Jack Bogle, Vanguard, and a Legacy

Jack who?

That would have been my reaction not too long ago. I had almost zero knowledge about investing. Wall Street and the stock market seemed like they belonged in a world that did not intersect with my own. Sure, I had some money in a retirement account and a taxable account, but I certainly didn’t understand how it was invested. I had made the mistake of getting complacent, letting my husband handle that part of our finances (which turned out fine since he made good decisions overall, but there was no reason for me to take myself out of the loop).

Now that I’ve taken the time to actually learn about the topic of investing, Jack Bogle became a very familiar name. In fact, without him, I doubt that many of us individual investors would even have a chance to DIY our own investing.

As a quick summary, Jack Bogle was a man who started his career in a standard way: he graduated from Princeton and worked for an investment firm. However, in 1976, he decided to take a chance and do something no one had done before: create a retail index fund that tracked the S&P 500. This would be sold to individual investors, cutting out the middleman broker. Thus, the passive, low cost index fund was born.

Back then, in order to invest, you had to go through a broker. It was all about trying to beat the market, and the idea that you could come out ahead by simply tracking the market was a novel idea.

Brokers received commissions (and still do) on the investment products that were sold to you. This wouldn’t be such an issue if they consistently outperformed the market and proved their worth. But it’s been shown time and again that this hasn’t been the case- especially when you take their fees into account. Fees add up over time, and Jack Bogle made it his mission to call out the brokers for their high fees, which were eating away at the returns of their clients.

At the time, people thought he was crazy. His idea of passive indexing became known as “Bogle’s Folly.” Why settle for market returns when you could (theoretically) do so much better picking your own stocks?

But he remained steadfast in his belief that for the average investor, the person that has a day job and wants to live their lives and not focus 24/7 on their investments, index funds were the way to go. Despite being ridiculed, despite investors showing a lot of skepticism with this idea, he pressed on.

The company he founded, Vanguard, now manages $5 trillion. He even has a legion of fans that call themselves Bogleheads. That, my friends, is really impressive.

He was in his 40’s at the time that he created Vanguard. He had a congenital heart problem that could have easily ended his life early. But he took a chance and did something that he truly believed in.

Vanguard differs from other investment companies in that if you own Vanguard mutual funds, you are essentially a shareholder. Other funds are typically owned by outside investors, which adds another layer of cost. This unique arrangement allows them to operate “at cost,” which is what allows for very low fees.

Again, this guy really wanted to save people a lot of money. He himself could have been a multi-billionaire if he had structured the company differently. According to this article, he was worth about $80 million at his death; no small amount by any measure, but he was known to be both frugal and philanthropic with his money.

Even if you don’t agree with his style of investing, it’s hard to ignore the impact that he has had. Without his presence, many of us would be missing out on the returns of the stock market, relying on questionable advice from the so-called “experts” in finance.

So thank you Mr. Bogle. I admire the vision that you had for everyday people. I admire your relentless pursuit for transparency, low costs, and ethical standards. I admire the fact that you completely disrupted the world of investing so that the average investor can invest intelligently and grow their savings to fund a financially secure life. Thank you, and rest in peace.