Ring Out the Old
Mike - Jan 02, 2014
December 31, 2013
TO VANGUARD VETERANS AND PRINCIPALS:
“Ring Out the Old, ring in the new,” Tennyson wrote, and continued, “ring out false pride in place and blood; . . . ring in the love of truth and right; ring in the common place of good.”
In that spirit, as the old year 2013 ends I attach the following items from the financial press.
1. Vanguard raked in almost every dollar that went into U.S. equity funds this year. (InvestmentNews, December 18, 2013).
Here, the article is speaking of both actively managed and traditional index funds (TIFs) investing in U.S. equities, excluding exchange traded funds (ETFs). The total cash flows: Vanguard, $41.4 billion of the $42.4 billion total. (Our total includes $36 billion in our index funds and $5.4 billion in our “active” funds.) “Thanks to Mr. Bogle’s creation, the index fund,” journalist Jason Kephart says, “the U.S. Mint may have to replace George Washington with Mr. Bogle on all its quarters.” (Please don’t hang by your thumbs waiting!)
2. Warren Buffett (again!) to the Motley Fool, (December 30, 2013). “If you invested in a very low-cost index fund . . . you’ll do better than 90% of [investors]. . . . Just pick a broad index like the S&P 500 . . . I recommend John Bogle’s books. Any investor in funds should read them. They have all that you need to know.”
3. Bogle urges regulators to move on fiduciary. (InvestmentNews, December 16, 2013). I’m accurately quoted as saying, “if you’re touching other peoples’ money, you are a fiduciary . . . Put the principle first.” (Just what Tennyson said: “Ring in the love of truth and right.”)
Enjoy these three articles. Happy New Year, and best to all.
Morningstar Interview at 2013 Bogleheads Conference
Mike - Oct 24, 2013
Bogle’s Expectations for Stocks and Bonds
Be Sensible About Rebalancing
Indexing Always Pays Off
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,
This Week in the Boardroom
Mike - Oct 17, 2013
Jack was recently interviewed by TK Kerstetter for the web series This Week in the Boardroom.
A Memo from Jack Bogle
Mike - Oct 17, 2013
October 10, 2013
To: Veterans and Principals
From: John C. Bogle
I’m back on the speaking circuit a bit (more to come on that later this month). I wasn’t sure whether or not to circulate “Financial Management: Profession or Business?”, the keynote speech I delivered on September 25 at the 70th Anniversary of the Philadelphia CFA Society (Chartered Financial Analyst).
But when the SRO audience at the National Constitution Center gave me a huge ovation for my efforts, and Philadelphia Inquirer columnist Joe DiStefano described the speech as a “stem-winder.” (His column is also attached.) I decided it was better for you at least to have the opportunity to peruse it.
Funny thing: audiences (especially this one) seem to like being critiqued, and inspired to lofty goals.
Think about it.
6 tips from Jack Bogle on teaching your kids how to invest
Mike - Oct 17, 2013
Jack was interviewed by Elizabeth MacBride for this article on CNBC.com about teaching your children how to invest.
Happy Birthday to Us!
Mike - Sep 26, 2013
September 26, 2013
To: Vanguard Veterans and Principals: Happy Birthday to Us!
September 24, 2013 marked the 39th anniversary of the birth of Vanguard, incorporated on September 24, 1974. We were tiny then, with only 28 crew members on board when we began operations in May 1975. The environment was difficult in those early days—we were suffering regular net cash outflows month after month. But we were all excited to be undertaking “The Vanguard Experiment” in a new model of mutual fund governance.
In this industry’s then-half-century of existence, the idea of a mutual mutual fund organization had never been tried before. Our formation was novel, contentious, and politicized, and in truth our continuing existence was in doubt. Few in the finance community noticed the new firm, and those who did belittled it.
But radical changes in finance were on the way. The creation of the world’s first index mutual fund (“Bogle’s Folly”) followed in short order, a direct result of our unique “at-cost” structure. Going “no-load” soon after and eliminating our entire broker-dealer distribution network was without precedent in the industry. The introduction of our novel defined-maturity bond fund strategy followed, changing almost overnight the bond fund landscape of the period. Other departures—less radical—followed in the years ahead.
It seems to me a long time ago when Vanguard began, but I still recall the trials and tribulations, the slings and the arrows, the successes and the profound disappointments, the hopes and fears that punctuated our nearly four-decade history. But it’s a treat to see that in recent weeks our astonishing acceptance in the marketplace continues to be celebrated in the media. I have attached just four recent examples:
- 1. Motley Fool “Father of the Index Fund,” commemorating Vanguard’s 39th anniversary and generously crediting Vanguard for “creating an entirely new way to invest.”
- 2. Philadelphia Inquirer exclusive on the human aspects of my long career, headlined “John Bogle’s Enduring Wisdom.”
- 3. Morningstar Rekenthaler Report describing your founder as one “who entered 2008 as the mutual fund industry’s leading figure, whose position, five years later is that much stronger . . . his legacy, never in much doubt has now been totally cemented.”
- 4. The Wall Street Journal, September 14-15, 2013 “What We Learned From the Financial Crisis,” emphasizing the importance of “character” in investing. For whatever it may be worth, I was highly complimented to have this major story conclude with a paragraph citing words from a speech I gave almost 15 years ago (!): “To earn the highest returns that are realistically possible, you should invest with simplicity. Rely on the ordinary virtues that intelligent investors have relied on for centuries: common sense, thrift, realistic expectations, patience, and perseverance. Call them ‘character.’ And in investing, over the long run, character will be rewarded.”
Please revel with me as we mark our 39th birthday and thank you all for your commitment to our long-standing mission of serving investors.