Show Notes

The Greatest Investors: John (Jack) Bogle – Investopedia

The Legend of Jack Bogle – Transcript

Tom Mullooly: In Episode 125, we’re going to spend a few minutes talking about Jack Bogle and Vanguard Group. Stick around.

Welcome to the Mullooly Asset Show. I’m your host, Tom Mullooly, and this is episode number 125. Thanks for tuning in. I want to spend a few minutes talking about Jack Bogle, the man from Montclair. A little thing we just found out. Bogle actually attended Manasquan High School, not five minutes from our office here on the Jersey Shore. So if you don’t recognize the name, Jack Bogle is the … Well, he passed away this week on January 16th.

He is the founder of the Vanguard Group back in 1975. Pretty good story. Bogle is really, I think as time goes by, and he was around for a long time, he was 89, but already legendary. I think that legend is only going to continue to grow because as time goes by, people are going to realize that this guy really was a pioneer when it comes to index funds, low cost investing, low minimums for investors, great customer service, and mutual ownership, which we’ll spend a moment talking about.

But, Bogle started at Wellington Management. Now, some of you may recognize there’s a Vanguard Wellington Fund. That is not an accident. He started with Wellington Management in 1951, a long time ago. Interesting. He did not start as a money manager. He was actually in the marketing department, so he was doing administrative stuff, doing marketing for Wellington Management. In 1960, he wrote an article for the Financial Analysts Journal under a pen name, John B. Armstrong. He wrote this paper basically saying that indexing is a terrible idea, that passive investing will never work, and there’s nothing better than what the mutual fund industry is doing right now for their clients.

By 1967, he was president of Wellington Management. He’d done a really great job. People really took notice of his article that he wrote. Became president in the company.

By then the company was publicly traded. Wellington Management. So, like most publicly companies, the focus now is on quarterly earnings, on profits, and so he had to keep doing things to keep the profit machine rolling. He merged with some hot go-go mutual funds. That was a period in the 1960s. Those funds all blew up and he wound up getting fired from Wellington Management in 1974. In ’75, he starts Vanguard Group, and he starts it in Valley Forge. Just like George Washington, he wants to rise from the ashes. One of the quotes that I took from Bogle’s story, which I think really made an impact on him and his whole attitude towards the Vanguard business. “We learned much from that go-go era of funds from 1965 through 1969. Many fund investors were badly hurt. We learned much from that drastic breach of trust.”

That’s really important. Drastic breach of trust. What does that say about where the industry was going at that period of time? So, Bogle now has gone complete 180, and now he is totally fond of indexing and low cost investing. He sets up the first index fund. It was launched August 31, 1976. He also set up Vanguard’s, through their charter, to do administrative work for other mutual funds.

The first couple of funds that Vanguard rolled out, they actually advertised it as this, “This fund is not managed.” So, they didn’t have a manager. They were able to crank out funds as long as they didn’t have a mutual fund manager in there, so that’s kind of how they stumbled into this business. So, when you look at Bogle, he really is a pioneer in a lot of different ways. He became a champion for using index funds.

That is the backbone of what we do here today at Mullooly Asset Management. He also was a champion for low cost investing, driving the cost lower and lower and lower each year. He also set up, for the first time ever, low minimums for individuals to invest. For many years, the minimum to get started at Vanguard was $3,000.

If you want to talk to a Wall Street broker, or advisor, or mutual fund manager, you needed big bucks. So this gave the opportunity for the guy on the street, or the gal on the street, to really get started. The other thing that he did, very unique, was he introduced the idea of mutual ownership to a mutual fund company. This is really important. I think a lot of people don’t understand this.

When you invest in a company that’s say a mutual savings bank, or a credit union, or a mutual insurance company, who owns that company? They’re not publicly traded. The management doesn’t necessarily own the business. The mutual owners are the policy holders, or in the case of Vanguard, the investors, and so they did a great job in lowering their costs, and when they would recognize savings or profits, those profits got rolled back into the company to help keep the cost of investing in Vanguard products as low as possible. Great idea. Terrific way to set it up.

So, we wanted to take a few minutes and speak about John Bogle. Some things you may not have known, but truly a legend in our business, and I think that legend will only grow as time goes on.

Thanks for watching Episode 125. We appreciate you tuning in, and we’ll see you next time.

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