John C. "Jack" Bogle is the Founder of The Vanguard Group, Inc., and President of the Bogle Financial Markets Research Center. He created Vanguard in 1975. Bogle built the mutual fund company around his idea that low-cost index funds can provide superior returns for the long-term investor.
Bogle served as Chairman and Chief Executive Officer at Vanguard until 1996 and Senior Chairman until 1999. Bogle died in his Pennsylvania home on January 16, 2019.
Bogle's 8 Basic Rules of Investing
Simplicity is at the core of Bogle's investment philosophy. He has shared with readers his 8 basic rules of investing:
- Select low-cost funds
- Consider carefully the added costs of advice
- Do not overrate past fund performance
- Use past performance to determine consistency and risk
- Beware of stars (as in, star mutual fund managers)
- Beware of asset size
- Don’t own too many funds
- Buy your fund portfolio—and hold it
The Bogle Investing Philosophy: The Power and Simplicity of Index Investing
John Bogle's investing philosophy led him to create the first index fund available to the general public, the Vanguard 500 Index in 1976. To this day, the fund is one of the best S&P 500 Index funds and Vanguard investments are among the best and favorite of mutual funds for the do-it-yourself crowd. It now takes investments as Admiral Shares, trading as VFIAX. It is also available as an exchange-traded fund (ETF) trading as VOO and has a low expense ratio of 0.03%.
Bogle taught that the combination of higher relative costs and the tendency for human error erodes returns for actively-managed funds over time. Therefore, it is the common sense approach of low costs and the removal of emotional barriers that makes index funds the best vehicles for investors, especially for those with long-term time horizons (greater than 10 years).
This philosophy can be summarized in the idea: "If you can't beat 'em, join 'em." Going all the way back to his college days in Princeton, Bogle recognized that most fund managers were not able to beat their target benchmarks, usually a broad-based index like the S&P 500.
If fund managers have difficulty beating the index, why not just hold the same stocks of the index, keep management costs low, and win by simply matching the performance of the index?
As they say, the rest is history. Vanguard is one of the biggest mutual fund companies in the world and index investing continues to prove his theories of low-cost, simple investing success.
Lessons of Jack Bogle
Bogle effectively and consistently demonstrated to the investor community that it is foolish to attempt an actively-managed approach where a simple, low-cost passively-managed index fund strategy can provide superior returns.
Vanguard also offers exchange-traded funds (ETFs), which have not been completely embraced by Bogle, who once labelled ETFs as a trend, potentially dangerous to the average investor.
Vanguard and Bogle have a loyal following of do-it-yourself investors that affectionately call themselves "Bogleheads" who love to apply Jack Bogle's practical guidance to investing and personal finance.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.