Vanguard Founder Jack Bogle’s ’90s Interview Shows His Investing Philosophy

They were bearish when they should have been bullish and bullish when they should have been bearish. So the index at least steers a steady course. We’re joined this evening by a mutual fund executive whose words are so clear they never need dissection or analysis. He’s John C. Bogle, founder- founder and senior chairman of the Vanguard Group the nation’s second largest fund company. And he joins us tonight tonight from Philadelphia. Welcome Jack. Thank you, Tyler. Nice to have you here. Always good to be with you. Great. You know your index 500 portfolio now the second largest fund in America has 55 billion dollars or thereabouts in it as of the end of last month. Do you worry that so many investors who have put so much money into that fund over the past few years are going to be disappointed, not when that fund does you know doesn’t perform as well but, when some other index fund that you own starts to be the one that everybody wants to be in? I worry about it a good bit. People should take an index fund for what it is, Tyler. This is a large cap oriented fund. There will be a time when small cap and mid-cap funds will do better than large cap stocks but it’s not here now. And to my delight, it wasn’t here and the decline the index fund gave a wonderful account of itself when the market went down mid July to the end of August. Hey Mr. B. Bill Griffith here as well. Hi Bill. What about the big picture though? I mean you more than anybody probably in the mutual fund industry have been a proponent early on of index mutual funds and people lately have been buying into them but what about the concept that if we see a market continue to decline that people will be disappointed in all index funds because they find that the managers are not allowed to sell to get out of the market? Well the fact of the matter is that the index fund has traditionally carried about 20 percent less risk than the average fund. In other words for all the vaunted ability of mutual fund managers to raise cash they’ve really been doing just the opposite. They had 14 percent in cash at the beginning of of this bull market and 4 percent only 4 percent at the peak. They were bearish when they should have been bullish and bullish when they should have been bearish. So the index at least steers a steady course. Do you still expect Mr. Bogle that if this becomes what people call a stock pickers market that the index funds will continue to outperform the stock pickers? I don’t think there’s such a thing as a stock pickers market. All investors are picking all stocks and to the extent an index fund owns all stocks. It’s a sort of contradiction in terms. Because if the good stock pickers take all the good stocks the other half of the market will be owned by the bad stock pickers who pick the bad stocks. It all comes out to a sum of one. You know we were talking last week on the program about a mutual fund fees how most people are happy to pay them when the market is going up because they’re still making money. But as the market comes down and especially as the net asset value of a mutual fund comes down people maybe start to pay more attention to those fees something that I know is very near and dear to your heart. Yeah the fees in the mutual fund industry, I’m sorry to say, are generally pretty outrageous and you add to an average fee of one and a half percent, at least, another half percent for the fund transaction costs inside the portfolio, which isn’t disclosed separately and then mutual funds are tremendously except for index funds really tremendously tax inefficient and the index fund is going to pick up another point and a half On tax efficiency. You think they’re going to have to come down though because of competitive practices and because maybe fund investors will demand it. I think sooner or later fund investors will see the light. You see more attention paid to cost in the press. You see more dissatisfaction with the mutual fund as an investment medium in the magazines and on television. And I think the industry has got to adjust to a different era. The fees are too high and that’s that’s all there is to that. In addition to fees being, your word outrageous, a lot of people think that there are just plain too many mutual funds out there. Some 9000. What’s your view on that? And I note that you guys have something like twenty two or more separate index portfolios just in the equity area. Why do you need that many? Well you need a first. I think there are far too many funds in the industry. I mean I don’t know what one does with 9000 funds. Now of course I can immediately jump to our own defense which maybe a little bit unfair but you need a number of index funds because investors are getting more specialized. And some investors want the 500. My preferred index fund happens to be a total stock market which includes large, medium and small stocks. But some investors with it with a blue chip portfolio want an aggressive entry into say a small cap growth funds or a small cap growth index fund. Isn’t it a very intelligent way to do that. So to a point we ought to meet public demand. We shouldn’t be creating. We as a company or we as an industry. Mutual funds whose only reason for being is to appeal to a marketing need that is unsound. We ought to be spending more time in this business on investing and less time on marketing.

85 Replies to “Vanguard Founder Jack Bogle’s ’90s Interview Shows His Investing Philosophy

  1. The man that revolutionized the investment industry. Thank you Mr. John Bogle for all you’ve done for the average Joe investor !

  2. My teacher talked about this man in my Econ class, glad I decided to look into him more. He was a true hero to the public.

  3. Those funds are huge today. He seemed to be a very sympathetic man. It is true what he said. I know from my own experience. R.I.P. Jack Bogle.

  4. There are alot people like donald trump in the finance industry who are nothing more then good marketeers and tv personality without much in them. more fake people who brag about other people's accomplishment that they had indirect or significantly minor influence in that they market as their own deeds. Basically there are more fake people who push you towards their own funds and needs but its your own job to research and look at the information yourself and judge whats right. In this day and age if you complain that you couldn't know or see or meet the requirement to understand how the funds work, reviews of the funds and the managers or the basic concepts then thats your fault. Dont bother investing at all. Go invest in REITs or bonds or FDRs that will easily beat inflation for you.

