We start our hero worship series with a look at the father of modern passive investing, John Bogle.
Extraordinarily for one individual John Bogle has managed both to change the face of investment management and also challenged the corporate ownership model.
Born in 1929, he set up Vanguard Group in 1974 to offer investors the opportunity to participate in the returns from the stockmarket (initially just the S&P 500 in the US) at low cost. He did this through a company that would be owned by its investors rather than being publicly listed and therefore at the whims of shareholders.
This was a very disruptive model because it challenged traditional fund managers who were charging high fees on the basis that they could outperform the market. Needless to say the early years were tough with rivals attacking index-tracking, the regulator unhappy with the ownership structure and very little in the way of funds being attracted.
Roll forward to today and Vanguard is attracting more money than any other asset manager, is managing in excess of $3trillion, its clients stay with it on average twice as long as the industry average and it owns 5% of every public company in America.
John has written on the subject of investing and holds to his eight principles of investing:
- Select low-cost funds.
- Consider carefully the cost of advice.
- Don’t overrate past fund performance.
- Use past performance to determine consistency and risk.
- Beware of stars.
- Beware of asset size.
- Don’t own too many funds.
- Buy your portfolio and hold it.
We couldn’t have put it better ourselves and his philosophy has even led to a movement of followers called Bogleheads.
It is unarguable that John’s influence has been to reduce fees across the entire investment management sector as others have felt the pressure of Vanguard’s competition. Time and again research has shown that active management usually underperforms passive investing and so the trend looks set fair to continue.
For all these reasons and the fact that he gave away 50% of his income at his career peak to charity we are naming him Altor’s first Money Hero.