A Remembrance of John Bogle

You may have heard that John Bogle died this year. Or, you may have no idea who he was.

The financial industry has produced few heroes; instead, it’s notable for its robber barons, thieves, and unrestrained greed. Or, as Bogle more politely said, “On balance, the financial system subtracts value from society.”

Bogle was the founder of Vanguard and arguably, the financial industry’s only hero. I’m not exaggerating to suggest he is singularly responsible for substantially lowering the cost of investing for every American through two innovations that he created — the low-cost index fund and the mutually-owned mutual fund company.

I’ll skip the obituary as there are many you can read but I do want to note how much Bogle has saved individual investors so you’ll better understand why you may want to thank him. The cost of investing in mutual funds is substantially lower today than if Bogle had never created index funds and Vanguard’s non-profit structure. Even if you don’t invest your 401K or other funds at Vanguard, you’ve benefited as he forced other financial firms to respond with lower fees, however reluctantly.

I’d conservatively estimate that investment fees would be at least 1% higher had Bogle never created Vanguard. There is somewhere around $15 trillion invested in stock and bond mutual funds in the U.S. A reduction of 1% per year results in aggregate savings of $150 billion per year flowing from Wall Street to Main Street. Even for a plutocrat, that’s real money and helps explain why the financial industry never viewed him as heroic.

Consider what this means for an individual investor over a lifetime of savings:

• Let’s say you manage to amass $1 million in your 401K; Bogle gave you $10,000 more retirement income per year.
• Put another way, with just a 1% reduction in fees per year, your wealth would grow ~25% larger by retirement age; Bogle made you 25% wealthier.

Thanks, Bogle.