The worlds greatest investors: John C Bogle

John C Bogle’s belief in passive investing was widely ridiculed by many on Wall Street, but he would later be vindicated over and over.


John C Bogle: vindicated in his belief in passive investing

John C Bogle was born in 1929. He first became interested in the mutual fund industry while at Princeton. He wrote an undergraduate thesis, in which one of his conclusions was that fund managers could not claim to be able to beat the market (he used the S&P 500). After graduating in 1951, he joined wealth manager Wellington, eventually taking over as chairman.

In an attempt to expand rapidly, he masterminded a merger with another company and refocused on growth stocks, which were extremely fashionable. However, when the market crash of 1973-74 arrived, growth stocks collapsed, Wellington was hit hard, and Bogle was fired.

How did his strategy change?

So in 1975, he set up Vanguard, and in 1976, launched First Index Investment Trust, the world's first fund to passively track a major stock index the S&P 500.

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Did it work?

However, by the time he stepped down as Vanguard's chairman in 1999, his key fund (now named the Vanguard 500 Index) had grown from having just $11m in assets under management to $100bn. And his passion for passive investing has been vindicated over and over one recent study by S&P Dow Jones Indices found that 99% of US equity fund managers failed to beat the index over the last decade. In this context, the Vanguard Fund was one of the best investments anyone could have made over that period.

What other advice did he have for investors?

Finally, just as he thinks that it is nearly impossible to consistently pick winners, it is also very hard to time the market. "Buy and hold" is best, he believes.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri