Memo to Veterans and Principals
Mike - Jul 24, 2015
TO: Veterans and Principals
FROM: John C. Bogle
DATE: March 16, 2015
RE: Financial Times Op-Ed
I penned a commentary for today’s Financial Times “Fund Management” section about the role of exchange-traded funds in the growth of indexing. I describe my concerns with the rapid trading so common with ETFs. The first and largest ETF—the $190 billion SPDR S&P 500 ETF—is the most widely traded equity in the world, averaging over $20 billion in turnover every day. As I wrote in the article, “broad-market exchange traded funds are fine, as long as investors don’t trade them.”
The front page of the FTfm section picked up that commentary in an article by journalist Chris Newlands. The headline of the article is rather over-the-top—“John Bogle renews attack on exchange traded funds”—but the facts presented by Mr. Newlands are accurate.
I like to think that Vanguard is a firm in which constructive debate is tolerated, perhaps even encouraged. My piece in today’s FTfm is a prime example of a case where, as Bill McNabb recently said, “reasonable people can disagree.”
A Memo from John C. Bogle
Mike - Oct 22, 2013
October 21, 2013
To Veterans and Principals,
The press reports mentioning Vanguard just keep pouring in! Here are a few that may be of special interest.
WSJ-1: “Give me a B . . .” Monday, October 7, 2013. An impressive piece about the Bogleheads coming to visit to our campus. A capacity crowd of 209 Bogleheads joined us on October 16-18, representing a “fan club” that now includes 37,000(!) members.
WSJ-2: A Nobel for the Random Walk . . . Tuesday, October 15, 2013. This op-ed piece claimed that “one beneficiary of Mr. Fama’s insight [on the ‘Efficient Market Hypothesis’] was John Bogle.” Alas, wrong on two counts: (1) I have never accepted the EMH and don’t today. (2) It was Nobel Laureate Paul Samuelson who was the major inspiration for the creation of the first index fund. So . . .
WSJ-3: Eugene Fama and Efficient Financial Market Theory. Saturday, October 19, 2013. My “no-punches-pulled” response to that op-ed, reaffirming my own CMH (look it up!) and its supremacy. I quickly received an apologetic note from the author of the original piece, reading simply, “I blew it.”
WSJ-4: Should You Invest for the Fun of It? Saturday, October 19, 2013. A long piece of journalism, with numerous quotes from former Vanguard director Burton Malkiel and me. To sum up: “funny money” should amount to no more than 5% of your investments . . .
NYT-1: The Erosive Effect of Expenses . . . Wednesday, October 16, 2013. From a special Times section on WEALTH, some of my comments on why investors must consider not only the drag of fund expense ratios on their long-term investment returns, but also the “hidden” costs of fund portfolio transactions, cash drag, and sales loads and fees for distribution and advice.
M*01: Bogle, Buffett, Dad: Readers’ Top Investment Influences. Sunday, October 6, 2013. From Morningstar’s Christine Benz, yet another poll, this one citing the opinions of investors naming the individuals who’ve had the biggest influence on their investment philosophies. You’ll have to read this short piece to see who it was that edged out the great Buffett for the top spot.
MF-1: Investing Legend . . . Wednesday, October 2, 2013. A nice piece that honors Vanguard’s recent 39th birthday, and provides some welcome perspective on index funds, and on staying the course. “The trick to what I’ve done in investing is I don’t do anything. I look, and watch, and observe, and laugh.”
Whether we should wish it to or not, the spate of positive mentions of our firm and our philosophy seems unlikely to slow down. Phew!
Best to all,
A Memo to Vanguard Veterans and Principals
Mike - Sep 13, 2013
To Vanguard Veterans and Principals
I’m sending along some of the press clippings that you may have missed during the dog days of summer, now rapidly coming to a close:
M/1. Bogle Weighs In On Key Issues. Morningstar’s summary of my extensive interview at the 25th Annual Morningstar Investment Conference. Responding to tough questions, I gave blunt—but, I hope, tactful—answers.
F/1. Enrich Your 401(k) In One Simple Move Using The Bogle Gospel. A nice article from FORBES on August 30. Little you’ll see there will surprise you, except that my correcting (sort of) the math of a Nobel Laureate may be a first.
FT 1/2/3. Vanguard’s Bogle Responds To ‘Parasite’ Tag. The first of five articles published by the Financial Times during the late summer, my somewhat sharp response to a London money manager’s opinion piece alleging that index funds are Passive Parasites . . . A commentary on this debate—An Elegantly Simple Formula Shows Why Passive Investing Will Earn Higher Returns Than Active Investing—is attached as well.
