Jack Bogle's enduring (and compound) gift
Photograph by Peter Foley / Bloomberg
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Jack Bogle had your back.
If there was a single animating principal behind the work of life by the investing giant who passed away on Wednesday, it was his crusade to protect investors from the greed of the economic industry and the relentless erosion of your savings from taxes – what he called " tyrannical fusion. "
For many years with interviews of economic types, I have found that most of the best investors I talk to are also least secure. Successful stock pickers are often quick to acknowledge what they do not know and emphasize that their decisions are based on their best analysis of an incomplete fact.
Jack Bogle was a booming exception to that rule. For him, the future direction of a stock was more than uncertain, it was unequivocally unknown. And so the Vanguard founder had no doubt that the vehicle he invented – the index fund – was the best way to invest. He was religious in his devotion to that idea, and thanks to a baritone of James Earl Jones-esque proportions, his market talks heard a bit like God's voice.
In addition to protecting investors from high fees, Bogle also warned against the speculation and siren song's temptation to "beat the market". His pitch was as easy as it was bulletproof: The market return is the sum of all trading. Before fees, exactly half of the investors will do better, and half will do worse. But after taxes, a much smaller percentage will beat the market, and it is impossible to identify these winners in advance. As he once told me, "Name Three Warren Buffetts."
What he did not say was that he actually employed one of the best storage groups in the industry to run the Vanguard Primecap funds, which have beaten the market in the long term. In the Bogle tradition, however, they charge very low fees.
However, Bogle insisted that the best way to invest was to hedge the portfolio into the most dynamic economy on earth, relying on capitalism to do things and reap rewards. A good number of top-ranked Barron advisors have adopted a Bogle-esque approach, using Index Funds or ETFs to get cheap market exposure and control the things they can, such as tax efficiency and diversification.
One, incomplete, way of thinking about the debt we owe to Jack Bogle is to do the math. If he had founded Vanguard as a profit company instead of a mutual company, it would be reasonable to assume that his net worth would be in Edward Johnson's ballpark and his daughter, Abigail, who owns and operates Fidelity and has a total net worth of approx. $ 26 billion, according to Forbes. In an interview in 2017, I asked Jack where all the billions had gone in his case. "In the pockets of the shareholders," he said.
However, his far greater contribution to investor savings spurs from his relentless campaign to reduce taxes leading to dramatic tax compression around the industry. (He once told that the trade association that represented the industry had long stopped asking him to speak.) Allan Roth, a Colorado Springs-based financial advisor and diehard Boglehead, estimates investors invested at least $ 500 billion in Bogle's lifetime charges . These savings – the composition – will be his lasting legacy.