    Jack is an honest man, and a real investor like Buffett who are the real investors in the market. Dont believe or pay less significance to day traders and chartists charlatans who just want to spend money on the market so that you can be a pawn to their market movements. Its not like their arent good mutual funds , but the good ones with good managers dont market themselves as much cause they know the right kind of people who can research on their own can find them eventually and they already have enough of those investors. Its kinda like the hidden special loots you find in video games that are in plain sight but most people fail to see it and take advantage of it, but when the information leaks about the loot it already has no value. (the loot here is the good managers and funds). The times old adage works every time. Invest in something diversified, mostly an index fund and if you arent an life long investor or diving deep kinda person who spends alot of time finding the right value, then just stick to index funds if you want to have a finger in the money market and dont listen to all the pundits about investing in their "Special" funds or "Instruments" . ( they will keep using fancy words to make it sound more scientific and abstract but investing in stock market aint even close to that complicated. I know people who you might call "financial engineeres" who sole job is to engineer complicated instruments to fuel your greed ,and it was these instruments that bought down the entire market. Research it and make your own mind. ) Greed is an infinite regression thing. it makes people do lots of things that they regret down the line. LIke i said , dont fix something that aint broken and invest in index funds and trail the market. when you retire, unload a significant portion of it to bank account and live your life tension free. (isnt that what retirement is about? we only have one life whats the point living it with stress all your life?)

    Remember, the market is just like a classroom.(as is most human interaction in life) The smart kids arent the most popular or the best athletes . there are outliers here and there but dont let that pollute the mean of the impression about the smart quiet kids who sits on the corner and have a select little group of friends. Finally, Finance aint that hard. People in the financial industry want you to think its rocket science so that you are intimidated out the gate to hand over the reign to these "expert" money managers who claim that they dont follow the herd mentality but the truth is they the biggest sheeps in the industry who invest in funds of funds and follow their pals of other funds and of their network and when the whole market goes down the gutter they go down with it as well.

  5. I didn't know he had passed away, he really did give all investor's a "fare Shake", well done Jack, a life well served, God bless x.

  6. I thank God that I found Jack Bogle and Vanguard right at the start of my investing career in 2012 at age 22. He already has and will undoubtedly save me incredible amounts of money over my lifetime. This man truly changed not only my world, but the world.

  7. I never comment on any videos.This is my first one. Thank you CNBC for putting this video, this man has truly inspired millions like me. If you notice what was said by Jack in 1990s is what he said in 2018 is all same (low cost, indexing and hold for long term). It holds true even after 20+ years. We all pray for Jack Bogle soul and eternal peace.

  8. CNBC can learn from Bogle….spending every day talking about what the stock market has done brings no value. Over time it will go up and nobody knows what it will do short time…even the so-called CNBC experts. Buy a broad index with money you don't need short term and don't look for 10 years. You will experience the miracle of compounding

  9. You leave a legacy, a voice for the mass with a purse/pouch tucked tightly in their bosom, compiled from years of grinding their life away, in hopes they do not out live their purse. He gave a place to shelter that purse – thank you, Mr. Bogle. Travel well.

  10. Legendary investor and thinker. May Jack Bogle rest in peace. His ideas on investing and wealth building will remain immortal.

  11. The greats of all time keep a consistent strategy because they often rely on investor psychology. Our society advances but everyone feels the same emotions.

  12. Passive stock investing always works… if you're immortal, and you didn't have to retire 1929 or 1987 or 2000 or 2008. But, other than when it doesn't work at all, it always works. Just give a constant percentage of your paycheck to someone else and they'll always do the right thing.

  13. Great man who could have made a fortune on the backs of his investors like the Johnson family at Fidelity. He chose to make his investors owners in his company and share the wealth.

  14. One of the best things i ever heard Mr. Bogle say was. Why try and pick the needle in the haystack with a single stock. When you can just buy the haystack with the total stock market index fund.

  15. ETFs and index funds are the most hands off way to build wealth over time. Buy some quality ETFs, add a little every week/month to it and reap the benefits over the years. I love Vanguard ETFs. I’ve got a video covering my favorite!

  16. Interesting how the US have bought into index funds in a big way when it has a long history of market beating fund managers like Benjamin Graham, Warren Buffett, Peter Lynch etc.

  17. RIP Jack , you were a true America treasure, thanks for saving the regular investor billions in fees and for steering me to a happy retirement, by managing my funds for decades. You were a class act, God speed.

  18. Wow, I didn't realize he died… Every time Bogle said to expect lower returns in the coming years of the stock market, there was almost always a recession within a few years. He was a good recession indicator for me. Really listen to when the old guys speak who have been dealing with bonds and stocks for 50-60 years – they tend to know what's coming to the economy.

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