FT 4/5. Hidden Fund Costs Are Hurting Investors. Separately, the Financial Times relied on research that I recently completed for the Financial Analysts Journal. Included is an interesting ETF story whose headline—Performance will Replace Price as Weapon of Choice —may well be correct.
FA/1. Bogle Pressures SEC On Fund Firm Fiduciary Rule. A rare story from Fund Action on the work that I’ve been doing to persuade the SEC to deal with the (almost) industry-wide conflict between the interests of fund managers and the interests of fund shareowners.
HK/1. From Hong Kong, The Ten ___iest People On Wall Street. It may well be that Maria Bartiromo deserves to be ranked #1, but it’s a tad idiotic for me to be #6, especially compared to Tim Geithner (#7) and Jamie Dimon (#8), both of whom are three decades younger than I. (To avoid the possibility of violating company policy, I will not provide translation.)
These are interesting times. Be sure to enjoy them.
Wall Street Journal Letter to the Editor
Mike - Jun 06, 2013
Jack Bogle’s letter to the editor of The Wall Street Journal regarding a recent opinion piece about hedge funds was published in the June 6, 2013 edition.
Hedge Funds Are Hardly a Panacea (subscription required)
I fear that The Wall Street Journal’s opinion piece by hedge-fund specialist Bob Rice (“The Hedge-Fund Investment Puzzle,” June 1) conceals more than it reveals.
Yes, as he writes, “it is plain common sense” to seek “downside protection, strategies that tend to zig when markets zag, and broader opportunities for profit.” But while the idea of market timing is indeed simple, many hedge fund managers have tried, but precious few have succeeded.
Citing Benjamin Graham as the first “hedged fund” operator is an especially unfortunate example. “The trick,” Mr. Rice writes, was Graham’s “clever way to make money . . . whether it [the market] continued to rise, or started to fall.”
How did the hedged strategy work out in the bull market of the Roaring Twenties and thereafter? Thanks to Joe Carlen’s recent book, “The Einstein of Money,” we know the answer. Mr. Carlen carefully documents the returns earned in the “Benjamin Graham Joint Account” (the predecessor to Graham-Newman Corporation).
From 1929 through 1932 inclusive, the Graham account turned in a loss of 70%, compared to a loss of 64% for the S&P 500 Index. (Dividends are included in both cases.) “The strategy unraveled quickly,” Mr. Carlen writes. “There was no longer any reliable advantage to be gained from that kind of hedging.”
Despite Mr. Rice’s high confidence in hedge funds (based on unspecified data), forewarned is forearmed!
John C. Bogle
Valley Forge, Pa.
Mr. Bogle is the founder of the Vanguard Group.
From John Bogle
Mike - Sep 08, 2011
September 6, 2011
To Veterans and Principals:
It seemed only appropriate to celebrate (as it were) the 35th anniversary of the index fund, the first major innovation of the then-tiny and young Vanguard Group. So last week, I wrote an essay on the creation of the fund and its initial public offering, which took place on August 31, 1976.
I sent the essay to the op-ed editors of The Wall Street Journal, hoping they could help me get it placed in the “Review” section, which runs on Saturdays. But they wanted to publish a significantly shortened version on “their” page, so I (reluctantly) did the merciless editing required.
I’m attaching the the piece as it appeared in the Journal on September 3, but also the full essay as originally penned. I like my title better (of course!); and I loved the flourish of my final sentence, sadly absent from the published version.
Can you even imagine Vanguard without index funds?
Wall Street Journal Op-Ed on the Birth of the Index Fund
Mike - Sep 06, 2011
An op-ed written by Mr. Bogle was published in the September 3, 2011 edition of the Wall Street Journal. The article can be found here.
John Bogle New York Times Op-Ed
Mike - Jul 06, 2011
Mr. Bogle contributed an op-ed in the May 15, 2011 edition of the New York Times. The op-ed can be found here.
From John Bogle
Mike - Jun 27, 2011
August 27, 2010
To Principals and Veterans:
In case you missed my op-ed in this morning’s Wall Street Journal, I’m attaching a copy. I’m pretty sure you’ll enjoy it. Also attached is a lovely article from the coming edition of Forbes.
New From Mr. Bogle
Admin - Jan 26, 2010
Mr. Bogle recently contributed an op-ed to the Wall Street Journal.
He spent an hour on Tom Ashbrook’s show, On Point.