performances make stars but records make legends that's true in sports and in
financial markets alike. we admire those who became billionaires with their
investment performances, but in terms of saving money for others one man holds a
record that may never be beaten. Jack Bogle: it's estimated that he saved 1
TRILLION dollars to investors. So how did he do that? The story starts in 1951 when
he finished his theses on fund management at Princeton with the
following advice: 1 a reduction of sales loads and management fees and 2 make no
claim for superiority over the market averages. Walter Morgan the CEO of
Wellington a fund manager was impressed. He offered him a job there. Bogle did so
well that he eventually became CEO himself. It was a traditional fund
management company picking stocks to beat the market but the belief that
things could be done differently was always on his mind
and the research he kept reading made the concept stronger and stronger people
like Samuelson a future Nobel Prize winner were challenging the status quo
books like a random walk down Wall Street showed and I quote most everyone
is wasting their time trying to beat the stock market and call for a cheap index
fund or the losers game which was comparing the stock market to a casino
where odds were against investors because of their costs the data
confirmed the concept from 1945 to 1975 S&P 500 outperform the average fund by
1.6 percent per year in 1975 he decided to launch convinced he could deliver a
better performance than most fund at a fraction of the cost
he built a pitch to show that great rewards grow from small differences in
cost a 1 million dollar investment with a 10 percent annual return would be
worth 17.5 million after 30 years with an 8.5% return so 1.5 percent difference
it would be 11.5 million so he spoke to the board and convinced them to launch a
new company named after HMS Vanguard Admiral Nelson's ship in many famous
battles the company was at the vanguard of a new logical concept index funds and
it wasn't going to be stopped easily the industry was not scared in fact they
thought it was a bit ridiculous the chairman of fidelity a big asset manager
said this would never work the concept of average sounded like mediocre who
wants to be operated by an average surgeon be advised by an average lawyer
how can you build highly skilled professional asset managers competing
against each other and trying to beat the market by just calmly following the
market then we're planning to raise 150 million
dollars they raised the 11.4 in the 70s acid state at similar levels if it was a
ship the banquet phone would look like this small hard work in cold weather the
fun must have been operating at a loss luckily the company had a legacy of
traditional funds as well with assets over 1 billion and it survived it just
got by until the 80s it was outperforming here after a year though
and the concept was becoming a reality for everyone else the tanker ship was
sailing and he was growing the 90s were a turning point they didn't have many
easy for everyone to access the data but I was often invited on TV and although
he wasn't always getting the best question he was getting his message
across
pickers I don't think there's such a thing as the stock pickers market Tyler
all investors are picking all stocks and the extent index fund owns all stocks
it's a sort of contradiction in terms because if the good stock pickers take
all the good stocks the other half of the market will be owned by the bad
stock pickers who pick the bad stocks it all comes out to a sum of one everybody
noticed even fidelity loans index funds and a new type of index to instrument
the ETF exchange-traded fund appeared the billions were flowing backwards were
launching more fun based on the same concept to start to look a bit like home
fleet very good sort and keeps growing very fast until today it now has over
five trillion in assets under management but the idea has grown even bigger than
Tonga it has changed the way we invest forever it's what we call now passive
investment where you simply follow the market as opposed to active investment
that tries to beat it and with a trillion dollars of saving the investor
community can really be grateful to Borden Jack Bogle is probably done more
for the American investor than any man in the country
Jack you set up there'll be more assets in passive investment than active
investment by 2024 each one from physical to decrease this month fidelity
launched the first zero percent free index fund in fact index funds are now
so popular that it's easy to forget how courageous and tenacious
Jack Bogle wasn't starting them thanks for watching this is actually only half
of the story we're going to go deeper about the life the values of Bogle and
what makes the company so unique and grow so fast this is for the next
episode though.
Please subscribe to get the full story