January 22, 2019

John C. Bogle – An Investment Genius

John C. Bogle – An Investment Genius

If you asked most people who they thought was the world’s most successful investor, you could expect many of them to say, Warren Buffett. However, there is someone else who has had a more profound effect on the investment world than anyone else, and his name is John C. Bogle.

As founder of Vanguard, the second-largest mutual fund in the world, Bogle has transformed the fund management industry, by launching the pioneering index mutual fund in the 1970s.

In order to gain insight into this legendary trader’s mind and learn what makes him so successful, it is necessary to examine his early life, education, introduction to business and trading style.

Who Are You John C. Bogle?

John Bogle’s early life was anything but easy since he grew up in a family that had been affected by the Great Depression. Still, his hard work got him enrolled at Princeton University, where he focused primarily on mutual funds.

In 1952, he graduated magna cum laude with his thesis titled “The Economic Role of the Investment Company”. The ideas contained in the thesis would then contribute to his later career, his lifelong investment philosophy and his development of index mutual funds.

Between 1951 and 1974, Bogle was employed by Wellington Management, where he swiftly rose through the ranks. Famously, Bogle challenged the Wellington Management strategy where the company concentrated most of its efforts investing in a single fund.

Bogle then founded his own mutual fund company, the Vanguard Group, as a vehicle for his new ideas regarding investing and fund management. The Vanguard 500, which made its debut in 1976, was Bogle’s attempt to introduce index investing to retail investors.

He wanted to present this type of investing as a high-return option to all investors, even those without the excess money that the wealthiest investors had, and he wanted to show that anyone could profit from the financial markets.

In addition, Bogle was a champion of no-load mutual funds. Currently, Vanguard manages more than $4 trillion in investments for millions of its global customer base.

Bogle was the Chairman and Chief Executive Officer of Vanguard from its establishment until 1999 when he decided to retire from his active role in the firm.

During the same year, Bogle was named by Fortune magazine as one of their four “investment giants” of the century.

Despite leaving his chairman and CEO positions, Bogle stayed on to head the firm’s Bogle Financial Markets Research Center, where he remains actively involved as a speaker on a range of financial and investment matters as well as an author.

Bogle’s Investment Philosophy

To create his concept of the broad-based index mutual fund, John C. Bogle concentrated on the low-turnover, low-cost, passively managed funds.

While many investors look to invest cleverly and beat the markets, the index fund would, instead, follow the movements within the greater share market over the long term.

Bogle believes that being cheap and boring is much safer and more important than risking everything and trying to be clever.

Bogle recommends the following considerations for individual investors who would like to grow their assets:

  • Simplifying the investment strategy, for instance, he discourages frequent rebalancing of asset allocation.
  • Reducing the costs and expenses that are related to investments.
  • Keeping the long-term investment horizon in mind.
  • Avoidance of emotional and instinctive trading. All investments need to be based on rational analysis of market conditions.
  • Index investing as a universal strategy that can benefit individual investors.

Bogle’s strict focus on the U.S. financial market in his own portfolio has attracted some criticism and caused confusion among contemporary investors.

However, he asserts that his trading approach is not necessarily U.S.-centric, but that he puts his money into investments that he knows best – American companies. Clearly, this is working for him!