If you’re an investor and you own an index fund, you probably have John Clifton Bogle to thank.
The legendary investor started a passive investing revolution when he launched Vanguard Group nearly 45 year ago.
“Jack,” as he was known to friends, is considered the father of indexing and did more than just about anybody else to drive down the cost of investing for millions of people.
Bogle died Wednesday in Bryn Mawr, Pennsylvania. He was 89.
The impact of an investing titan
When discount investment behemoth Vanguard launched in 1975, there was no such thing as an index fund.
As is so often the case, Bogle’s stroke of genius was deceptively simple. Rather than trying to pick individual stocks, Bogle advocated an “own the whole market” approach and his company reflected that.
Rather than relying on a Wall Street brainiac to pick stocks, an index fund offers market returns without the downside risk of holding your money in just a handful of companies.
With index funds, you buy little slices of hundreds or thousands of companies in one neat package. And because there’s no fund manager to pay, the costs associated with index funds are tiny.
For example, you can buy 500 Index Fund Admiral Shares (VFIAX) for an expense ratio of just 0.04% — that’s 96% lower than the average expense ratio of funds with similar holdings.
In layman’s terms, that means if you invest $100, just four pennies goes to Vanguard for expenses! The rest goes to work building your financial future when you buy the underlying securities the fund invests in.
That’s the beauty of owning index funds!
A man beloved by fellow investors and colleagues
Under Bogle’s leadership, Vanguard has grown to a $5 billion passive investment beast by offering low fees and keeping the customer at the center of the business model.
His legions of fans call themselves Bogleheads. They even started a forum named in his honor where they exchange investing and other money-related tips at Bogleheads.org.
No less an investing luminary than Warren Buffett even wrote the following in a recent shareholder letter:
“If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle…In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Meanwhile, much of the advice money expert Clark Howard gives out about investing wouldn’t be possible without the influence of the Vanguard founder.
“John Bogle did more than any American to save his fellow Americans money,” Clark says. “He was a fierce advocate for the small investor and was the conscience of the investment world. I will miss him.”
Everything you need to know about money can be written on an index card!
Jack Bogle had three simple investing rules he lived by…
1. Own the entire stock market
Stick with broad-market index funds instead of trying to chase the hot stock of the moment!
2. Take the passive approach to investing
Don’t try to time the market, i.e. don’t try to jump in and out of investments at the “right” moment based on external economic conditions.
Instead, just invest steady-as-you-go by putting in the same amount in the market each month or each pay period — regardless of what’s going on in the larger economy.
3. Keep your costs low
The math shows it time and time again: A difference of as little as 1% in what you pay to invest gets magnified over a lifetime.
After 30 years, it can mean tens of thousands of dollars less in your pocket if you don’t minimize your investing costs.