Reflections on John Bogle, and the Debt Every Investor Owes Him

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The Motley Fool is committed to the idea that individual investors can, with some work, beat the market on a steady enough basis to make stock picking a worthwhile endeavor. That said, not all of us can give it the required time, or develop the skill. More to the point, the majority of people who are paid big bucks to do that very thing fail at it: Most actively managed funds don't beat their benchmarks in a given year. Which is just the beginning of the reasons we should all pay homage to the late, great Vanguard founder Jack Bogle for creating the low-cost index fund.

In this segment of the Motley Fool Money podcast, host Chris Hill and senior analysts Andy Cross, Ron Gross, and Jason Moser discuss their personal memories of the father of passive investing, his enduring contributions to the world of investing, and more.

A full transcript follows the video.

This video was recorded on Jan. 18, 2019.

Hill: This week, the investing world lost a true giant. John Bogle died at the age of 89. In 1976, he founded Vanguard Group, created the first index mutual fund, and started a revolution in low-cost investing. Andy, make no mistake, every one of us -- whether we were a shareholder of Vanguard's products or not -- every one of us benefited. Every one of us is richer because of John Bogle.

Cross: I wrote this week that if there's ever an Investing Hall of Fame, he's an automatic first ballot taker. You just think about what he's created. Vanguard now has more than $5 trillion in assets under management. Most of those are invested in passive index funds to match the market in as low of cost as possible. This was revolutionary back in 1976. He was laughed at, he was derided. Yet, given the success and the way that he's built that business, as a mutual business, it really has had this lasting impact, and his legacy will not be forgotten. We all owe a debt of gratitude to Jack Bogle.

Gross: Yes. Certainly beloved by the individual investor. Not so much by the active manager, however, because all of a sudden, there was a passive product that you could buy, and you didn't necessarily need to rely on your active fund manager any longer. I think, as a whole, it's certainly been better for the investment community, for the world. But at the time, it was revolutionary, and not everyone was a fan.

Hill: Oh, no question! There were absolutely people used to a pretty cushy fee-based lifestyle, Jason, on Wall Street. And I'm sure some of them tried to pull him aside and say, "John, why are you trying to ruin a good thing here?"

Moser: Everything changes eventually, right? A lot of his investing tenets are what helped build our Foolish investing philosophy here that we talk about every week, on and on and on. I've seen the question posed more than once this week, who's going to be the next Jack Bogle for the market? I think the point is, there's not going to be one and we don't need one. That's how profound what he did was. He's going to have people like us, organizations like us, investors like us, get up there and call BS when we need to. That's the impact he's had. I think once that cat is out of the bag, it ain't getting back in.

Hill: We here at The Motley Fool had the chance to meet him a bunch of times. We've had him here at Fool headquarters a number of times. We loved Bogle for his passion, his competitive fire, also for his sense of humor. I want to play a clip of Jack Bogle when he made an appearance on the original Motley Fool Radio Show around the turn of the century. Here's Jack Bogle playing a round of "Buy, Sell, or Hold" with me and Tom Gardner.

Tom Gardner: OK, let's start with buy, sell, or hold Warren Buffett.

Jack Bogle: Buy. He's a fundamental value investor. He would diversify a portfolio of U.S. stocks because he has some high-grade stocks in there but has also done very well over a long period of years in insurance company holdings. He's more of an insurance company than he is a U.S. stock investor now.

Gardner: OK, Jack. You live in Valley Forge, Pennsylvania, in the area. Buy, sell or hold Philly cheesesteaks?

Bogle: Hold Philly cheesesteaks.

Gardner: OK, why are you holding?

Bogle: Well, I'm holding them only if you don't have heart problems, because they've got, A, cheese, and B, steak. Cholesterol lovers -- those that can handle it, anyway -- should be entitled to it. They're delicious! They should be entitled to a good Philly cheesesteak. But I'm not putting it on buy, because you might do it more than, say, once a month.

Hill: OK, John, our final one: buy, sell, or hold teen pop sensation Britney Spears.

Bogle: Well, I would sell Britney Spears.

Gardner: OK, let's hear why.

Bogle: Well, she's a little sultry for those goo-goo eyes, I don't know, she's displaying a certain amount of virtue that we didn't use to see the stage.

[...]

Hill: Love that! Love that clip! Also, as he indicated when he was talking about cheesesteaks, pretty remarkable that Bogle had a heart transplant when he was in his mid-60s. Made it another 23 years. I think we all had the chance to meet him. So much energy and an absolute iron grip of a handshake.

Cross: The story of when he founded Vanguard, being forced out of Wellington, it's a really great boardroom struggle. He went off and backdoored his way back into creating the index funding and creating Vanguard and turning it into this amazing business.

Gross: He was a convert. He was not always a fan of passive investing. In fact, he railed against it. But kudos to him for realizing in the end that this was the way to go and it would be a great thing for individual investors.

Hill: Although, his senior thesis at Princeton was about index investing. I don't know about your senior thesis.

Gross: [laughs] Not that!