dies, its performance usually poor, its purpose passé.”
