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John C. Bogle

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John Clifton "Jack" Bogle (May 8, 1929 – January 16, 2019) was an American investor, business magnate and philanthropist. He was the founder and chief executive of The Vanguard Group and is credited with popularizing the index fund. An avid investor and money manager himself, he preached investment over speculation, long-term patience over short-term action and reducing broker fees as much as possible. An ideal investment vehicle for Bogle was a low-cost index fund representing the entire US market, held over a lifetime with dividends reinvested.

His 1999 book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor became a bestseller and is considered a classic within the investment community.<ref>Template:Cite news</ref><ref>Template:Cite news</ref>

Early life and educationEdit

John Bogle was born on May 8, 1929, in Montclair, New Jersey,<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> to William Yates Bogle, Jr. and Josephine Lorraine Hipkins.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> He was the great grandson of Philander Banister Armstrong, who Bogle referred to as his "spiritual progenitor".<ref name=":0">Template:Cite book</ref> Armstrong was the founder and president of the Phoenix Mutual Fire Insurance Company and is noted for his attempt to reform the fire and life insurance industries.<ref name=":0" />

His Scottish-American family was harmed by the Great Depression.<ref name=":1">Template:Cite book</ref> They were well-off but lost it all.<ref name=":1" /> His father fell into alcoholism, which resulted in his parents' divorce.<ref name="Berr2010">{{#invoke:citation/CS1|citation |CitationClass=web }}Template:Dead link</ref>

Bogle and his twin, David, attended Manasquan High School near the New Jersey shore for a time. Their academic record there enabled them to transfer to Blair Academy on work scholarships.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The twin remained close throughout their adult lives.<ref>Template:Cite book</ref>

At Blair, Bogle showed a particular aptitude for mathematics with numbers and computations fascinating him. In 1947, Bogle graduated from Blair Academy cum laude and was accepted at Princeton University, where he studied economics and investment. During his university years, Bogle studied the mutual fund industry. He spent his junior and senior years working on his thesis "The Economic Role of the Investment Company".<ref>Template:Cite book</ref>

Bogle graduated magna cum laude from Princeton in 1951 and was soon hired by Walter L. Morgan, founder of the Wellington Fund, reportedly as a result of Morgan reading his 130-page thesis.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Investment careerEdit

After graduating from Princeton, Bogle sought a position in banking or investments. Hired by Morgan at the Wellington Fund, Bogle was promoted to assistant manager in 1955, at which time he was able to analyze the company and its investment department. Bogle persuaded Wellington to change its strategy of concentrating on a single fund and to create a new fund. Eventually he succeeded, and the new fund became a turning point in his career. After successfully climbing through the ranks, Bogle replaced Morgan as chairman of Wellington's mutual funds in 1970<ref name="inside vanguard">Template:Cite book</ref> but was later fired for an "extremely unwise" merger that he had approved. It was a poor decision which he later considered his biggest career mistake, stating: "The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot."<ref>Template:Cite news</ref> He was motivated to form an index fund partly as a result of the merger's aftermath, the terms of which prohibited him from managing money directly on behalf of clients. Following an index created by Standard & Poor's allowed the creation of a fund that Bogle himself did not oversee.<ref name=Wiggleworth2021/>

In 1974, Bogle founded The Vanguard Group, which is now one of the most respected and successful companies in the investment world.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> In 1999, Fortune magazine named Bogle as "one of the four investment giants of the twentieth century".<ref>Template:Cite bookTemplate:ISBN?</ref>

In 1975, Bogle introduced the first index mutual fund, coined "Bogle's Folly" by critics and derided as unamerican for its new, passive approach.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

In 1976, influenced by the works of Paul Samuelson, Bogle created the First Index Investment Trust (a precursor to the Vanguard 500 Index Fund) as one of the first index mutual fund available to the general public. It was not immediately well received by individuals or the investment industry but is now lauded by investment legend Warren Buffett, among others.<ref name="BBC" /> In a 2005 speech, Samuelson ranked "this Bogle invention along with the invention of the wheel, the alphabet, Gutenberg printing".<ref name="BBC">Template:Cite news</ref>

