All of the great investors, from Seth Klarman and Howard Marks to Warren Buffett and Phil Fisher, have one thing in common- their ability to clearly communicate their philosophy. Great investors need to be masterful in delivering their message in order to see their clients or partners through difficult times.
Jack Bogle rightfully gets all the credit for creating the index fund, but he’s very underrated when it comes to his ability to effectively communicate. He is the author of thirteen books, which is pretty amazing when you consider he’s only really saying three things; buy index funds, keep costs low, and stay the course. His most recent book, Clash of the Cultures, which details how companies went from an investment business to a marketing business, is an excellent read.
Bogle keeps coming up with new and interesting ways to explain why trying to beat the market over the course of one’s life is so difficult:
The typical investor owns about four equity mutual funds; the typical fund manager lasts for five years. So in the course of, say, a 60-year investment lifetime, the investors portfolio will have been managed by almost 50 different managers. It seems to me that it would be, well, inconceivable for such an investor to even approach the returns earned by an index fund.
There are things in life more important than picking stocks.
Don’t worry about portfolio managers who will come and go, and don’t speculate on which manager may be lucky enough or smart enough to outperform the market for a time. Own an index fund, get a life outside of finance, and relax.
The proof is in the pudding.
At this celebration (30th anniversary of the fund), attorney Steven West of Sullivan & Cromwell, counsel for the fund’s underwriters reported to the group that he had actually purchased 1,000 shares at the original offering, at a price of $15.00 per share, including an initial sales charge of 6 percent for its distributors. He had held on to that $15,000 investment ever since, making no redemptions and reinvesting all dividends. He pulled from his pocket his most recent Vanguard statement and proudly announced that the value of his holding in that statement had grown to $461,771. As 2012 began, despite the steep bear market of 2007 through early 2009, the value of that initial investment has actually continued to grow– to $550,134. That achievement would seem to require no comment.
I wouldn’t be surprised if people have overlooked his books because they think they already know what he’s going to say. This is a mistake. Buffett recommended Clash of the Cultures at the 2013 Berkshire annual meeting and I’m pretty sure he’s familiar with Bogle’s concepts. Do yourself a favor and pick up one of the books from his catalogue.