5 pieces of investment advice from the late Jack Bogle

Marcus Tuck

Mason Stevens

The investment industry lost one its pioneers earlier this month with the passing of Jack Bogle. He is widely seen as having changed how ordinary people invest their money. The firm he founded, The Vanguard Group, was built on a belief that, over the long term, most investment managers cannot outperform the broad stock market averages. 

The 89-year-old had had a heart transplant when he was 67, having suffered 6 heart attacks from the age of 31. He recently said:

"I've done a lot and I know I've done what I can. I feel good ... I've had good fortune, good karma. It has been a charmed life - getting 22 extra years is by no means an inconsequential part of it." 

The first retail index fund was started by Vanguard in 1976 and simply tracked the S&P 500 Index. The first two investors in the index fund were Jack Bogle himself and Princeton professor Burton Malkiel who had written about the idea of an index fund in his ground-breaking book A Random Walk Down Wall Street, first published in 1973. At the time, the fund was derided by competitors as "Bogle's folly" and even described as being "un-American". 

The Chairman of Fidelity Investments at the time was quoted as saying he "couldn't believe that the great mass of investors are going to be satisfied with receiving just average returns".

The fund started with comparatively meagre assets of US$11 million but crossed the US$100 billion milestone in November 1999. Today, Vanguard has about US$5 trillion under management and owns approximately 7% of every company in the S&P 500 Index

Warren Buffett writes:

"If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing - or, as in our bet [that hedge funds would underperform the S&P 500 after fees over the last decade], less than nothing - of added value. In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me." 

Jack Bogle was big on humility, ethics and simplicity. He always put customers first and was proud that he wouldn't die a billionaire, even though he easily could have. Bogle established Vanguard essentially as a not-for-profit organization for the benefit of investors and staff (whom he referred to as "crew members" - he liked sailing), and led the downward pressure on funds management fees across the industry, the ramifications of which are still being felt today. What would have been profit effectively went to investors. Ironically, Fidelity introduced a zero-fee index fund in the US last year.  

Bogle believed there is a clear differentiation between traditional, diversified, low-cost index funds/ETFs, designed to be long-term investment vehicles, and the plethora of active, high-turnover, higher-fee-paying, sometimes synthetic (i.e. derivatives-based) ETFs built by "financial buccaneers" that have sprung up since Vanguard's first index fund. Not all of them are bad, but many are or at least are prone to misuse. 

5 pieces of investment advice from the late Jack Bogle

In its obituary, the New York Times published five pieces of investment advice from him. They are as follows: 

1. Stay the course

"Wise investors won't try to outsmart the market. They'll buy index funds for the long term, and they'll diversify." "Long-term investors must hold stocks even though the market is risky, because they are still likely to produce better returns than the alternatives." "Investors should weather any storms." "If we're going to have lower returns, well, the worst thing you can do is reach for more yield. You just have to save more." 

2. Beware the experts

Bogle noted that most money managers missed the warning signs before the 2008 financial crisis. "How could so many highly skilled, highly paid securities analysts and researchers have failed to question the toxic-filled, leveraged balance sheets of Citigroup and other leading banks and investment banks." 

3. Keep costs down

"In investing, you get what you don't pay for. Costs matter. Returns are uncertain but fees are not. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won't be foolish enough to think that they can consistently outsmart the market." 

4. Don't get emotional

"Impulse is your enemy. Eliminate emotion from your investment program. Have rational expectations for future returns and avoid changing those expectations in response to the ephemeral noise coming from Wall Street." 

5. Own the entire stock market

Bogle was the leading proponent of structuring an investment portfolio to mirror the performance of a particular market yardstick, e.g. "the S&P 500 is a great proxy". At the asset allocation level he was a proponent of "passive rebalancing" - periodically trimming the weights of outperforming asset classes and increasing the weights of underperforming ones, back to an investor's strategic asset allocation benchmark weights. 

Many people still find Bogle's advice as controversial today as it was in 1976 - not that that would bother him.

R.I.P. Jack Bogle. 


Marcus Tuck
Head of Equities
Mason Stevens

Responsible for identifying domestic and international equity investment opportunities. 25 years of financial markets experience as an equity strategist, economist, analyst, portfolio manager and consultant.

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