In 1984, Bogle met with the management team of Primecap to launch a fund together. In November 1984, the Vanguard Primecap Fund was launched.<ref name=":8">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Bogle suffered heart issues in the 1990s, subsequently relinquishing his role as Vanguard CEO in 1996. His successor was John J. Brennan, his handpicked heir and second-in-command, whom he had hired in 1982. Bogle, who was then 66 and "considered past the age for a healthy heart transplant", had a successful heart transplant in 1996.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

His subsequent return to Vanguard with the title of senior chairman led to conflict between Bogle and Brennan. Bogle left the company in 1999 and moved to Bogle Financial Markets Research Center, a small research institute not directly connected to Vanguard but located on the Vanguard campus.<ref name="Sommer2012">Template:Cite news</ref>

Investment philosophyEdit

The idea of passive investing in a fund that mirrors the entire stock market developed in the 1960s, mainly among University of Chicago researchers who found it was difficult or impossible to consistently pick winning stocks that will perform better than average. These researchers also argued that transaction and management costs were a significant drain on long-term investing returns.<ref>Justin Fox (2011). The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. Harper Business, ISBN 9780060599034</ref>

The first index fund available to the general public was established in 1973 by Rex Sinquefield, who later went on to work at Dimensional Fund Advisors.<ref name="wsj-interview">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> This fund had billions of dollars under management after a few years, indicating the public was open to the new investing concept.

Bogle's early investing career was devoted to active management, though he was always aware of the importance of low fees and his funds had substantially lower costs than competitors.<ref name=Wiggleworth2021>Robin Wigglesworth (2021). Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever. Portfolio, ISBN 0593087682</ref> As academic research accumulated in favor of indexing, Bogle helped popularize these ideas and created an S&P 500 fund in 1975. He argued 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.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Bogle's idea of index investing offers a clear yet prominent distinction between investment and speculation. The main difference between investment and speculation lies in the time horizon and the risk of capital. Investment is concerned with capturing returns on the long run with lower risk of destruction of capital, while speculation is concerned with achieving returns over a short period of time, with potentially destructive risk to capital. The speculator is often only concerned with the price of a security and not the underlying business as a whole, while the investor is concerned with the underlying business and not the price of the security. Even if a business is steady in cash flow, the market quotations of a security are anything but, as a result of speculators driving up prices and bringing down prices based on hope, fear and greed. Bogle believed this is an important analysis to be taken into account as short-term, risky investments have been flooding the financial markets.<ref>Template:Cite book</ref>

Bogle was known for his insistence, in numerous media appearances and in writing, on the superiority of index funds over traditional actively managed mutual funds. He contended 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.<ref name=BBC/> He was also keenly aware of the importance of overall market valuation, and developed a simple but reliable method to forecast long-term returns over decade-long periods. Bogle added existing dividend yield to expected earnings growth, then adjusted for overall market valuation as measured by price to earnings ratio and corrected for inflation.<ref>Christine Benz (2017). Bogle's 'Reasonable Expectations' for Market Returns. Morningstar.com, accessed 26 April 2017</ref> He argued most investors should have a minimum 20% bond allocation to reduce volatility, and should tend to increase their bond allocation when stocks became overvalued and as they age but should maintain at least a 20% stock allocation.<ref>Bogle, John C. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (John Wiley & Sons, 2007), ISBN 978-0-470-10210-7</ref> In the late 1990s dot-com bubble, Bogle sold most of his stocks and correctly anticipated poor returns on stocks and superior results from bonds over the next ten years.<ref>Part 6 of Bogle 2014 interview with professor Mark Witte</ref>

