3/8/2024

John Bogle: father of index investing

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To become a successful investor yourself, you need to learn from the best. We’ve already talked about Carl Icahn, and it’s time to talk about another big personality in the history of investing.

John Bogle is a name inextricably linked with index investing. It was he who, as the founder of Vanguard Group, revolutionized the world of mutual funds.

Index investing, created by Bogle, allowed investors to invest in funds that mimic the dynamics of entire markets. This was a real breakthrough, making investing accessible and understandable to a wide range of people.

John Bogle’s main goal was to make investing easier and cheaper for ordinary traders. He believed that the index approach was the most effective way to achieve long-term investment success.

Early life

John Bogle was born May 8, 1929 in Montclair, New Jersey. The future investor’s childhood was marred by the stock market crash of 1929, which led to the loss of much of the family’s wealth. Thanks to his uncle’s support, John was educated at Blair Academy and then continued his studies at Princeton University, where he studied economics.

In 1951, John Bogle began his career with Wellington Management. Even then, he tried to convince the company’s management to change its strategy, focusing on the development of one investment fund instead of a disparate portfolio. Although he subsequently became chairman of Wellington, his innovative ideas were not supported and he was sacked after a failed merger decision.

Vanguard 500 Fund

In 1976, John Bogle founded the Vanguard 500, the first index fund available to a wide range of investors. This fund tracks the performance of the S&P 500 index, allowing investors to invest in the 500 largest US companies without having to select them themselves.
Vanguard’s unique structure, created by Bogle, featured no commissions on stock purchases. This has made investing in the Vanguard 500 even more attractive to average investors.

Despite its humble beginnings (only $11 million was raised in 1976), the Vanguard 500 is now one of the largest funds in the world. As of July 28, 2022, its assets exceed $709 billion.

In 1999, John Bogle left his position as Vanguard’s CEO and chairman. That same year, he wrote the book “Mutual Funds from a Common Sense Point of View. New Imperatives for the Smart Investor”, which has become a classic for traders around the world.

John Bogle’s influence

The investor has tirelessly promoted the idea that it is difficult or impossible for the average trader to beat the market over the long term. Bogle’s philosophy is based on minimizing the costs associated with investing. He advocated no-load funds with low turnover and simple investment strategies.

Passive investing, based on Bogle’s ideas, suggests that the pursuit of market returns does not justify the high costs. A passive strategy implemented through index funds allows you to get stable and long-term profits.

Index funds replicate the composition of major market indices, which provides diversification and risk reduction. Investors investing in such funds get access to a wide range of securities. Moreover, index funds do not require active management, which allows for lower fees. This makes them more accessible to ordinary investors.

Thus, John Bogle’s main contribution to the development of the industry was to democratize investing, making it accessible to millions of people around the world.

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