Updated at 9:47 a.m. ET Thursday
Jack Bogle, the founder of Vanguard who made investing and retirement affordable for millions, died Wednesday at the age of 89, the company said.
Bogle transformed the way people invest their money when he created the first index mutual fund for individual investors in 1975.
He believed that investors should own a mix of bonds and stocks but shouldn't pay investment managers to pick them, so he created funds that represented a basket of stocks, such as those in the S&P 500 index.
That approach to investing became what economists regard as the bedrock, most powerful tool for how everyday Americans should save and invest for the future. And over the past four decades, Bogle has drastically changed the way millions of people all over the world save and invest their money.
To see the impact he has had, you need to look no further than your own retirement account — chances are you have more money in there because of Bogle.
That's because by creating that first index fund back in the 1970s, Bogle started a revolution of super-efficient low-cost investing — taking on Wall Street firms and the high fees they charge investors.
Bogle also became a champion for the little guy investor, perhaps because he knew what it was like not to have enough money. His family lost everything they had in the Great Depression, "so I grew up having to earn what I got, help out with family expenses," Bogle told NPR several years ago. "I started working when I was 9 years old."
Today Vanguard, the company Bogle founded, manages more than $5 trillion. Some of that could be your retirement savings. And the firm is structured essentially as a nonprofit.
Vanguard and its index funds are built upon a pretty simple insight.
"We live in this mythical world where we kind of believe the American way is if you try harder, you will do better — that if you pay a professional to do something, it will pay off," Bogle told NPR in 2015. "And these things are true — except in investing!"
He realized that the stock market doesn't really have that high a return. So the fees people pay have an enormous impact on their investing returns. "Cost turns out to be everything," he said.
"It's just what I've often called the 'relentless rules of humble arithmetic,' " Bogle said. Those fees can eat up half of the money you would otherwise have down the road. "The tyranny of compounding long term costs because they eat you up," he said.
Bogle showed that instead of hiring mutual fund managers to try to pick stocks, 80 percent to 90 percent of the time, you're going to make more money just buying the entire stock market. And that's what a broad-based index fund lets you do — just buy a big list, an index of stocks, of, say, the biggest companies in the U.S.
Investing that way can be 10 to 20 times cheaper than traditional mutual funds with high fees. And Bogle showed with the index fund approach you're much more likely to make more money over time.
That's why among the most popular investments now are low-cost funds that represent the S&P 500 index of the largest American companies. The pressure that put on the financial industry to lower costs has also brought fees down on many other types of investments — far beyond Vanguard's own index funds.
And all this is why Bogle is celebrated as the George Washington of an investing revolution.
"Jack Bogle has probably done more for the American investor than any man in the country," is how billionaire investor Warren Buffett summed it up at a Berkshire Hathaway annual shareholders meeting in 2017.
Buffett invited Bogle there to honor him. "I estimate that Jack at a minimum has left in the pockets of investors, he's put tens and tens of billions into their pockets and those numbers are going to be hundreds of billions over time," Buffett said. He called Bogle a "hero."
But while Bogle was a critic of greed and excess on Wall Street, he was also a big fan of capitalism. He spoke out, calling for young people — the leaders of tomorrow — to be more idealistic, follow his lead and clean up the mess: "The soul of capitalism, if you will," he said. "It's there to be fixed."
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