Jack Bogle

The Great Financial Eclipse: How Eclipsing What and Why

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What Made Jack Bogle Special?

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Little light bulb man plugging himself inA simple idea made Jack Bogle special.

Some ideas are complex — quantum theory, for instance.

Some ideas are silly– drinking this kind of sugared burp water will make me irresistible to the opposite sex.

Some ideas are appealing but wrong — sadly we haven’t invented warp drive.

Jack Bogle had a very simple idea and he was right.

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One last Scaramucci speech to analyze

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Baseball player clearly outWhat did Anthony Scaramucci do before briefly entertaining us/appalling us as press secretary?  He was the very successful founder of Skybridge Capital.  By successful, I mean that he made a lot of money from mom and pop investors and provided them with below average returns.  See Skybridge Capital’s own dismal report card.

In the very engaging Freakonomics broadcast of The Stupidest Thing You Can Do With Your Money, the host, Stephen Dubner, interviews Scaramucci about his hatred of the Fiduciary Rule and of index funds.  Scaramucci’s answers are worth thinking about.  It’s a shame he didn’t think about them.

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The Man Who Put the Fun in Mutual Fund

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Dart in the bullseyeOn August 31, the First Index Trust mutual fund began operations.  It was tiny and disrespected.  Now it’s the largest one in the world.

Here’s how that fund changed the investing world, why that’s important to you, and why you should celebrate Jack Bogle Day.

  1. First Index Trust is now the Vanguard 500, once known as “Bogle’s Folly” and described as “unamerican”, is now the largest mutual fund in the world.
  2. Vanguard 500 pioneered indexing, which gets the investor out of the loser’s game of stock guessing.  Are you really going to outmaneuver the professional firm whose inside-the-stock-exchange computer can react in microseconds?
  3. Vanguard 500 typically outperforms actively managed funds, but at lower costs.  “Active” mutual fund managers guess right 49% of the time, charge about 1.2% for that guessing “skill”, and lose about 1% of your money per year in transaction costs.
  4. Vanguard 500 pioneered and improved ultra low costs.  This has forced even forced managed funds to lower their fees.  I.E.  Vanguard started low, then went to .05%, vs. managed funds grudgingly moving from 1.08% to .82%.  Since one of the best indicators of mutual fund performance is low fees, you get exactly what you don’t pay for.
  5. The Vanguard 500 has siblings:  8 of the 10 Largest mutual funds are Vanguard’s.  Bonds, international stocks, etc. are available at low yearly fees.
  6.  Vanguard is owned by its investors and works for them, not for third parties eager to extract your money.
  7. Just about anyone can get in on this (a $3,000 minimum, 1 share via the ETF version, or less via a 401k).

All of this came about because Jack Bogle was creative and determined.  Read Jack Bogle’s biography and admire his business jiu-jitsu that enabled him to produce the revolutionary index fund.  Better yet, take advantage of what he built.

 

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