To: Vanguard Veterans and Principals
From: John C. Bogle
Date: May 12, 2015
Re: Recent Vanguard News Items
The media attention on our structure and strategies goes on unabated—or maybe has even increased in intensity. I attach some of the major items for the period ended May 8, 2015.
- “Financial Pros Choose Indexing for Retirement Savings.” In April, Bloomberg Business cited studies showing that fully 70%(!) of financial professionals who recommend mutual funds—“people who are paid to make money for investors”—side with our index philosophy. (42% of all investment pros choose index funds, versus only 18% who recommend actively managed funds.) Of the remainder, 17% recommend individual stocks and bonds; 14% recommend real estate.
- “Bogle vs. Grant in the Great Fund Debate.” Jason Zweig, The Wall Street Journal, May 3, 2015. (Despite the photo, I was not yelling! Photoshop?) Jason may have seen the result as a “split decision;” to me, the winner was obvious. In his newsletter, Grant’s Interest Rate Observer, Jim Grant conceded that the 500 Index Fund’s superiority over active managers “may be generally true … for the average lay public investor … [and] for the run-of-the-mill … professional investor.” But for “not a few people in this room, it certainly isn’t true.” (He names no names.) In the Philadelphia Inquirer, Joseph N. DiStefano presents a detailed summary of the debate. It’s a largely accurate and amusing, if hardly conclusive, story.
- “The Warren Buffett Bookshelf.” The Wall Street Journal cites 11 of Mr. Buffett’s favorite books, by Benjamin Graham, Phillip A. Fisher, John Brooks, John Maynard Keynes, and yes, John C. Bogle, whose The Little Book of Common Sense Investing was the only book recommended in Mr. Buffett’s recently released annual report of Berkshire Hathaway.
- Two interviews by Olivier Ludwig of ETF.com—“Broker Behavior Costs Investors” and “Investors Are Now Driving Ethics”—focus on the issue of fiduciary duty, and conclude with the now-familiar phrase, “If you simply own the (broad stock) market in a cheap index fund, it is guaranteed to give you your fair share of the market returns.”
- “Why Hair-Trigger Stock Traders Lose the Race.” The Wall Street Journal, April 10, 2015, Jason Zweig. Jason illustrates the rapid trading in ETFs, (turnover 1244% last year), and warns that, “in the long run, he who trades the least will end up with the most.” (He fails to note the huge increase in ETF trading volume: for the hundred largest ETFs last year, $16 trillion, almost as large as the $18 trillion volume for the 100 largest common stocks.)
- May 1, 2015, Jason Zweig wrote a story about the end of fixed commission on stock trades, on May 1, 1975 (“May Day”). “Remembering How May Day Remade Wall Street.” It includes a comment from me about the self-interest. (I was a vigorous and unpopular proponent of the change). Jason also notes our own May Day, one of the anniversaries we celebrate. Together, these articles should add to your understanding of present tradition and past history.
- “. . . Just buy an index fund.” The caption of a cartoon published by Grant’s Interest Rate Observer on May 1, 2015, humorously (I guess!) citing the conclusion of Warren Buffett and Charlie Munger at the recent Berkshire Hathaway Annual Meeting . . . and a fine way to conclude this note.
Best,
Jack