Vanguard's John Bogle dies at 89. Father of the index fund, he brought investing to the masses

[IronLionZion]

https://www.cnn.com/2019/01/16/investing/john-bogle-obituary/index.html

New York (CNN Business)John Bogle, who created the first index fund in 1975 and founded The Vanguard Group, died Wednesday at the age of 89.

Bogle is legend in the investing world for inventing a low-cost way for individuals to invest in the broad market, and advocating for their interests.
"Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children's futures," Vanguard CEO Tim Buckley said in a statement. "He was a tremendously intelligent, driven and talented visionary whose ideas completely changed the way we invest. We are honored to continue his legacy of giving every investor 'a fair shake.'"

Vanguard is now the largest investment firm in the world. And index funds account for trillions in assets. One of the largest -- the Vanguard 500 Index Fund -- has more than $440 billion. All Vanguard index funds combined account for more than 70% of the firms nearly $5 trillion in assets, according to the company.
Bogle was revered for his steadfast commitment to the best interest of the investor.

Jack Bogle really made investing affordable and accessible to normal people. And as a bonus, the existence of these massive index funds helps add some stability to our whole market.

Full disclosure: My retirement funds are in Vanguard. I'd recommend it to anyone.

[IronLionZion]

1. There's an excellent interview at the link

also a link to his latest book

[lordsummerisle]

2. A titan in the investing world

Imagine that, someone who made investing easier for ordinary folks...

[customerserviceguy]

3. Earlier last year (2018)

when I rolled my 401K into an IRA, I took the option of sticking a fair amount of my money in a Vanguard 2020 so-called "balanced" fund. Yes, I was excited when it went up $300 in a week, but I was much less than pleased when I pulled the plug a month later, and had a loss of about a thousand dollars.

Fuck index funds, I went back into the money market fund that I had used for the years when the 401K was being built up. And, lo and behold, at the end of 2018, when I went to look at the performance of Vanguard's most popular funds, the money market fund had outperformed every other fund they offered on that list.

If I had avoided this supposedly conservative fund, I would have an extra thousand bucks in my retirement account, but greed for a better return screwed me in the ass.

[question everything]

4. You don't put money in any fund for a month

Yes, even if you already retired, you should stay there for the long haul. But, then depends on your sensitivity for risk. And, of course, you don't want to put all your funds in the market.

Our employer had the 401K with Vanguard, so when we decided, 12 years ago to roll them to an IRA fund, we naturally stayed with Vanguard.

I think that the laws have changed since, about keeping money in employer 401K.

The only problem was that we had some "pre1987" funds that should have been kept separately, since they were after tax.

We have been quite happy with Vanguard over the years. The only thing that we changed, after the 2016 elections, was to switch from 60:40 stock bonds, to 50:50.

[customerserviceguy]

6. I have zero tolerance for risk

That's why I went with a retirement fund that was targeted to 2020, not that far away.

If they can't keep it from losing vast amounts of money during any financial situation, then what use is fund management?

I'm glad I got out when I did, had I stayed until now, who knows how many more thousands they'd have lost?

[A HERETIC I AM]

8. I agree with questioneverything above. Why did you redeem the fund so quickly?

I'm glad I got out when I did, had I stayed until now, who knows how many more thousands they'd have lost?

Well, what difference would it make if it was down as long as you didn't sell? I'm sure you know that the only true loss is a realized loss, and that happens only if you redeem the shares.


If your description of the fund is accurate to the one you purchased, then it is likely ticker "VTWNX" , Vanguard Target Retirement 2020 Fund, Investor Shares

That fund was down 3.76% last year, but averaged almost 8% total return over the last 3 years!

That fund is a "Fund of Funds" meaning that instead of individual positions, like shares of 3M along with a few dozen others for instance, the largest portion of the funds portfolio consists of other Vanguard Mutual Funds. The portfolio of issues contained inside the funds held give this fund roughly a 50/50 split between bonds and equities.

I hate to say this, but I think you made a significant mistake (or at least a $1,000 one) by redeeming those shares so quickly. The fund has done OK for what it is since its inception, and it is sort of contrary to the point of a mutual fund to sell out of such a position after a mere 30 days.

