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THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
“THE CHIEF CORNERSTONE” 4 trillion, 2 with the $3.2 trillion in U.S. equities representing the ownership of fully 20% of our stock market’s capitalization. The Chief Cornerstone As much as I value Dr. Samuelson’s extraordinarily high appraisal of the creation of the first INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000*THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
“THE CHIEF CORNERSTONE” 4 trillion, 2 with the $3.2 trillion in U.S. equities representing the ownership of fully 20% of our stock market’s capitalization. The Chief Cornerstone As much as I value Dr. Samuelson’s extraordinarily high appraisal of the creation of the first THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. “THE CHIEF CORNERSTONE” 3 funds then in existence—have, well, bitten the dust and gone out of business. And rather than being stamped out, that first index fund has now been joined by 362 others, including such, well, “all- American” managers as Merrill Lynch, T. Rowe Price, Dreyfus, Scudder, and Morgan Stanley. “TIS THE GIFT TO BE SIMPLE” 1 “Tis The Gift To Be Simple” Remarks by John C. Bogle, Founder and Former Chairman The Vanguard Group On Receiving The 2000 Business Leader of the Year Award RE-MUTUALIZING THE MUTUAL FUND INDUSTRY— THE ALPHA AND THE 3 But these ratios greatly understate the increase in the Trusts’ costs. For even as its assets were growing, so were its fee rates, resulting in enormous increases in the dollar amounts of fees paid. With assets of $2.2 billion in 1969, MIT’s management fees (including some relatively small operating “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
THE ECONOMICS OF THE MUTUAL FUND INDUSTRY: FOR FUND 1 The Economics of the Mutual Fund Industry: For Fund Investors . . . For Fund Managers a Presentation by John C. Bogle Founder and Senior Chairman, The Vanguard Group WHAT CAN ACTIVE MANAGERS LEARN FROM INDEX FUNDS? 2 The Merrill Lynch/BARRA Study For me—and I think for you as financial service professionals—the heart of the ML/BARRA study is not its long series of speculations, however intelligent, about the future development of investment management—the business itself, investment manufacturing (their off-putting word); distribution; viable business models; and optimal size.THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* RISK AND RISK CONTROL IN AN ERA OF CONFIDENCE (OR IS IT 3 outpace bonds more than 99% of the time, about as close to zero risk as is imaginable here on earth. (I’ve deliberately committed the sin of using outpace. The correct phrase is: have in the past outpaced. Please join me expressing the idea correctly!) Because we can never be certain of the order in which the annual returns will come, those kinds of cumulative data are period-dependent and “THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. “A LOT CAN HAPPEN IN 25 YEARS” MUTUAL FUNDS AND THE 4 managers alone account for $580 billion of DC assets, fully 70% of the fund industry’s $820 billion total. Defined benefit plans also make up a significant portion of the asset bases of most of these firms. A focus on the institutional ownership of fund shares, then, has been one of the major forces that shaped the widely varying fortunes of mutual fund firms, and is responsible—for ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality IN TROUBLED TIMES . . . THE ARITHMETIC OF MUTUAL FUND 4 percent, plus other expenses 0.6, for a total expense ratio of 1.5 percent. (2) Hidden portfolio transaction costs of at least 0.8 percent (the average fund turns its portfolio over at an astonishing 100 percent per year, meaning that a $5 billion dollar fund sells $5THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* RISK AND RISK CONTROL IN AN ERA OF CONFIDENCE (OR IS IT 3 outpace bonds more than 99% of the time, about as close to zero risk as is imaginable here on earth. (I’ve deliberately committed the sin of using outpace. The correct phrase is: have in the past outpaced. Please join me expressing the idea correctly!) Because we can never be certain of the order in which the annual returns will come, those kinds of cumulative data are period-dependent and “THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. “A LOT CAN HAPPEN IN 25 YEARS” MUTUAL FUNDS AND THE 4 managers alone account for $580 billion of DC assets, fully 70% of the fund industry’s $820 billion total. Defined benefit plans also make up a significant portion of the asset bases of most of these firms. A focus on the institutional ownership of fund shares, then, has been one of the major forces that shaped the widely varying fortunes of mutual fund firms, and is responsible—for ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality IN TROUBLED TIMES . . . THE ARITHMETIC OF MUTUAL FUND 4 percent, plus other expenses 0.6, for a total expense ratio of 1.5 percent. (2) Hidden portfolio transaction costs of at least 0.8 percent (the average fund turns its portfolio over at an astonishing 100 percent per year, meaning that a $5 billion dollar fund sells $5 INVESTMENT WISDOM AND HUMAN VALUES 3 only a single decade (again, the 1930s), generally running in the range of 8% to 13% per year, and averaging 9.8 percent. Enter Speculative Return: Compared with the relative consistency of dividends and earnings growth over the decades, truly wild variationsin
THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its THE FIRST INDEX MUTUAL FUND The First Index Mutual Fund Introduction In April, 1995, just two years ago, Vanguard published a booklet which we had the temerity to title, “The Triumph of Indexing.” THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
“THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award “ONE EQUAL TEMPER OF HEROIC HEARTS” 1 “One Equal Temper of Heroic Hearts” Remarks By John C. Bogle, Founder and Former CEO The Vanguard Group on receiving the 2003 CVILeadership Award
“A LOT CAN HAPPEN IN 25 YEARS” MUTUAL FUNDS AND THE 4 managers alone account for $580 billion of DC assets, fully 70% of the fund industry’s $820 billion total. Defined benefit plans also make up a significant portion of the asset bases of most of these firms. A focus on the institutional ownership of fund shares, then, has been one of the major forces that shaped the widely varying fortunes of mutual fund firms, and is responsible—for ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality “TIS NOT TO LATE TO SEEK A NEWER WORLD” ACCEPTANCE REMARKS 2 But if I could point to a single trait that I hope would distinguish my career, it would be idealism, sometimes over-bearing, frequently naïve, too often self-righteous, but THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* RISK AND RISK CONTROL IN AN ERA OF CONFIDENCE (OR IS IT 3 outpace bonds more than 99% of the time, about as close to zero risk as is imaginable here on earth. (I’ve deliberately committed the sin of using outpace. The correct phrase is: have in the past outpaced. Please join me expressing the idea correctly!) Because we can never be certain of the order in which the annual returns will come, those kinds of cumulative data are period-dependent and “THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. IN TROUBLED TIMES . . . THE ARITHMETIC OF MUTUAL FUND 4 percent, plus other expenses 0.6, for a total expense ratio of 1.5 percent. (2) Hidden portfolio transaction costs of at least 0.8 percent (the average fund turns its portfolio over at an astonishing 100 percent per year, meaning that a $5 billion dollar fund sells $5 THE IMPLICATIONS OF STYLE ANALYSIS ON MUTUAL FUND 4 As Exhibit VI shows, the differences in risk-adjusted return ratings are also extremely wide—in fact, exactly 100%, from 120 for large blend funds to 60 for small growth funds. To make the point clear, if THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* RISK AND RISK CONTROL IN AN ERA OF CONFIDENCE (OR IS IT 3 outpace bonds more than 99% of the time, about as close to zero risk as is imaginable here on earth. (I’ve deliberately committed the sin of using outpace. The correct phrase is: have in the past outpaced. Please join me expressing the idea correctly!) Because we can never be certain of the order in which the annual returns will come, those kinds of cumulative data are period-dependent and “THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. IN TROUBLED TIMES . . . THE ARITHMETIC OF MUTUAL FUND 4 percent, plus other expenses 0.6, for a total expense ratio of 1.5 percent. (2) Hidden portfolio transaction costs of at least 0.8 percent (the average fund turns its portfolio over at an astonishing 100 percent per year, meaning that a $5 billion dollar fund sells $5 THE IMPLICATIONS OF STYLE ANALYSIS ON MUTUAL FUND 4 As Exhibit VI shows, the differences in risk-adjusted return ratings are also extremely wide—in fact, exactly 100%, from 120 for large blend funds to 60 for small growth funds. To make the point clear, if INVESTMENT WISDOM AND HUMAN VALUES 3 only a single decade (again, the 1930s), generally running in the range of 8% to 13% per year, and averaging 9.8 percent. Enter Speculative Return: Compared with the relative consistency of dividends and earnings growth over the decades, truly wild variationsin
THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its THE FIRST INDEX MUTUAL FUND The First Index Mutual Fund Introduction In April, 1995, just two years ago, Vanguard published a booklet which we had the temerity to title, “The Triumph of Indexing.” THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
“THE UNCANNY ABILITY TO RECOGNIZE THE OBVIOUS” 1 “The Uncanny Ability to Recognize the Obvious” Remarks by John C. Bogle Founder and former Chief Executive, The Vanguard Group On Receiving the 2005 Outstanding Financial Executive Award “ONE EQUAL TEMPER OF HEROIC HEARTS” 1 “One Equal Temper of Heroic Hearts” Remarks By John C. Bogle, Founder and Former CEO The Vanguard Group on receiving the 2003 CVILeadership Award
“A LOT CAN HAPPEN IN 25 YEARS” MUTUAL FUNDS AND THE 4 managers alone account for $580 billion of DC assets, fully 70% of the fund industry’s $820 billion total. Defined benefit plans also make up a significant portion of the asset bases of most of these firms. A focus on the institutional ownership of fund shares, then, has been one of the major forces that shaped the widely varying fortunes of mutual fund firms, and is responsible—for ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality IN TROUBLED TIMES . . . THE ARITHMETIC OF MUTUAL FUND 4 percent, plus other expenses 0.6, for a total expense ratio of 1.5 percent. (2) Hidden portfolio transaction costs of at least 0.8 percent (the average fund turns its portfolio over at an astonishing 100 percent per year, meaning that a $5 billion dollar fund sells $5 INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000*THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
