To: Veterans and Principals
From: John C. Bogle
Date: March 5, 2014
Re: Lots More Public Recognition
Part II
1. Buffett Endorsement of Vanguard 500 Index Fund. I first learned of the contents of Warren Buffett’s annual letter to his Berkshire Hathaway shareholders in a note from one of our veteran crewmembers (thanks!), who wrote that Mr. Buffett has now “confirmed that Bogle is right.” I next heard from investment adviser and author Frank Martin, who wrote, “Jack, it looks like you are now the number two salesman for Vanguard.”
Both were comments on Warren’s report that “his money is where his mouth is.” His will provides a bequest for his wife, directing that his trustee should “put 10% of [the bequest] in short-term government bonds and 90% in a very low-cost S&P 500 Index Fund. (I suggest Vanguard’s.)”
The Buffett letter is also laced with the wisdom of Ben Graham, as outlined in The Intelligent Investor. Enclosed are three pages of excerpts. Our crewmembers will find Vanguard’s investment philosophy echoed here . . . over and over again.
2. Do ETFs Turn Investors into Market Timers? Wall Street Journal, March 1-2, 2014. Here, popular columnist Mark Hulbert uses a variety of quotes from me on the trading activity in ETFs, noting that “the typical investor in [Vanguard’s] ETFs trades less actively then investors [traders?] in ETFs sold by other fund firms.” His column ends with four recommended stock funds (all Vanguard funds) and four bond funds (including two Vanguard funds).
3. How to Predict the Next Decade’s Bond Returns. Wall Street Journal, March 3, 2014. Relying on research provided by the Bogle Financial Market Research Center—and many conversations!—reporter Chris Gay accurately describes the analysis I’ve been producing for the past few decades: “current yield is the best indicator of how much you’ll earn over time from fixed-income holdings.” 92% of the future 10-year return is determined by the current yield. My “Seeing the Future” chart (illustrated here) could hardly make it clearer.
4. Give Fees an Inch and They’ll Take a Mile. The New York Times, March 2, 2014. “Watch out for expenses. They will cut down your returns, shrink your nest egg, and may well prevent you from achieving your financial goals,” writes Times financial editor Jeff Sommer. He sums up his long article (largely focused on a study by the SEC) with this (I suppose) classic Bogle quote: “In investing, you get what you don’t pay for.”
5. What was John Bogle Thinking? FORBES, February 10, 2014. Here, investment adviser (and Boglehead!) Rick Ferri, relying on my recent correspondence and the history of my indexing philosophy, as well as subsequent interviews, describes how I “revisited the idea of passive investing; which ultimately reversed [my] long-held view of active management, and changed Vanguard’s destiny.” Rick calls it, “John Bogle’s epiphany.” If you’re interested in Vanguard’s early history, you’ll love this article!
6. Are there any circumstances in which you’d own an actively-managed fund?, Kiplinger’s Personal Finance, February 2014. “Yes, although they are extremely rare,” is how I respond to the question, noting but two exceptions to my “rule.” (The tipster who showed me the article: a fellow-traveler on a recent airline flight!)
7. Bogle: Indexing Has Gone Too Far. Financial Planning, March 3, 2014. Here, journalist Paula Vasan (fairly) accurately reports the results of our luncheon conversation. The idea that indexing has “gone much too far” (with my reasoning for that view) is only a small part of a controversial discussion on financial services today. I conclude that, yes, “some investors really need advisors,” if only “to keep them from doing anything.”
8. Can Vanguard Become Too Big? Financial Planning, March 4, 2014. Allan S. Roth, journalist, money manager, and, yes, Boglehead, has asked a good question, and penned a thoughtful article in response. Several charts show Vanguard’s amazing rise to our record share of fund industry assets, to 17.75% in stock and bond funds—vs. 17.74% (interesting!) for our two largest rivals combined. Asked to predict (guess at) our market share in 2030, Rick Ferri and Bill Bernstein suggest 30% to 40%, Bogle “offers a best guess of 25%.” Who really knows?
But, yes, as Bill McNabb acknowledges, there are “dangers” of giant size, “including the possibility that a larger Vanguard could become bureaucratic and self-serving.” Best that we mind our P’s and Q’s!
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That’s it for this huge list of press stories featuring Vanguard, just in the past few days and weeks.
Good News! Part III of this recent series, to be sent to you tomorrow, has only a single item . . . but a good one!
Best to all,
Jack