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To: Veterans and Principals<\/span><\/b><\/p>\n From: John C. Bogle<\/span><\/b><\/p>\n Date: March 4, 2014<\/span><\/b><\/p>\n Re: Banner Days for Vanguard!<\/span><\/b><\/p>\n \u00a0<\/span>Part I<\/span><\/b><\/p>\n Ever since Vanguard began, almost 40 years ago, we\u2019ve had many great \u201cPR\u201d conquests. But I can recall no short period during our long history<\/i> in which our founding principles and values received such positive attention as in the past several weeks . . . so much so that I\u2019m sending you three different mailings during the course of this week. Part I<\/b> begins the series with reactions to my landmark article in the January\/February 2014 issue of the Financial Analysts Journal<\/i>.<\/span><\/span><\/p>\n I sent a copy of the paper, \u201cThe Arithmetic of ‘All-In’ Investment Expenses<\/a><\/b>,\u201d to each of you on January 2, 2014, and it remains available on my eblog, <\/span><\/span>www.johncbogle.com<\/span><\/a>.<\/span><\/span><\/p>\n You may recall that the paper demonstrated that investors in tax-deferred retirement plans can increase their wealth accumulation by 65%(!), simply by using a low-cost stock index fund rather than a typical actively-managed stock fund.<\/span><\/span><\/p>\n In an earlier paper, Nobel Laureate William F. Sharpe had estimated that enhancement at \u201cmore than 20%.\u201d However, he applauded my \u201cwonderful combination\u201d of expense ratios and several other costs of investing that are too often ignored. And (as I mentioned earlier), he loved my final sentence \u201cDo not allow the tyranny of compounding costs to overwhelm the magic of compounding returns.\u201d<\/b><\/span><\/span>[1]<\/a><\/p>\n But perhaps the greatest bonus of the paper for us was the fine essay in the Buttonwood column of the Economist<\/i> of London, entitled \u201cAgainst the Odds<\/a>,\u201d<\/b> illustrated (appropriately, I think) with a slot machine taking in dollars and shooting out a penny. In his column, \u201cButtonwood\u201d notes potential criticisms of my work, but concludes that \u201cthe arguments do not make much of a dent in Mr. Bogle\u2019s case.\u201d<\/span><\/span><\/p>\n Two points: One<\/b>, articles in professional and academic journals\u2014given their relative rarity and detailed process of review and approval\u2014are perhaps the most effective vehicle for spreading investment ideas. Two<\/b>, the Economist<\/i> is noted for the highest standards of journalism, and a level of intellectual depth and integrity only rarely matched by other publications.<\/span><\/span><\/p>\n Of course I\u2019m pleased that the FAJ<\/i><\/b> article represents my eleventh work in this professional publication and its competitor, Journal of Portfolio Management<\/i>; and that the Economist<\/i> has now done perhaps another eight major stories on my work over the years.<\/span><\/span><\/p>\n The attention on my FAJ<\/i> essay has also brought further attention to Vanguard\u2019s guiding principle that \u201cCosts<\/b> Matter.\u201d<\/b> In last Saturday\u2019s New York Times<\/i> (March 1, 2014), for example, journalist Paul Sullivan (who said nice things about my philosophy in another recent article) gave my FAJ<\/i> essay a nice boost<\/a>, noting that \u201c. . . low-cost [index] funds in tax-deferred retirement account could add as much as 65% to a person\u2019s savings over a high-cost actively managed fund.\u201d\u00a0<\/span><\/span>\u00a0<\/span><\/p>\n Even earlier, on January 28, 2014, author, veteran journalist, and financial adviser Daniel Solin added his voice in U.S. News and World Report<\/i>. In an article entitled \u201cWhat Wall Street Doesn\u2019t Want\u00a0Investors To Know<\/b><\/a>,\u201d Mr. Solin carefully outlined the points in my FAJ<\/i> paper, and then added a wonderful summary of the important \u201ctakeaways\u201d that I\u2019ve done my best to instill here as part of our corporate character. I\u2019m confident that you\u2019ll find his essay well worth reading . . . and re-reading.<\/span><\/span><\/p>\n And there\u2019s much more to come.<\/span><\/span><\/p>\n Best to all. Part II will follow tomorrow.<\/span><\/span><\/p>\n <\/p>\n \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Jack<\/em><\/b><\/span><\/p>\n