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John Bogle Knows a Thing or Two About Investing

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Recently, Robert Pozen, chairman emeritus of MFS Investment Management and author of a new book The Fund Industry: How Your Money is Managed, spoke to us at Fool HQ about mutual funds and the future of money management.

All these expenses Bogle my mind!
Pozen's thoughts deservedly garner some attention since he's an expert in the field of fund management. And when a Foolish question about John Bogle popped up in the question-and-answer session, I was very interested to hear what he had to say.

You see, John Bogle holds some status for us Fools; heck, we even have a room on the fourth floor named after him. Known as the father of index funds, Bogle founded Vanguard in 1974 and championed low-cost index funds for the masses. In fact, he introduced the very first index fund, the Vanguard 500 (Nasdaq: VFINX  ) , in 1976.

Principles of success
Putting the interests of investors first and keeping costs low are just a couple of the principles that have helped make Bogle an investing legend. As a proponent of the index fund, Bogle encourages individual investors to focus on a few main points for long-term success:

  • Keep it simple, silly -- The more difficult the investment, the more chance there is of getting it wrong.
  • Low-cost provider -- Funds that charge exorbitant amounts are ripping investors off and limiting their long-term gains. It doesn't have to be this way.
  • A long, strange trip -- Take a long-term view when it comes to investing. This allows for things like the magic of compounding to take place.
  • Be rational, not emotional -- Don't let emotions get in the way. Investment decisions should be based on thoughtful and rational analysis, not feelings.
  • Indexes for everyone! -- Index funds work. Whether you're rich or just aspiring to be rich, index funds are appropriate for investors everywhere.

About Bogle
Getting back to the question at hand, one of my Foolish colleagues asked Pozen about John Bogle and his impact on the fund industry. Here's what Pozen had to say:

  • A smart and stand-up guy -- First, John Bogle is a smart man. Not only this, though, he is a man of high integrity. When you put those two qualities together, good things are bound to happen; and with Bogle they have.
  • Heed the call -- Second, it took a tremendous amount of courage for Bogle to break away from the Wellington Fund where he got his start after college. An initial ouster in 1974 that voted him out of the firm turned out to be the impetus for Bogle to start Vanguard, which today holds approximately $1.6 trillion in U.S. mutual funds. Vanguard continues to be successful today by applying the very same principles that have helped make Bogle a legend.
  • I'm aware! -- Finally, perhaps the most profound effect Bogle has had on the individual investor is to bring about awareness and the importance of costs involved with investing. Low-cost, low-turnover, and passively managed funds eliminate the unnecessary frictional costs that can hinder long-term results. Bogle fights for low costs still to this day, and the fund industry is better for it.

It's all mutual
As consumers and investors, we all get the idea that low costs help us win in the end. With more than 7,000 mutual funds alone in the U.S. there are a whole lot of choices. Now don't get me wrong, I'm not saying that the lowest cost fund is necessarily the best. But when choosing funds for your investing dollars, it most definitely pays now to focus on the costs that could hurt later.

Stock Advisor analyst Jason Moser owns no shares of any companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 01, 2011, at 2:44 PM, Bill2143 wrote:

    Got to agree with this article. My father invested almost exclusively with Vanguard and became a millionaire doing it. He said no load, low cost was the only way to go. Must have been doing something right.

  • Report this Comment On June 01, 2011, at 4:48 PM, TMFJMo wrote:

    Glad to hear it Bill. I believe firmly that we are better off as investors thanks in no small part to Bogle and all he has done.

    Foolish best,


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