“THE CHIEF CORNERSTONE” 3 funds then in existence—have, well, bitten the dust and gone out of business. And rather than being stamped out, that first index fund has now been joined by 362 others, including such, well, “all- American” managers as Merrill Lynch, T. Rowe Price, Dreyfus, Scudder, and Morgan Stanley. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000*THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
“THE CHIEF CORNERSTONE” 3 funds then in existence—have, well, bitten the dust and gone out of business. And rather than being stamped out, that first index fund has now been joined by 362 others, including such, well, “all- American” managers as Merrill Lynch, T. Rowe Price, Dreyfus, Scudder, and Morgan Stanley. THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little AFTER THE FALL: WHAT LIES AHEAD FOR CAPITALISM AND THE 3 them in 2002 had multiplied that capital 13 times over. So for all of the stock market’s wild and wooly extremes, long-term holders of common stocks have been well-compensated for the risks they assumed. For such investors, the coming of the bubble and then its THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 2 managers (State Street Global Advisors, Barclays Global Investors, and Vanguard, all overseeing from $700 billion to $1 trillion in assets) have reached this pinnacle largely on the basis of theiremphasis on
“THE CHIEF CORNERSTONE” 3 funds then in existence—have, well, bitten the dust and gone out of business. And rather than being stamped out, that first index fund has now been joined by 362 others, including such, well, “all- American” managers as Merrill Lynch, T. Rowe Price, Dreyfus, Scudder, and Morgan Stanley. “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
RE-MUTUALIZING THE MUTUAL FUND INDUSTRY— THE ALPHA AND THE 3 But these ratios greatly understate the increase in the Trusts’ costs. For even as its assets were growing, so were its fee rates, resulting in enormous increases in the dollar amounts of fees paid. With assets of $2.2 billion in 1969, MIT’s management fees (including some relatively small operating THE ECONOMICS OF THE MUTUAL FUND INDUSTRY: FOR FUND 1 The Economics of the Mutual Fund Industry: For Fund Investors . . . For Fund Managers a Presentation by John C. Bogle Founder and Senior Chairman, The Vanguard Group ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* PUBLIC ACCOUNTING: PROFESSION OR BUSINESS? 3 While the four non-public members are of course members of the profession, I can tell you that in three years of working with them I have developed a high respect for the integrity, intelligence, and THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier “TIS THE GIFT TO BE SIMPLE” 1 “Tis The Gift To Be Simple” Remarks by John C. Bogle, Founder and Former Chairman The Vanguard Group On Receiving The 2000 Business Leader of the Year Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. THREE CHALLENGES OF INVESTING: ACTIVE MANAGEMENT, MARKET 3 10.4%; S&P 500 return, 11.8%. Gap 1.4%. If we assume, conservatively, an annual survivor bias of just 1.5%1, the fund return would be 8.9%, and the index advantage would be increased to 2.9% per year. Since the volatility of the Index during that period was lower than that of the funds, that remarkable 2.9% THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* PUBLIC ACCOUNTING: PROFESSION OR BUSINESS? 3 While the four non-public members are of course members of the profession, I can tell you that in three years of working with them I have developed a high respect for the integrity, intelligence, and THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier “TIS THE GIFT TO BE SIMPLE” 1 “Tis The Gift To Be Simple” Remarks by John C. Bogle, Founder and Former Chairman The Vanguard Group On Receiving The 2000 Business Leader of the Year Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. THREE CHALLENGES OF INVESTING: ACTIVE MANAGEMENT, MARKET 3 10.4%; S&P 500 return, 11.8%. Gap 1.4%. If we assume, conservatively, an annual survivor bias of just 1.5%1, the fund return would be 8.9%, and the index advantage would be increased to 2.9% per year. Since the volatility of the Index during that period was lower than that of the funds, that remarkable 2.9% THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. AFTER THE FALL: WHAT’S NEXT FOR THE STOCK MARKET AND THE 3 And what a difference it made! Consider the magic of compounding returns on an investment of $10,000 at the start of each period. The 1961 investor, earning a 7 ½% compound market return, enjoyed a $32,000 profit at the end of 1981. The 1981 investor, on the other hand, earned a 15% return, producing a $140,000 profit by March 2001.That remarkable near-five-fold increase came, not from RE-MUTUALIZING THE MUTUAL FUND INDUSTRY— THE ALPHA AND THE 3 But these ratios greatly understate the increase in the Trusts’ costs. For even as its assets were growing, so were its fee rates, resulting in enormous increases in the dollar amounts of fees paid. With assets of $2.2 billion in 1969, MIT’s management fees (including some relatively small operating “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
