The investor who stood up for the little guy
John Bogle’s humble approach to investing was an affront to the wisdom of Wall Street. Realizing that few stock pickers could outperform market averages in the long term, he founded Vanguard Group in 1975 to sell index funds—broad stock portfolios structured to mirror a yardstick such as the Standard & Poor’s 500. “Don’t look for a needle in the haystack,” Bogle said of his strategy. “Just buy the haystack.” With no high-salaried investment managers to reimburse, Vanguard’s fees were far lower than those of its competitors. That meant fund investors— who also collectively owned the business—got to keep more of their profits, paying an average of only 0.1 percent in annual expenses. Many active funds charge 1 percent or more. “In investing,” Bogle said, “you get what you don’t pay for.”
That cost-efficient approach has made Vanguard a market giant: It is now the world’s second-largest fund manager, with $4.9 trillion in assets.
Bogle was born in Montclair, N.J., to an affluent family that saw its fortune ruined by the 1929 financial crash, said The Times (U.K.). His father became an alcoholic and his parents divorced; his mom was left to support her three sons. She taught the boys “never to give up by reading them inspirational literature.” Bogle worked his way through prep school and then Princeton University “as a waiter,” said The Washington Post, and after graduating was hired by the Philadelphia-based Wellington Management Co. A management dispute in the early 1970s led him to leave the firm and found Vanguard. The business introduced its first index fund for individual investors in 1976. Competitors nicknamed it Bogle’s Folly. It’s now called the “Vanguard 500 Index Fund, the crown jewel of the entire company, with more than $441 billion in assets.” Vanguard transformed the investment business, said The Wall Street Journal: Index funds today “represent almost 50 percent of all mutual-fund assets.” The firm also made Bogle an $80 million fortune. But his belief that as much money as possible should go to investors’ accounts meant his wealth was dwarfed by his peers’. The chairman of Fidelity Investments, for example, is worth $15.3 billion. “My only regret about money,” said Bogle, who regularly donated half his salary to charity, “is that I don’t have more to give away.”