Bogle argued for an approach to investing defined by simplicity and common sense. Below are his eight basic rules for investors:<ref>Sigma Investing. Review of Common Sense on Mutual Funds Template:Webarchive.</ref>

  1. Select low-cost funds
  2. Consider carefully the added costs of advice
  3. Do not overrate past fund performance
  4. Use past performance to determine consistency and risk
  5. Beware of stars (as in, star mutual fund managers)
  6. Beware of asset size
  7. Don't own too many funds
  8. Buy your fund portfolio – and hold it

His investment philosophy is the founding principle of the eponymous "Bogleheads" forum.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> This group is now supported by the John C. Bogle Center for Financial Literacy and hosts national conferences in addition to its online forum. Members of the group have collaborated to write three books expanding upon Bogle's investment philosophy.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Later in his life, Bogle expressed concerns that the growing popularity of passive indexing would lead to a concentration of corporate voting power for leaders of the three largest investment firms (Vanguard, BlackRock, and State Street),<ref>Template:Cite news</ref> adding, "I do not believe that such a concentration would serve the national interest."<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

PhilanthropyEdit

During his high-earning years at Vanguard, he regularly gave half his salary to charity, including Blair Academy and Princeton. In 2016, the Bogle Fellowship was established at Princeton University by John C. Bogle Jr, Bogle's son. The fellowship sponsors 20 first year students in each class.<ref name="Sommer2012"/>

In 1991, he established The Armstrong Foundation, where "he gave back to the schools that had given him scholarships early in his life, the hospitals that had fixed his heart, his church, and the United Way".<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Awards and honorsEdit

  • Named one of the investment industry's four "Giants of the 20th Century" by Fortune magazine in 1999.<ref>{{#invoke:citation/CS1|citation

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  • Institutional Investor's Lifetime Achievement Award (2004).<ref name=VanguardBogleBio>{{#invoke:citation/CS1|citation

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Personal lifeEdit

Bogle attended his wife's Presbyterian church, but maintained his faith as an Episcopalian.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

At age 31, Bogle suffered from his first of several cardiac arrests, and at age 38, he was diagnosed with the rare heart disease arrhythmogenic right ventricular dysplasia. He received a heart transplant in 1996 at age 66.<ref name="Sommer2012"/><ref>Template:Cite news</ref>

Bogle received honorary doctorates from Princeton University in 2005<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> and Villanova University in 2011.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Bogle served on the board of trustees of the National Constitution Center in Philadelphia, a museum dedicated to the U.S. Constitution.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> He had previously served as chairman of the board from 1999 through 2007.<ref name=VanguardBogleBio/>

Politically, Bogle was a Republican (a self-described Teddy Roosevelt Republican), although he voted for Bill Clinton, Barack Obama in 2008 and 2012,<ref name="Sommer2012"/> and Hillary Clinton in 2016.<ref>Template:Cite news</ref> He supported the Volcker rule and tighter rules on money market funds, and was critical of what he believed was the US government's lack of regulation of the financial sector. Bogle said the current system in the US had "gotten out of balance", and advocated for "taxes to discourage short-term speculation, limits on leverage, transparency for financial derivatives, stricter punishments for financial crimes, and a unified fiduciary standard for all money managers".<ref name="Sommer2012"/> In 2017, Bogle stated his belief that President Donald Trump's policies were good for the market in the short term, but dangerous for society as a whole in the long term.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Bogle died on January 16, 2019, at his home in Bryn Mawr, Pennsylvania.<ref>Template:Cite news</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> After Bogle's death, Warren Buffett attributed Bogle's contribution to help individual investors to steer in a better "direction" in the field of investing. "Jack did more for American investors as a whole than any individual I've known", Buffett said in a CNBC interview.<ref>Template:Cite news</ref> Bogle was also previously mentioned in Berkshire Hathaway's 2016 annual shareholder letter for his contribution of developing the investment landscape.<ref>Template:Cite news</ref>

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