THE ECONOMICS OF THE MUTUAL FUND INDUSTRY: FOR FUND 1 The Economics of the Mutual Fund Industry: For Fund Investors . . . For Fund Managers a Presentation by John C. Bogle Founder and Senior Chairman, The Vanguard Group ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality THE MUTUAL FUND INDUSTRY IN 2003: BACK TO THE FUTURE 2 1. Funds are Far Bigger, More Varied, and More Numerous The mutual fund industry has become a giant. From its 1949 base of $2 billion, fund assets soared to $6.5 trillion at the outset of 2003, a compound growth rate of 16%. If we’d grown at the 7% THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* PUBLIC ACCOUNTING: PROFESSION OR BUSINESS? 3 While the four non-public members are of course members of the profession, I can tell you that in three years of working with them I have developed a high respect for the integrity, intelligence, and THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier “TIS THE GIFT TO BE SIMPLE” 1 “Tis The Gift To Be Simple” Remarks by John C. Bogle, Founder and Former Chairman The Vanguard Group On Receiving The 2000 Business Leader of the Year Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. THREE CHALLENGES OF INVESTING: ACTIVE MANAGEMENT, MARKET 3 10.4%; S&P 500 return, 11.8%. Gap 1.4%. If we assume, conservatively, an annual survivor bias of just 1.5%1, the fund return would be 8.9%, and the index advantage would be increased to 2.9% per year. Since the volatility of the Index during that period was lower than that of the funds, that remarkable 2.9% THE BOGLE EBLOGACADEMIC ARTICLESBIOGRAPHYBOOKSCALENDARDATAFAQ jcbadmin - Jan 16, 2019. John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William YatesIII
THE POWER OF WORDS, IDEAS, IDEALS, AND BOOKS “COMMON SENSE 3 mid-1960s died, and in the early 1970s was followed by a 50% market decline. The once happy partners had a falling out, and in January 1974 I was fired from what I had considered “my” company. INTRODUCTION OF THE PRESIDENT OF THE UNITED STATES BY JOHN Introduction of the President of the United States By John C. Bogle, Chairman, National Constitution Center Groundbreaking Ceremony, Sunday, September 17, 2000* PUBLIC ACCOUNTING: PROFESSION OR BUSINESS? 3 While the four non-public members are of course members of the profession, I can tell you that in three years of working with them I have developed a high respect for the integrity, intelligence, and THE FOUR DIMENSIONS OF INVESTMENT RETURN 2 that the real (after inflation) returns on equities have averaged 6.7 percent annually.1 Over 25-year measurement periods, the high range of real returns (9 percent to 11percent) came in the periodsending
IN INVESTING, YOU GET WHAT YOU DON’T PAY FOR 2 Now let’s look ahead. We know that the present dividend yield is slightly less than 2 percent. While we don’t know what future earnings growth will be, let’s assume that the past trend of about 6 percent growth per year will continue. Result: reasonable expectations suggest an annual investment return of about 8 percent in the coming decade, or about 2 ½ points less than the earlier “TIS THE GIFT TO BE SIMPLE” 1 “Tis The Gift To Be Simple” Remarks by John C. Bogle, Founder and Former Chairman The Vanguard Group On Receiving The 2000 Business Leader of the Year Award THE MUTUAL FUND INDUSTRY SIXTY YEARS LATER: FOR BETTER OR 1 Essay for the 60th Anniversary of the Financial Analysts Journal The Mutual Fund Industry Sixty Years Later: For Better or Worse? By John C. Bogle Over the course of the past 60 years, the mutual fund industry has undergone tremendous change. THE VANGUARD STORY: “LUCK, LEADERSHIP, AND STRATEGY” 2 The Beginning That original piece of luck from which all else would follow was an article on the mutual fund industry in the December 1949 issue of Fortune magazine, which I happened upon in the reading room of Princeton’s then brand-new Firestone Library. THREE CHALLENGES OF INVESTING: ACTIVE MANAGEMENT, MARKET 3 10.4%; S&P 500 return, 11.8%. Gap 1.4%. If we assume, conservatively, an annual survivor bias of just 1.5%1, the fund return would be 8.9%, and the index advantage would be increased to 2.9% per year. Since the volatility of the Index during that period was lower than that of the funds, that remarkable 2.9% THE DREAM OF A PERFECT PLAN 3 Being right twice in the financial markets, in short, is virtually impossible. Better to enjoy the long-run and productive economics of equity investing—earnings and dividends, stable and growing over time— and ignore the short run and counterproductive emotions of equity investing—essentially encapsulated in price-earnings multiples that surge madly to and fro, often for little THE STOCK MARKET UNIVERSE—STARS, COMETS, AND THE SUN 5 achieved a marvelous lifetime return on a time-weighted basis, the return it earns for its investors (the dollar-weighted return) often leaves much to be desired.Specifically, the standard time-weighted record published by the fund presents a decade-long compound return of+27.1% per year.
