John Bogle, who popularized the low-cost index-based mutual fund as founder of Vanguard Group Inc. and insisted that most stock-picking money managers weren’t worth the fees they charged, has died. He was 89.
He died Wednesday in Bryn Mawr, Pennsylvania, the company announced in a statement. The cause was cancer, according to the the Philadelphia Inquirer, citing his family. He suffered the first of at least six heart attacks at age 31. In 1967 he had a pacemaker installed, and in 1996 he received a heart transplant.
(Read one of his last interviews: John Bogle: RIAs Are the Future; Trading Is Investors’ Enemy on ThinkAdvisor)
By word and example, Bogle proselytized on behalf of patient, long-term investing in a diversified group of well-run companies. He focused his advocacy on index funds, those that buy and hold the broadest mixes of stocks. He cautioned that the pursuit of quick trades and short-term profits typically helped investment advisers more than investors.
“The way to wealth for those in the business is to persuade their clients, ‘Don’t just stand there. Do something,” he wrote in “The Little Book of Common Sense Investing” (2007). “But the way to wealth for their clients in the aggregate is to follow the opposite maxim: ‘Don’t do something. Just stand there.”
Bogle’s formula turned Vanguard into the largest U.S. manager of stock and bond funds.
“He was a towering figure,” Burton Malkiel, a Princeton University economics professor and Vanguard board member since 1977, said in an interview. “The mutual-funds industry is infinitely better because of Jack Bogle.”
Bogle founded Valley Forge, Pennsylvania-based Vanguard in 1974. Investors attracted to its low fees helped the firm overtake American Funds, managed by Los Angeles-based Capital Group Inc., in 2008 as the biggest U.S. stock and bond fund manager. Vanguard has $4.9 trillion in assets under management.
Under Bogle, the company introduced the first retail index mutual fund in 1976.
Initially greeted with skepticism, the Vanguard 500 Index Fund, an unmanaged portfolio of the stocks represented in the Standard & Poor’s 500 Index, has more than $441 billion in assets. A related fund, Vanguard Institutional Index Fund, has $221.5 billion in assets, according to the company.
“It was lambasted as foolishness in the 1970s,” Dan Culloton, editor of the Vanguard Fund Family Report for Chicago-based research company Morningstar Inc., said of the inception of index funds. “It’s a cornerstone of investing now.”
Another Vanguard index fund, Total Stock Market Index, had $672 billion in assets as of Dec. 31, 2018.
“Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children’s futures,” Tim Buckley, Vanguard’s chief executive officer, said. “He was a tremendously intelligent, driven, and talented visionary whose ideas completely changed the way we invest. We are honored to continue his legacy of giving every investor ‘a fair shake.”’
Bogle promoted the idea that index funds such as the Vanguard 500 can outperform most actively managed funds because they have lower management fees and trading costs.
“Everybody really thought he was crazy, but he was tough enough not to care what everybody thought,” said Malkiel, author of “A Random Walk Down Wall Street,” which shares Bogle’s view that trying to outsmart the market is a lost cause.
By making Vanguard a cooperative, owned by the funds it ran, Bogle gave up the opportunity to amass a much larger personal fortune. He said the cooperative ownership, unique in the industry, eliminated what he saw as a fundamental conflict faced by publicly listed money managers, which try to serve both corporate shareholders and fund investors.
When Bogle retired from Vanguard on Dec. 31, 1999, the company established the Bogle Financial Markets Research Center. He served as president and continued to speak and write about the need for reforms.
“The mutual-fund industry is now dominated by giant, publicly held financial conglomerates run by businessmen hell bent on earning a return on the firm’s capital, not the return on the capital invested by the fund shareholders,” Bogle said in a 2006 speech at the Free Library of Philadelphia.
He told Bloomberg Television in December 2008 that the U.S. government’s bailouts of companies including American International Group Inc. and Citigroup Inc. had “deeply discredited” capitalism. At a February 2009 congressional hearing, he warned that the U.S. retirement system “is imperiled, headed for a serious train wreck.” Months later he filed a brief with the U.S. Supreme Court siding with investors who were challenging fees charged by fund managers.
At industry events and other public appearances, Bogle often drew admirers while making fund company executives uncomfortable. Some fans called him “St. Jack of the mutual-fund industry.”