Jack Bogle, founder of Vanguard

  • You were in college when you researched why so many actively managed funds underperformed. How did you come up with this? I did it by accident. I was looking for a subject for my senior thesis. I wanted to write about something that no one had written about before. I found an article about the mutual fund industry. I realized the cost of all that management was more expensive than the benefit.

  • Why did you found The Vanguard Group? I was 35 years old. I was working at the Wellington Fund. It was in crisis. They fired me. I was out of a job and I had a young family. I was very angry. I decided to start my own fund. I was restricted from active management. This lead to the creation of the Vanguard Group. 

  • The product we created was an index of the 500 largest companies in America:There is no manager. Nobody is in charge. It’s an unmanned broad index. [One of the most important products created, ever.] 

  • Vanguard is an enormous success. How come no one tried to compete with you? The answer is simple. Index funds have a real problem. All the damn money goes to the investors. Managers can’t take anything. [There is no economic incentive.]

  • Financial services has become a marketing business: If you realize how important low costs and a long term focus is, you will never do anything but own a broad market index and hold it forever.

  • Why it’s hard to compete with Vanguard: No one has the bully pulpit we have. You have a company like Fidelity that had to be pulled into the index business kicking and screaming. Compare that to our missionary zeal saying this is the way.

  • Be like Warren: Warren Buffett is leaving 90% of his wife’s estate in the Vanguard S&P 500 index fund.

  • Why he doesn’t buy other countries index funds: I can’t imagine that there will be a significant advantage of international companies compared to US companies.

  • Great quote: The stock market is a giant distraction to the business of investing.

  • One of my basic rules: Don’t do something. Just stand there. 

  • On why not to monitor your portfolio daily: The movements of the stock market are a tale told by an idiot, full of sound and fury, that signifies nothing.

  • My first mentor was a graduate student running the athletic ticket office at Princeton: He taught me how to do a job. How to do it with integrity. I learned how to do it on time. I learned how to keep my emotions out of it. He had a great sense of business values.

  • Book recommendations: The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham, A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton Markiel, Unconventional Success: A Fundamental Approach to Personal Investment by David Swensen, Against the Gods: The Remarkable Story of Risk by Peter Bernstein, and The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William Bernstein

  • Timeless advice: Is this in the customer’s best interest? If the answer is no you can’t do it.

  • What do you know today that you wish you knew when you started your career in 1951: The power of compounding. The beauty of keeping costs low. The need to ignore the market.

  • Full podcast here.