THE TELLTALE CHART
5 truism—and increasingly a trite one—that all of the investors in the stock market (or in any discrete market sector) earn the market return before the costs of financial intermediation, but actually receive the return after those costs. If the cost of implementing a small stock strategy AS THE INDEX FUND MOVES FROM HERESY TO DOGMA . . . WHAT 4 the confiscation of real return rises to nearly 75%. In a coming era in which returns may well fall below historic norms, we must look at potential investment accumulations in a new and harsh light. AFTER THE FALL: WHAT’S NEXT FOR THE STOCK MARKET AND THE 3 And what a difference it made! Consider the magic of compounding returns on an investment of $10,000 at the start of each period. The 1961 investor, earning a 7 ½% compound market return, enjoyed a $32,000 profit at the end of 1981. The 1981 investor, on the other hand, earned a 15% return, producing a $140,000 profit by March 2001.That remarkable near-five-fold increase came, not from RE-MUTUALIZING THE MUTUAL FUND INDUSTRY— THE ALPHA AND THE 3 But these ratios greatly understate the increase in the Trusts’ costs. For even as its assets were growing, so were its fee rates, resulting in enormous increases in the dollar amounts of fees paid. With assets of $2.2 billion in 1969, MIT’s management fees (including some relatively small operating “ENERGY AND PERSISTENCE CONQUER ALL THINGS” 2 Money—A Means to An End There is a difference, then, between an entrepreneur and a capitalist. According to biographer H.W. Brands,1 had Franklin possessed the soul of a true capitalist, “he would have devoted the time he saved from printing to making money somewhereelse.”
THE ECONOMICS OF THE MUTUAL FUND INDUSTRY: FOR FUND 1 The Economics of the Mutual Fund Industry: For Fund Investors . . . For Fund Managers a Presentation by John C. Bogle Founder and Senior Chairman, The Vanguard Group ADAM SMITH, THE INVISIBLE HAND, AND THE MUTUAL FUND 2 Directors. The paper was entitled “The Future Structure of The Vanguard Group of Investment Companies,”1 and it took the position that our mutual funds should have: “. . . an appropriate amount of corporate and economic independence, the highest quality THE MUTUAL FUND INDUSTRY IN 2003: BACK TO THE FUTURE 2 1. Funds are Far Bigger, More Varied, and More Numerous The mutual fund industry has become a giant. From its 1949 base of $2 billion, fund assets soared to $6.5 trillion at the outset of 2003, a compound growth rate of 16%. If we’d grown at the 7%*
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In Memoriam – John C Bogle jcbadmin - Jan 16, 2019 John Clifton Bogle of Bryn Mawr PA died at home on January 16, 2019, surrounded by his family. He was 89 years old. Mr. Bogle, known as Jack, was born May 8, 1929 in Montclair NJ with his twin brother David Caldwell to William Yates Bogle Jr and Josephine Hipkins Bogle. They joined their older brother William Yates III (Bud) and became known by a lifelong circle of friends as theBogle Boys.