In case you have not seen it, I put up a tutorial post a few years ago regarding Mutual Funds. It may be something you would find interesting.

[customerserviceguy]

10. Two reasons

One, it was going down quite rapidly. Two, I could see that Trump was starting a trade war with China, and I didn't see the market getting any better because of that.

Clearly, I was wrong about the latter point, and I wanted to make sure I still had something besides Social Security and my meager pension (worked there only eight years, and it won't start until Nov 2020) to fall back on.

I had a tiny account on the side that I'd use for "fun money" betting for years, but I liquidated that when I retired two years ago. It wasn't even worth a thousand bucks, which was the amount I was solidly putting into my 401K during seven of those eight years, between my contributions and my employer's match. It wasn't making squat for interest, but at least it was growing by a grand a month.

I wanted to avoid having a month where I'd give up $1K of creature comforts (hey, I could have spent like a drunken sailor if I wanted to!) , and seeing the account be the same as it was the month before. That was the same thing as watching the damned thing go down a grand, only in this case, I didn't have a job shoveling $1000 back into the account in that month. It was easy to feel panic.

You did find the right fund, and while it may well have gotten an 8% return for three years, I wasn't in there for the two of those years that it did the best. You can't buy past results.

In any case, I'm completely done with gambling in the market in any form. Not even a "fun money" account.

[progree]

9. Re: risk

I have zero tolerance for risk

That's why I went with a retirement fund that was targeted to 2020, not that far away.

If they can't keep it from losing vast amounts of money during any financial situation, then what use is fund management?

Very few mutual funds try to time the market. Somehow you have been misled about what the purpose of mutual funds are. They are essentially a collection of stocks from (almost always) at least 30 or more different companies, and are therefore far less volatile than a portfolio comprised of the stocks of a few companies, where one or two companies' especially bad performance can ruin the portfolio's overall performance. And a lot less work than trying to pick and manage a stable of individual stocks.

As for the Vanguard Target Retirement 2020 Fund, Investor Shares (VTWNX) I read that it is "holding approximately 55% of assets in stocks and 45% in bonds." and that this allocation shifts more towards bonds as time goes on. It doesn't try to "beat the market" let alone try to market time. https://investor.vanguard.com/mutual-funds/profile/VTWNX

As for risk, the risk of running out of money in a long retirement is much greater in portfolios that are mostly in bonds or other fixed income than for portfolios that are mostly equities.

As for why we consider equities an investment and not "a casino", is the vast long-term performance superiority of equities over bonds or other fixed income investments.

For example, since its August 31, 1976 inception, the Vanguard S&P 500 index fund (VFINX) with dividends reinvested and after expenses, has returned 10.72%/year on average (through December 31, 2018). It has increased 74.511 fold during this 42.333 year period (1.1072^42.333 = 74.511). ON AVERAGE, it has doubled every 6.8 years. On average.
https://www.thestreet.com/quote/VFINX.html

This page dramatically shows the difference between the performance of the S&P 500 vs. 3 month T Bills and 10 year T Bonds.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

As one example, $100 invested at the beginning of 1928 compounded to $382,850 when invested in S&P 500. This despite being pummeled by the 1929 crash, the Great Depression, the 1974-75 crash, the Reagan double-dip recession, the dot-com crash, and the housing bubble crash.

If instead it was invested in 3 month T bills it would have only compounded to $2,063. And if invested it 10 year T bonds, it would have compounded to only $7,308.

I have more on the subject of why equities here:

https://www.democraticunderground.com/?com=view_post&forum=1014&pid=2212402
https://www.democraticunderground.com/?com=view_post&forum=1121&pid=1306

In my early investing years in the mid-1980s thru the 1990s, I was mostly in bonds and CDs (which were in the double digit yields in the beginning of the period and in high single digit yields in most of the 1990s). Fortunately, I did have about 25% in equities and that did considerably better than the fixed income stuff.

During the 1980s and 1990s, I used to squawk and holler about national and world events and oh God, the market is going to crash and its rigged and blah blah blah. And whenever the market dipped, I was a "see I told you so" type of idiot. And whenever it went up, I was a "it's a bubble" type of idiot. Meanwhile I noticed that my parents were nonchalant about market dips and just plugged away with a wide range of equity investments (mostly).

