February 16, 2011
To: Principals and Veterans
I’m sure you’ll enjoy these recent “items of interest” that are attached.
A. No, it wasn’t I who wrote this ringing endorsement of indexing in the current (January-February) issue of The Financial Analysts Journal. It was respected (and totally objective) academic Mark Kritzman, CFA, who lays out-in just three pungent pages-something all of us at Vanguard know: “Elevating wmecessary expenses is the most reliable path to higher returns.”
B. A similar philosophy is described in Financial Times, where journalist Tom Stabile writes: “Investing passively should (be) the norm … and active management should come with a brighter warning sticker.”
C. A perfectly marvelous letter from a long-time Vanguard shareholder. (I get at least one letter like this just about every day.) Interestingly, this 1999 investor hit those two big market bumps along the way, but his original $890,000 is now worth $1,023,000, after $443,000 in withdrawals. (He’s now moving to a more conservative allocation than the original 20 percent in our bond funds). Investing his life’s savings at Vanguard was, he writes, “the best decision of my life.”
D. Alas, a bit self-serving. I’m so pleased that my essay “The Fiduciary Principle” has won the Bernstein Fabozzi/Jacobs Levy 2010 award for Outstanding Article in The Journal ofPortfolio Management. This comes as a nice “twofer,” since my earlier essay “A Question So Important …” won the award in 2009. (You may recall that my essays “Black Monday and Black Swans” and “Markets in Crisis” won Graham and Dodd awards at the Financial Analysts Journal in 2008 and 2009, respectively, so I’ve got quite a remarkable streak going.) I believe that the constant pounding home to financial professionals of the flaws in the markets and the importance of traditional investment principles has been a major asset to our firm. I hope you agree.
Best,
Jack