Who is John Bogle
John Bogle was the founder of the Vanguard group and a big supporter of index investing. Commonly known as “Jack,” Bogle has revolutionized the world of mutual funds by creating index investments, which allow investors to buy mutual funds that follow the market in general.
He died on January 16, 2019 at the age of 89.
John Bogle on the launch of the world’s first index fund
John Bogle attended Princeton University, where he studied mutual funds. Early in his career, he worked for Wellington Management before founding his own mutual fund company, Vanguard Group, in 1975. With Vanguard, Bogle used a new ownership structure in which the shareholders of mutual funds have become co-owners of the funds in which they have invested. . The funds themselves own the investment business, making investors of the funds indirect owners of the business itself. This structure allows the company to integrate the profits into its operational structure, thereby reducing investment costs for fund investors.
In 1976, Bogle introduced the Vanguard 500 fund, which tracks the returns of the S&P 500 and marked the first index fund marketed to retail investors. Bogle’s unique structure for Vanguard also makes it a natural choice for the provision of no-cost mutual funds, which do not charge a commission on investment purchases.
Bogle retired as CEO and President of Vanguard in 1999.
John Bogle and passive investing
John Bogle has contributed significantly to the popularity of index investing, in which a fund maintains a combination of investments that follow a major market index. Bogle’s philosophy that average investors would find it difficult or impossible to beat the market over time has led it to prioritize ways to reduce the expenses associated with investing in mutual funds. For example, Bogle has focused on no-load funds with low turnover and simple investment strategies.
The philosophy behind passive investing is generally based on the idea that the expenses associated with pursuing high market returns nullify most or all of the gains that an investor would otherwise realize with a passive strategy that relies on funds with a lower turnover rates, lower management fees and expense ratios. Index funds fit this model well because they base their holdings on securities listed on a given index. Investors who buy stocks in index funds benefit from the diversity represented by all the securities in an index. This protects against the risk that a given company may reduce the performance of the entire fund. Index funds also manage more or less themselves, as managers only have to make sure that their holdings match those of the index they track. This keeps fees lower for index funds than for funds with more active trading. Finally, since index funds require fewer transactions to maintain their portfolios than funds with more active management systems, index funds tend to produce more tax-efficient returns than other types of funds.