Jack Bogle, founder of Vanguard Mutual Funds, died Thursday at age 89. I call him the “Mozart of Finance” because he transformed the stock market…
Jack Bogle, founder of Vanguard Mutual Funds, died Thursday at age 89. I call him the “Mozart of Finance” because he transformed the stock market based on a theory from his senior thesis at Princeton University.
At an age when Mozart was scribbling operas, Bogle was thinking about disrupting how investments are done. With no political or ideological agenda, he turned millions of middle-class Americans into capitalists.
If you have a 401(k) and are invested in a stock index fund, you can thank Jack Bogle.
In 1974, when he started what would become the first Vanguard Fund, the financial community thought he was nuts. Back then, the way to make money in the market was to pick individual stocks (or pay someone to pick them for you) and hope that the stock’s value would increase faster than inflation and the average market growth.
Bogle, whose father had lost his family’s fortune in the October 1929 crash, saw this philosophy as akin to a crap shoot in Vegas, where not only were the odds in favor of the casino, but the casino charged the gambler a fee for the chips, win or lose.
There were mutual funds prior to 1974, and they charged and continue to charge a fee for investment services. Bogle believed if a fund was based on a simple index (e.g. Standard & Poor 500 stocks), the fund’s computer would do the buying on a programmed basis — resulting in tiny fees for investors.
