Passive is the New Aggressive (Part 8)

Key Points

  • Jack Bogle, the father of the index fund, passed away on January 16, 2019, and over his career Bogle pioneered the philosophy of passive investing for the common investor.
  • Bogle founded and built The Vanguard Group into the world’s largest mutual fund company, with over five trillion in assets under management (AUM).

Farewell, Jack

On January 16, 2019 the world lost its greatest contributor to passive investing. No individual has contributed to the growth of this space more than this man, so let’s take a moment to review his legacy and the impact that he has had on the financial industry over his lifetime.

john_c._bogle
Jack Bogle (1929-2019)

John Clifton “Jack” Bogle was born to a modest family in Montclair, New Jersey in the year 1929. Growing up, his family lost its home during the Great Depression, which led to his father falling to alcoholism, and ultimately the breakup of his parents.[5] Nevertheless, through superior academic performance and grit, Jack Bogle gained admission in high school to the prestigious Blair Academy, on a work-study scholarship. In 1947, Bogle was accepted into Princeton University, where he first began to study the mutual fund industry.

Upon finishing undergraduate studies in 1951[7], Bogle joined the Wellington Fund, a firm which offered the first balanced mutual fund (which combines both value and growth stocks) in the United States (established in 1928). Bogle worked hard and climbed through the ranks to eventually became chairman of this very actively managed Fund, replacing its founder in 1970. Not long after this, Bogle was fired from Wellington after approving a merger that regrettably went south.

Nevertheless, Jack went on to found The Vanguard Group in 1974, and two years later the firm launched the world’s first index fund available to the general public.

In a 2005 speech, [Paul] Samuelson ranked “this Bogle invention along with the invention of the wheel, the alphabet, Gutenberg printing”.[11]Wikipedia

King of the Hill

Today, The Vanguard Group is the largest mutual fund provider in the United States, with over $5.1 trillion is assets under management (that’s over $5,100,000,000,000 in AUM!). And over his the entire life the firm, Jack had always been a strong proponent for low-cost investing opportunities for individuals. For example, the firm’s flagship fund is the Vanguard 500 Index Fund, which is a large-cap passively managed mutual fund that is benchmarked to the S&P 500® Index. Today this fund has over over $400 billion in AUM alone, and the fund boasts a modest expense ratio of only 0.04% a year (which is less than half of the average fee based upon our previous analysis of this space).

“Jack did more for American investors as a whole than any individual I’ve known…. A lot of Wall Street is devoted to charging a lot for nothing…He charged nothing to accomplish a huge amount. He converted in a 30-year period a lot of people to the right religion of investing. And it’s a good religion. It pays off.” —Warren Buffett

Given the strong appeal of his philosophy, there’s a highly active online community dedicated to Bogle’s highly influential investment style, known as Bogleheads.org; for more insights into everything Jack, I highly recommend a venture over there.

Ultimately, much of the analysis presented throughout this blog, and especially throughout this series, would not be possible without the inventions of this one man, and for this and much more, I am forever grateful. Rest in peace, Jack Bogle.