Back in 1975, the world’s first index mutual fund was started with the guiding principle of “trusteeship”. It put the investor first and ensured that the maximum share of the investment rewards went to the investor.
The fund house, a familiar name now, is Vanguard. As of today, Vanguard is the largest no-load mutual fund house in the world managing over USD 5.3 trillion (as on Sept 2018) for its unit holders. To understand this better here’s a perspective – the size of the economy of India is just USD 2.7 trillion.
Well, the man who was responsible for creating and building Vanguard was its founder, John C. Bogle, who passed away yesterday.
John Bogle started studying mutual funds in 1949 when he began his senior thesis at Princeton University. His thesis laid out how it is impossible for individuals to beat the markets over a long period of time.
Bogle joined the industry in 1951. In 1975, he launched Vanguard.
Bogle was named as one of America’s four financial “giants of the twentieth century” by Fortune magazine.
Warren Buffett, in one of his letters to shareholders, wrote:
“If a statue is ever erected to honour the person who has done the most for American investors, the hands- down choice should be Jack Bogle.”
Bogle was a hard-core believer in indexing or buying index funds. In his findings, a broad market index fund will almost always beat an actively managed fund. This will primarily be a function of the costs that are loaded onto actively managed funds.
He logically outlines his approach in his book Common Sense on Mutual Funds. In Chapter 1 of the same book, he has a section called Simples Principles for Long Term Success. They are:
- Invest you must
- Time is your friend
- Impulse is your enemy
- Basic arithmetic works
- Stick to simplicity
- Stay the course
He goes on to say:
The secret of investing is that there is no secret.
We have just lost a true giant. He is one of the shining examples of a life lived with purpose.
An ode to Bogle’s simple ideas for the common investor
Investing is hard, there is not enough money
There is much uncertainty, says the investor of 21st century.
Which funds to choose, which stocks to buy
Or is it bonds to get in, the confusion runs high.
Attention, o’ investor, here’s the most important advice
Earn more, save more & do not take to any vice.
The beginning is the goals, give a direction to your life
That set, the money will then, work for them to realise.
If you want to see your wealth grow, give it exposure to equity
If preservation is your aim, bonds and cash will be it.
Uncertainty (risk) is everywhere, but you learn to tread
Decide & take it in your stride, but don’t risk it all on a fad
Remember the path to wealth, can take you to the end of your wits
Stay Alert! Don’t burn your hands, in pursuit of hot tips.
Make patience your virtue, and discipline your tame
The monsters of fear and greed, rest assured, will not be your bane
A portfolio is strong, when spread in cash, equity and bond
The balance will soften a blow and, with time, wealth too will compound
If I could have the half the commitment, will and character John Bogle did!
May his soul rest in peace.