#JohnBogle on Mutual Funds
John Clifton “Jack” Bogle (born May 8, 1929) is an American #investor, #business magnate, and philanthropist. He is the founder and retired chief executive of the #Vanguard Group. In 1974, Bogle founded the Vanguard #Company which is now one of the most respected and #successful companies in the investment world. In 1999, Fortune magazine named #Bogle as “one of the four investment #giants of the twentieth century”.
In 1976, influenced by the works of Paul Samuelson, Bogle founded First #Index Investment Trust (a precursor to the Vanguard 500 Index Fund) as the first #index #mutualfund available to the general public. In a 2005 speech, Samuelson ranked “this Bogle invention along with the invention of the wheel, the alphabet, Gutenberg printing”.
Index Fund Pioneer
Bogle’s #innovative idea was creating the world’s first index mutual fund in 1975. Bogle’s idea was that instead of beating the index and charging high costs, the index fund would mimic the index #performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively #managed #funds.
Bogle’s idea of index investing offers a clear yet prominent distinction between investment and #speculations. The main difference between investment and speculation lies in the time horizon. Investment is concerned with capturing returns on the long-run with lower risk, while speculation is concerned with achieving returns over a short period of time. Bogle believes this is an important #analysis to be taken into account as #shortterm, #risky investments have been flooding the #financial #markets.
Bogle is known for his insistence, in numerous media appearances and in writing, on the superiority of index funds over traditional actively managed mutual funds. He contends that it is folly to attempt to pick actively managed mutual funds and expect their performance to #beat a low-cost index fund over a long period of time, after accounting for the fees that actively managed funds charge.
Passive Investing Expert
As of February 2017, Bogle has a #networth of $80 million USD according to Business Insider. During his high-earning years at Vanguard he regularly gave half his salary to #charity, including Blair Academy and #Princeton. Bogle argues for an approach to investing defined by simplicity and #commonsense. Below are his eight basic #rules for investors:
- 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