John Bogle (1929-2019): The man who fought for the individual investor

John Bogle, who died on 16 January at the age of 89, is credited with lowering the cost of investing for millions of people globally, including an increasing number of investors in South Africa, by introducing index funds to the retail market in 1975.

Bogle, the founder of the Vanguard Group, at first met with fierce resistance, with the industry complaining that index funds amounted to “settling for average”, which was “un-American”. But index funds have since become hugely popular around the globe and show no signs of stopping.

Vanguard dominates the mutual funds industry in the US with $4.5-trillion in assets and a 24% share of the market. The company has systematically reduced its average fees, from 0.89% in 1975 to 0.11% in 2018.

Bogle, who is often described as the “father of indexing”, is a hero to many for disrupting a self-serving and highly lucrative industry, and bringing the focus back to serving the individual investor. He did this by, first and foremost, dispelling the notion that fund managers could magically predict which stocks were going to perform well in the future and deserved to be paid handsomely for their efforts to do so, even when they underperformed their benchmarks.

The seeds of Bogle’s investor-first philosophy were laid in 1951 in his senior thesis at Princeton, where he outlined four core values which would underpin his investment philosophy and inspire others around the world:

  1. The prime responsibility is always to the fund investor;

  2. The fund must operate in the most efficient, economical and honest way possible;

  3. The fund cannot claim superiority over the market;

  4. Corporate governance should first and foremost represent the individual, disenfranchised client.

These investor-focused values are still not shared by the broader fund management industry, which to this day is characterised by salesmanship instead of stewardship, which Bogle frequently complained about until his death.

Bogle retired as chief executive of Vanguard in 1996 and died on 16 January, but the power of his convictions will long outlive him. The popularity of low-cost index investing is increasing exponentially, but the real value of Bogle’s contribution is felt on an individual level by millions of investors, retirement savers in particular.

Thanks to his tireless efforts and unwavering belief, countless people’s lives have been changed dramatically for the better because they put their money into index-tracking funds.

Vanguard savers keep almost all the growth that their investments generate for themselves and avoid the high risk and expense of actively managed funds, which fail to even match their benchmarks more than nine times out of 10. DM

Mica Townsend is Business Development Manager at 10X Investments.