I was also fortunate enough to be a member of AAII (the American Association of Individual Investors), and eventually began to read more and more articles from the AAII Journal, and that was my primary way that I learned to invest, and to spend less time gnashing my teeth and wringing my hands. Consequently, I fortunately held on to my equities through both the dot com crash and the housing bubble crashes.

I hope you will consider putting at least 25% into equities. Whatever you decide, I wish you the best.

[customerserviceguy]

11. I'm done

No more gambling where the brokers, fund managers, and others make money whether I do or not. If you want to spend the time to become a sharpie at this stuff, more power to you. The average Jane or Joe just isn't going to be able to figure this out, and is far better off by cutting unnecessary spending, and saving as much as they possibly can in things that don't go crash in the night.

I'm thinking about getting my IRA out of Vanguard, I think they're screwing me on interest. During the time I worked at my last job, I was getting about 0.1 to 0.2% interest out of them, but for some reason, my Health Savings Account with Mellon seemed to be able to pay out 0.4% without any fees for me to pay.

[progree]

12. You don't have to spend a lot of time learning to be a "sharpie" - Warren Buffett, the greatest

investor of all times said that he would advise someone who didn't have or want to spend the time to learn to put their equity portion in an S&P 500 index fund. There are many choices besides Vanguard. That advice was years ago, before there were many other very low expense index funds. Like the many total U.S. stock market index funds.

James Cloonan, the founder of AAII, in his book, "Investing at Level 3" (I highly recommend the book), recommends the Invesco S&P 500 Equal Weight ETF (RSP) because the equal weighting gives more prominence to the relatively smaller cap stocks amongst the S&P 500 that have traditionally done better than the largest cap stocks.

As for simplicity, nothing is simpler than buy and hold.

I don't know why Vanguard and Schwab, to name two, have such low interest on their settlement funds. Just transfer those to a regular money market funds when the amounts become large enough to worry about. For example, the 3 Vanguard money market funds are yielding between 2.31% and 2.47% for your ready cash.
https://investor.vanguard.com/mutual-funds/list?filterAllAssetClasses=false&filterMoneyMarket=true&filterFiftyThousandAndUp=true&filterLowCostInvestor=true#/mutual-funds/asset-class/month-end-returns

brokers, fund managers, and others make money whether I do or not

Someones are making plenty of money too -- the banks and brokerages -- when you put your money in a money market fund. And you get a pitiful 2 - 2.5 percent or so. Certainly not a good deal for the average Joe or Jane.

The expenses of the Vanguard S&P 500 index fund is 0.04%/year. If the average annual gain is 10%, as it has been historically, you keep the other 9.96%. That's sure better than settling for 2 - 3% on a money market or CD.

The Schwab S&P 500 index fund (SWPPX) and the Fidelity 500 index fund have an even lower 0.02%/year in expenses. You keep the other 9.98% (again given the historic average annual 10% return).

I'm sure the total market index funds, which I consider a better choice for a single fund (because they include small caps) have the same low expense ratios.

[customerserviceguy]

13. Again

you're talking about history that I cannot buy. I feel that we are in the very beginning of a gridlock period where nobody accomplishes anything, which may end when there is a Democratic Congress and a Democratic President. At that point, I will evaluate my options. I appreciate your advice and encouragement, but so far, the stock market has mostly burned me, and I will remain wary for the rest of my life.

[progree]

14. Again

Good luck and take care.

[IronLionZion]

5. Index funds are meant for long-term investment over many years or decades

based on the fact that in the long term, the market will always go up.

2018 happened to be a down year for both stocks and bonds because of rising interest rates and Trump's trade wars. Believe it or not, by having your money in that fund you actually did better than at least half of all investors in stock and bond markets. There are many more up years than down.

[customerserviceguy]

7. Nope, screw the funds

I built that retirement account up the old fashioned way, by upping my payroll deductions to the point where it nearly hurt. Now that I'm not working, I can't afford to have piss-poor management of a fund piddle the rest of it away.

The whole flipping thing is nothing but a casino, and the house always wins in the long run.

[IronLionZion]

15. John Bogle Tribute on Vanguard

https://about.vanguard.com/who-we-are/a-remarkable-history/founder-Jack-Bogle-tribute/