Consistently driven, determined and hard working, the twins followed their older brother to Blair Academy in 1945 and graduated in 1947. Their time at Blair inspired a life long devotion and commitment to the school. After graduating from Blair, Mr. Bogle entered Princeton University as a scholarship student, working as a waiter in the dining halls and in the athletic ticket office to pay for his education. He studied economics, writing his thesis on the then unknown mutual fund industry, and graduated magna cum laude in 1951. While at Princeton he met and was befriended by Jay Sherrerd, class of 1952, who brought Mr. Bogle home to Bryn Mawr to meet his family, including Jay’s younger sister Eve. The two married in 1956 and had six children. After Princeton, Mr. Bogle was hired by Walter L. Morgan, founder of the nation’s oldest balanced mutual fund, Wellington Fund, where Mr. Bogle was the driving force behind Wellington’s growth into a mutual fund family. A dispute with new partners at the Fund lead to his firing and subsequently his founding in 1975 of The Vanguard Group of Investment Companies, two occasions he proclaimed ever since that he underwent “fired with enthusiasm!” Leading the company until his heart transplant in 1996, he nonetheless remained forever after a vocal and strident advocate of the individual investor with books, speeches, opinion pieces, and public appearances. Mr. Bogle was fiercely competitive, especially on the doubles squash courts where opponents feared his determination and drop shot. The family played tennis together, often at their treasured family home in Lake Placid, NY, a place to which they still retreat for the summer months. Not just athletically competitive, his relaxation came from completing the daily New York Times crossword puzzles, including Sunday, in ink, comparing his time to finish to those of his brothersand children.
A devoted philanthropist, Mr. Bogle served the Board of Trustees of Blair Academy from 1972 to this day, including 16 years as its Chairman. Among his most remarkable and proud accomplishments, he established the Bogle Brothers Scholarship Fund which to date has funded the education of nearly 200 students. In 1998 he was named Chairman of the National Constitution Center, overseeing its creation and building on Philadelphia’s Independence Mall where it continues as one of the city’s most treasured institutions. He remained active in numerous other local and national educational, civic, medical and arts organizations as well. Mr. Bogle suffered from a rare and degenerative heart disease, and was admitted to Hahnemann Hospital in the fall of 1995 to begin the wait for a new heart. He received the extraordinary second chance at life in February 1996, for which he remained exceptionally grateful. Mr. Bogle is survived by his wife Eve, daughters Barbara Bogle Renninger (Scott), Jean Bogle, Nancy Bogle St John (Gordon), and Sandra Bogle Marucci (Buddy), sons John Clifton Bogle Jr (Lynn) and Andrew Armstrong Bogle, twelve grandchildren, and six great-grandsons, and his brother William Yates Bogle III. He is predeceased by his twin brother David Caldwell Bogle.0 Comments
Memo to Veterans and PrincipalsMike - Feb 22, 2018
“BOFFO FOR BOGLE
.”
_Philadelphia Inquirer_, February 18, 2018. A nice article celebrating the twentieth anniversary of the Bogleheads forum. In February 1998, the Bogleheads began corresponding through Morningstar’s online forums. Originally titled “Vanguard Diehards,” the group steadily grew larger and, in 2007, moved to its own non-commercial forum Bogleheads.org. The forum now has some 64,000 registered members, 1.5 million unique visits each month, and 1,000 to 1,500 new posts every day. The article’s carryover headline on the second page was also nice: “FINANCE AND BOGLE-WORSHIP.” “VANGUARD INVESTORS KEPT THEIR COOL DURING STOCK-MARKET TURMOIL,”
_MarketWatch_, February 19, 2018. This review of Vanguard’s recent announcement noted that the vast majority of Vanguard investors “stayed the course” during the recent volatility. Vanguard’s Center for Investor Research found that 97% of Vanguard households made no trades from Feb. 2 through Feb. 9. The article concludes that Vanguard’s long-term-investment “ethos does seem ingrained in individual Vanguard investors, who sometimes dub themselves ‘Bogleheads’ in acknowledgment of the founder’s investing principles.” A special surprise was journalist Ryan Vlastelica’s opening: “The founder of Vanguard, who has long advocated that investors take a simple approach to their portfolios by buying low-fee index funds and holding them for the very long term, seems to have taught his lesson well. . . . Jack Bogle should be proud.” I _am_ proud . . . of all that we have accomplished together.Best,
_JACK_
JOHN C. BOGLE
FEBRUARY 21, 2018
0 Comments
JOIM Speech
Mike - Oct 02, 2017
Jack gave the keynote address at the 2017 Seminar of the Journal of Investment Management in Boston on September 24, 2017. His speech, “Numbers Games–Reflections on the Uses and Abuses of ‘Big Data,'” looks at quantitative investment strategies and the likelihood that some of the most popular such strategies will endurein the years ahead.
Numbers Games–Reflections on the Uses and Abuses of “Big Data” CFA Conference SpeechMike - May 26, 2017
Jack spoke at the 70th CFA Institute Annual Conference in Philadelphiaon May 23, 2017.
