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.

Paul Whisler

67 Comments

  1. 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.

  2. 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.

  3. 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.

  4. The great Jack Bogle! You taught me a lot sir. May you rest in peace God Bless! Vote Trump!

  5. 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

  6. The way he imitates interviewer’s way of saying ‘stock picker, Cool guy

  7. 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.

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

  9. 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.

  10. 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.

  11. He maybe the single most important aspect for fees coming down for the regular joe

  12. I'm among the millions whose lives Bogle has changed for the better. You are sorely MISSED!

  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. Thank you, Jack. Without you I would still be that 18 year old kid wondering wtf to invest in. ♥️

  15. I'm sure Jack is preaching index funds in heaven! All the angels are going to be rich!

  16. I loved Bogle's book The Little Book of Common Sense Investing. I wish I could have met him.

  17. Jack wants you in his fund, but gives you ample reasons not to…..lolol

  18. No idea who this guy is but every comment is thanking him. Sure speaks alot

  19. 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.

  20. OMG! this man was born in 1929, so he was in his 60s in this video, and look how sharp and well spoken he is!

  21. Can anyone put in two words what did he do and what was his philosophy on investing?
    I'm afraid I didn't get it

  22. I always choose Vanguard if it's offered by an employer.
    👋🏿🤑🤑🤑🤑🤑🤑🤑🤑🤑👍🏿

  23. GOD Bless you Jack!  
    An Honest, & thoughtful Man that surely has the greatest of returns now.

  24. 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!

  25. 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.

  26. 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.

  27. 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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