Esophageal cancer was the thief that took John Bogle’s life today. He was the man who built Vanguard, on a simple belief that was repugnant to mutual fund firms: over the long term, most portfolio managers won’t be able to outperform the broad market averages. He popularized indexing, the practice of structuring an investment portfolio to mirror the performance of a market yardstick; Vanguard’s Index 500 fund, one of the world’s largest, has more than $441 billion in assets under management.
The advent of index funds accelerated a long-term decline in fund fees (even before the advent of today’s high-frequency traders) and fostered greater competition in the industry. Investors paid 40% less in fees for each dollar invested in stock mutual funds during 2017 than they did at the start of the millennium, for example. But, according to The New York Times, Bogle continued to maintain that many funds were overcharging investors, and once called the industry “the poster-boy for one of the most baneful chapters in the modern history of capitalism.” His approach was personal; he once taught a limo driver who took him home from a TV interview about index funds and helped him fill out the paperwork to open an account on the hood of his car.
Bogle believed that the corporate structure of most fund companies posed a conflict of interest, because a public fund company could (and should) put the interests of shareholders ahead of those owning shares of its mutual funds. Bogle managed its indexed mutual funds at cost, charging investors fees that were far lower than those of virtually all of rivals.
This type of structure made Bogle very rich, but not to the extent of the wealth accumulated by other founders. For instance, Edward Johnson III, the chairman of Fidelity Investments, has a net worth of $7.4 billion, according to Forbes. Mr. Bogle’s net worth was generally estimated at $80 million last year, around 1% of Johnson’s wealth. A paltry sum, indeed, for the giant who simplified investing for the masses that today celebrate his legacy.