When John Bogle founded Vanguard and launched the first-ever index fund in 1975, many in the financial services industry thought there was no way he’d succeed. Forty impressive years later, however, his critics have been silenced and his role as the conscience of the investing world is assured. Bogle has proven that you can, in fact, succeed by putting the customer first, by not charging outsized fees, and by aligning the interests of both fund providers and fund investors.
Bogle is a prolific author, and his book Enough is a great starting point for anyone interested in learning more about the man himself, his path to starting Vanguard, and his views on everything from Ben Franklin to modern-day financial innovation. Published in the fall of 2008, it reads now like an eerily prescient indictment of all the bad behavior that led to the financial crisis, and it’s just as relevant today as when it came out.
A plea to stop chasing “things” and money in order to measure what a life’s worth, Bogle hopes for a return to more humble, honest times when it was enough to work hard, treat people fairly, and love your community and family. He decries the “me-first” culture of Wall Street, where businesses exploit their customers by charging them too much for too little and where financial “innovation” often only serves to further enrich those at the top rather than actually improving the status quo. In his words, “On balance, the financial system subtracts value from our society.”
Bogle is particularly concerned about the shift from investing to speculating that’s developed in the markets throughout his long career. This change, combined with the fees charged for many actively managed mutual funds, means that it’s a near certainty that investors are not getting their money’s worth. When you compare the low-cost index fund, which guarantees the market’s return, to the vast majority of active funds that charge more and then lose to the market, his point is tough to argue with.
Granted, his praise for the index fund could be seen as self-serving, and he’s the first to acknowledge that perceived conflict. The truth remains, though, that it does deliver more in returns, on a net basis, over time to investors than most other options. Everyone from Warren Buffett to Peter Lynch is a fan.
Bogle advocates for simplicity, whether he’s describing a meaningful life or talking about the best solution for investors. I think we’d all be wiser and better off if we listened to him.
(Originally published here: http://msbusiness.com/2015/03/louann-lofton-the-father-of-the-index-fund-on-the-good-life/)