John C. Bogle’s CFA Conference Opening Remarks0 Comments
Morningstar Speech
Mike - May 01, 2017
Two early press reports covering Jack’s April 2017 Morningstarspeech:
Vanguard Founder’s Advice to Rivals: Stand Still,
_The Wall Street Journal_ Jack Bogle: It’s Easier to Serve One Master than Two,
_Morningstar_
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The Road Less TraveledMike - Apr 28, 2017
Jack delivered a landmark speech at the Morningstar Investment Conference on April 27, 2017: THE ROAD LESS TRAVELED The speech chronicles the remarkable rise of Vanguard and indexing from a sort-of-joke in 1974-76 to unprecedented industry domination in 2017, largely because of its mutual structure and its index strategy. What does that remarkable growth portend for the mutual fund industry? The eight highlights below summarize the key issues: 1. Index fund growth will continue. It remains to be seen whether broadly diversified long-term traditional index funds (TIFs) will lead the way, or whether exchange-traded index funds (ETFs) with their marketing attraction, substantial trading, and largely short-term focus, will dominate index cash flows. Pages 1-3, 10. 2. To meet the challenge of indexing, today’s active fund managers will have to develop a variety of appropriate business strategies.Page 10.
3. Active management is not going away, and large privately-held fund managers should pretty much stay the course, with few changes in their present business strategy. Page 7-8. 4. Conglomerate-owned fund managers (30 of todays 50 largest fund management firms) should adopt a “cash cow” business strategy.Pages 9-10.
5. Public policy—and the very words of the Investment Company Act of 1940—will compel fund directors to consider, not merely the _business_ strategy of the manager, but the _fiduciary_ strategy that places the investment interests of fund shareholders ahead of the business interests of fund managers. Pages 11-12. 6. Outside forces—a strong bull market and tax favored retirement plans—have driven mutual funds’ growth during the past 35 years. These forces will not repeat, and may even recede. Pages 11-12. 7. Fund directors, in general, have failed to measure up to this challenge, in part because fund boards are dominated by directors affiliated with fund managers. Such directors have two distinct fiduciary duties—one to the shareholders of the management company, the other to the shareholders of the mutual fund. Page 15. 8. Director lassitude has been reflected in the fact that more than 100% of the economies of scale in operating mutual funds have been garnered by fund managers. None of these economies have been shared were fund owners. (Since 1951, fund assets are up 5,400 times, fund expenses up 5,600 times.) Pages 13-14.0 Comments
Mike - Mar 01, 2017
To Veterans and Principals VANGUARD IN THE NEWS Hi, all, Here are some more press clippings that highlight Vanguard. 1. “YEARS AFTER SURGERY, A HEARTFELT REUNION,”
_PHILADELPHIA INQUIRER_, FEBRUARY 22, 2017. Thomas Jefferson University hosted a wonderful panel discussion with the two surgeons who performed my heart transplant way back in 1996, Dr. Rohinton Morris and Dr. Louis Samuels. They joined me and Jefferson CEO Stephen Klasko for a discussion on the 21st anniversary of my heart transplant. A standing room only crowd attended the seminar, moderated by students and focused on my transplant experiences and the similar challenges facing investment management and health care. 2. “JACK BOGLE DOESN’T FEEL ‘SUPER CONFIDENT’ ABOUT THE MARKET RALLY—HERE’S WHY,”
_CNBC_, FEBRUARY 21, 2017. Just before the panel at Jefferson, my interview on CNBC was broadcast live to the audience. In the interview, I talked about the potential strength of the recent market rally, my outlook for stocks over the long term, and my “heartbirthday.”
3. “A LESSON IN INVESTING SIMPLICITY: WHY THE BOGLE MODEL BEATS THEYALE MODEL
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_MARKETWATCH_, FEBRUARY 7, 2017. I am a great admirer of David Swensen, who runs Yale’s highly successful endowment and is the pioneer of “The Yale Model,” which calls for large allocations to illiquid and alternative assets for investors with very long-term time horizons like university endowments. Nonetheless, I read with great delight this article comparing a simple three-index-fund portfolio, dubbed “The Bogle Model,” to the average endowment. Not only did the index funds beat the average endowment and even the top quartile endowments over 3, 5, and 10 years, it even beat the very best—top decile endowments—over 10 years (losing by only a whisker over 3 and 5 years). What a great endorsement of the power of simplicity over complexity—even for some of the world’s most sophisticatedinvestors.
