"Investing is not nearly as difficult as it looks," the business magnate and philanthropist once said. "Successful investing involves doing a few things right and avoiding serious mistakes."
Bogle did a lot of things right during his career, including launching Vanguard Group in 1974, which is credited with popularizing index funds.
The S&P 500 is the most popular index to track, with a historical annual return of 10%.
The benefits of index investing include low cost and convenience; the method also requires little financial knowledge and provides diversification for portfolios, according to the Corporate Finance Institute.
Disadvantages include the lack of protection against market drops, no choice about which securities are included, and by definition the method cannot beat the market return, the group says.
Bogle named his company after the HMS Vanguard, Lord Nelson’s flagship in the British victory over the French in 1798.
Vanguard ran into some rough waters early on when critics labeled the company's First Index Investment Trust as “Bogle’s Folly." They maintained that the trust aimed only for mediocrity and missed money-making opportunities outside its narrow focus.
Jack Bogle, founder of the mutual fund company Vanguard Group, speaks at the John C. Bogle Legacy Forum, named in his honor, in New York on Jan. 31, 2012. Bogle popularized index investing. Photo: Peter Foley/Bloomberg via Getty Images Bloomberg/Getty Images
Vanguard CEO: Firm designed for investors
But Bogle persisted, believing, as he said, that "time is your friend; impulse is your enemy."
And people started coming around to his way of thinking as his followers dubbed themselves “Bogleheads” and invested in index funds for the long haul.
Bogle, who died in 2019, said that index investing “is the ultimate buy-and-hold, all-American business strategy."
"It is the gold standard; there is no way around it," he said. "Mathematically, indexing wins. And if the data don’t show indexing wins, well then, the data are wrong.”
Vanguard has grown to become the world's largest provider of mutual funds and the second-largest provider of exchange-traded funds, right behind BlackRock's iShares.
The company, which is marking its 50th anniversary on May 1, has announced the broadest round of fee cuts in its history.
Vanguard reduced fees for 168 mutual fund and exchange-traded share classes across 87 funds by 0.01% to 0.06% as of Feb. 3.
The fee reductions are expected to save investors more than $350 million this year alone, the firm said.
"This fee cut speaks to what our founder, Jack Bogle, set out to do, which is create an investment company that was designed for one constituency, and that's our investors," Chief Executive Salim Ramji said in a company video.
To make his point, Ramji quoted Bogle's line "you get what you don't pay."
"There's a false dichotomy between 'do you want great performance high quality or do you want low costs?'" he said. "With Vanguard you can get both. This is over $350 million of estimated savings, the largest expense cut in our history."
"Since 1975, we've actually reduced our funds expense ratios more than 2,000 times," he added.
"Our financial model and structure creates a virtuous cycle of economies of scale, where we can continue to reduce fees and invest in things like technology and talent," he continued. "And as a result, our edge just keeps getting sharper."
Analysts see the move as a win for investors, while throwing down the gauntlet to Vanguard's competitors.
“As one of the world’s largest asset managers, Vanguard’s move will pass on significant savings to investors, while also putting significant margin pressure on ETF competitors,” Aniket Ullal, CFRA’s head of ETF research, wrote in a note, according to Bloomberg.
“It will be interesting to see how the other leading ETF issuers respond to Vanguard’s aggressive fee reduction strategy," Ullal continued. "It appears likely that only BlackRock has the scale to sustain such low fees in the core, indexed segments of the market.”
KBW analyst Aidan Hall said that BlackRock’s responses could range from cutting fees on its so-called core ETFs to a wholesale repricing of its lineup. While the latter is “highly unlikely,” he said, pursuing those options could shave 0.5% to 5.6% off BlackRock’s 2026 operating income.
Vanguard economist: Don't overweight tech
Vanguard said in a recently released study that the global monetary easing cycle will be in full swing this year, with inflation in most developed economies now within touching distance of central banks’ targets.
Joe Davis, Vanguard's global chief economist, has suggested that investors should avoid overweighting tech stocks.
Davis said that diversifying investments across the entire U.S. equity market would better capture potential growth and productivity increases beyond just technology.
Last month, the Securities and Exchange Commission said Vanguard would pay more than $100 million to settle charges for misleading statements related to capital gains distributions and tax consequences for retail investors who held Vanguard Investor Target Retirement Funds in taxable accounts.
The settlement amount will be distributed to harmed investors, the SEC said.
