This is the first person of my Investor Spotlight series; John Bogle (1929-2019). He was
the founder of Vanguard Group (The world’s 2nd largest fund company.
He was the man that popularized the concept of the index funds and changed the
investment industry for the better (more on this later).
But yes, let me start
of the series properly:
1.
Background
He was born
in 1929 in New Jersey. His family had to sell their house that year. He had to
start working at a very early age as his family suffered due to the stock
market crash. His family was also broken up as his father fell into depression
and alcoholism.
Despite so,
he graduated university with a major in economics, his thesis titled “The
Economic Role of the Investment Company” scored an A+ and also got him a job
into Wellington Managements after the founder read it. Subsequently, he rose and rose
to the role of Chairman, and got fired due to disagreements with management in
1974. He then started his own fund company – Vanguard Group in 1975 with $1.8
billion under management.
With the new company, he brought index investing to the masses in 1976 (YAS!!) with the
first index mutual fund – Vanguard 500 Index Fund. It only had $11 million initially
but grew to one of the industry’s largest today. In 1977, Vanguard converted to
a no-load system, meaning that investors can have more of their money put into
their investment at the beginning stage of their investment. In 1986, Vanguard
introduced the first bond index funds to the masses.
In 1996, he
retired as Vanguard’s chairman and CEO. In 2000, he retired as the senior
chairman and became president of the Bogle Financial Markets Research Center.
2.
Investment Approach
He is a firm believer that lower costs would allow for better returns. Till his death,
he could be seen on many podcasts and videos advocating the use of low-cost index
funds or ETFs in our investment. He also believes in the alignment of investors’
interests with the fund houses. This is exemplified in Vanguard’s radically different
from other investment companies. Instead of having Vanguard manage the funds’ approach
for profit, the funds under vanguard were to operate independently to benefit
their unit/shareholders. Furthermore, under his direction, Vanguard also
converted from a broker-dealer distribution model to a no-load system, which was in line with lowering the costs of investing for the common investors.
Essentially
– A low-cost index fund (for diversification of assets), held over a very long
time, with dividends, reinvested and investing through dollar cross averaging
and balance less than or equal to once
per year. He also believes that only stocks and bonds are needed for
diversification purposes (He would rather have the whole stock market for his
stock portion)
3.
Broader impact on the industry
He has indeed
changed the industry for the better. Ever since the first index funds were introduced
in 1976, actively-managed funds have shrunk to 51% of the market in 2019. Index
funds also control 17.2% of US-listed companies. There has also been an increase
in the number of index funds, making the market more efficient.
His
innovation has also lowered the fees of other mutual funds by 30-40% within the
10 years index fund was released to the market. His idea of bringing value to his
clients has also allowed Vanguard to be the 2nd largest fund company
in the world. An estimation of $250 billion dollars was saved for the public
investors from the low-cost index funds and the imitators they have inspired.
4.
Personal Impact
Honestly, I
did not know about John Bogle, what he stood for, and the impact of his life. However,
in some way, my investment approach of using index funds/ETFs using lower costs
to invest is inline with the investing philosophy of Mr. Bogle. Even after almost
50 years, the ideas brought forth by the product he launched are still
influencing investors today.
He is also
a philanthropist, giving away half of his income every year (yet his fortune is
at $80 million). His nonprofit “The John C. Bogle Center for Financial Literacy”
also aims to educate people on sound financial principle, staying out of debt, minimize
investment costs to reach financial independence.
He is a role model for me. I hope to be someone like him in the future, even with a lot
of money, still gives back to the bigger community. I also hope to leave my
mark on this world like him by lowering fees for investment for investors.
5.
Fun facts
· The
name Vanguard was the name of a ship – HMS Vanguard, which was the flagship in the
Great British victory over Napoleon at the Battle of Nile. Bogle wanted the Vanguard
Group to be the leader in a new trend
· Even
though he is the chairman of the 2nd largest mutual fund company in
the world, he has consistently criticised the mutual fund industries for their hidden
fees, bad products, and marketing of misinformation to the public. He earned
his reputation of being “The conscience of the industry”.
With that,
I end today's topic.
Stay vested, Stay frugal my friends,
Dionysius
With that,
I end today's topic.
Stay vested, Stay frugal my friends,
Dionysius
Sources:
Common Sense on Mutual Funds
0 comments:
Post a Comment