4. “JOHN BOGLE: DEMISE OF FIDUCIARY RULE WOULD BE ‘STEP BACKWARD’ FOR NATION,”
_INVESTMENTNEWS_, FEBRUARY 9, 2017. InvestmentNews ran this summary of my recent New York Times op-ed about the Department of Labor’s fiduciary rule. In the op-ed, I referenced a consulting firm’s estimate that Wall Street would lose $20 billion through 2020 as a result of DOL’s rule, which I pointed out the overlooked fact that the $20 billion would go to Main Street investors. I added, “By any definition, that’s a social good.” 5. “THE GRANDDADDY OF INDEXING,”
_THE GLOBE AND MAIL_, JANUARY 25, 2017. This interview touches on the history of indexing, the current investment environment, and Warren Buffett’s endorsement of indexing, among other topics. But I’m not sure how I feel about the headline—if I’m the “granddaddy of indexing,” who is the father? 6. “THE MAN WHO TRANSFORMED INVESTING FOR MAIN STREET SEES A BLEAK FUTURE FOR WALL STREET’S MONEY MANAGERS,”
_BUSINESS INSIDER_, JANUARY 24, 2017. This extensive interview with journalist Rachel Levy covers a wide range of topics. My conclusion about the asset management business: “We’re paying people to beat the market when they aren’t doing it, and when you think about it, that doesn’t make sense.” 7. “A LOVE LETTER TO JACK BOGLE,”
_THE MOTLEY FOOL_, JANUARY 8, 2017. I always enjoy spending time with the gregarious Gardner brothers from The Motley Fool. This article is a transcript of a podcast I recorded in December with David. He generously said, “I don’t think anybody … can touch the influence that Jack Bogle has wielded over the investment world. It’s not just that he’s always been a reformer. that he’s always tirelessly worked for the common man and for uncommonly good returns for the common man. . . . He’s really democratized investing through the index fund.” Thanks David!Best,
_Jack_
John C. Bogle
March 1, 2017
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Bloomberg Markets Cover StoryMike - Nov 30, 2016
Jack was featured on the cover of the December 2016/January 2017 issue of Bloomberg Markets magazine. In a wide-ranging interview with Michael Regan, Jack discusses the history of index investing from its uncertain beginning to its current triumph, corporate governance, robo-advisers, ESG investing, and which Hollywood actor he would like to play him in a movie. Q&A With Jack Bogle: We’re in the Middle of a Revolution0 Comments
The Philadelphia Inquirer Industry Icon AwardsMike - Nov 16, 2016
On November 16, 2016, Jack was honored at the inaugural Philadelphia Inquirer Industry Icon Awards. Here are Jack’s expanded comments upon accepting the award.0 Comments
Weinberg Center for Corporate Governance Conference at the Universityof Delaware
Mike - Oct 12, 2016
“HOW THE FINANCIAL SYSTEM FAILS INVESTORS AND HOW TO FIX IT FROM A STRUCTURAL AND GOVERNANCE PERSPECTIVE” TUESDAY, NOVEMBER 1, 2016 AT 9:30AM TO 12:00PM CENTER FOR THE ARTS, GORE RECITAL HALL 110 ORCHARD ROAD, UNIVERSITY OF DELAWARE, NEWARK, DE 19711, USA Financial/investing institutions form the bedrock of the U.S. economic system. Without them, the economy can’t grow and our capitalistic system would grind to a halt. However, few believe that our financial/investing institutions work as well as they could. Critics argue that misalignments promote the interests of the financial sector itself above those of society, the real economy and the individual citizen investors whose pensions and savings are entrusted to these institutions. They argue that errant expertise and incentives; gaps in accountability, transparency and governance; poor regulation and a misreading of economics combine to impose a huge stealth tax on individual savings and national economic promise. Further, they say that these structural and governance misalignments create systemic pressure for short-termism in the boardroom and within investinginstitutions.
STEPHEN DAVIS and JON LUKOMNIK, two of the three authors of What They Do With Your Money: How the Financial System Fails Us and How to Fix It, will be joined by JOHN BOGLE, legendary founder of Vanguard, and JENNIFER TAUB, Professor of Law, Vermont Law School, for a robust, provocative discussion of how to fix our financial/investing institutions so that they serve individual citizen investors and thereal economy.
Among the issues that will be discussed are: How have short-term oriented capital markets, the scores of financial intermediaries, and executive compensation structures both in financial/investing institutions and in our corporations combined to reduce long-term corporate investment in America? What are the consequences of governance gaps in investing institutions? What about the governance structures of pension plans and their plan sponsors? Should there be a shift in the governance paradigm to give individual citizen investors more transparency and more of a voice? The discussion will also showcase potential solutions that range from the narrow and technical, such as potential revisions to the tax law, to the big and ambitious, such as fresh models of governance and transparency for financial/investing institutions and for pension/savings plans. Please join us for a fascinating discussion peering behind the curtain of finance to understand why the capital market works the way it does. And how it can potentially change for the better. A complimentary lunch will follow the program. Click here for more information and to register for the event.0 Comments
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