Weekend reading: The house that Jack built

What caught my eye this week.

Hard to believe now, but when Monevator was born in the summer of 2007, passive investing with tracker funds was still a minority pursuit in Britain.

Few investors did it. Newspapers and magazines rarely wrote about it, except in a “oh if you can’t be bothered you could buy an index fund and just accept the market return (you loser)” sort of way.

The financial crisis didn’t help – it’s hard to sell index tracking when the index has just fallen 50%! All the talk was of clever fund managers who would pick through the rubble, absolute return funds and structured products touting upside without downside, and hedge funds that hadn’t yet posted a decade of lagging a cheap 60/40 ETF portfolio.

The US was ahead of us, though. And that’s because North America was where Vanguard founder John ‘Jack’ Bogle had conceived of and launched the first index fund back in the mid-1970s.

Long time horizons

The Accumulator joined Monevator after a year or two. He told me Monevator was the only site he’d found that regularly translated US passive investing ideas for an everyday UK audience.

My co-blogger turbo-charged our efforts to bring Bogle’s key insights to wider attention here.

In the meantime global stock markets began rising. Passive investing took off in Britain, too, as more people started to get it. Eventually, index funds went mainstream.

We were in the wilderness for maybe two or three years. John Bogle was in the wilderness for two or three decades.

The $1 trillion man

Bogle was questioning the value of traditional investment approaches in the early 1950s. He finally launched the first index fund in the 1976 – labelled by competitors as ‘Bogle’s Folly’.

In other words it has taken more than 40 years for Bogle’s principles to give us the highly-efficient investing that most Monevator readers take for granted today.

Talk about long-term investing!

John Bogle died this week. He was 89. You’ll find coverage of his achievements in the links below. The impression he made is as clear as his legacy.

It wasn’t a given that the inventor and populariser of the low-cost index fund would necessarily be such a humble, inspiring, and tenacious individual. Tracker funds are essentially run by computers. Their progress would probably have been assured eventually, solely on account of the remorseless reality of their mathematical cost-advantage.

But happily, on top of that, index funds were championed by perhaps the greatest investor of all time – at least in terms of money he’s saved the world’s savers.

It’s been estimated Bogle’s innovations will have left investors with an extra $1 trillion in their accounts by 2023.

Good luck getting that sort of edge out of the latest Top Funds To Buy Now list.

Think different

If our website has patron saints, I’d say they are Jack Bogle and Warren Buffett. The two men are more similar than you might suppose.

Warren Buffett – probably the greatest active investing individual the world has ever seen – urges us to use index funds. On his death his wife’s money will be in a tracker fund run by Vanguard. Buffett recently won a 10-year bet pitching cheap active funds against handpicked hedge funds. Convinced of the index fund’s primacy, this week he said Bogle had done more for the individual investor than anyone else he’s known.

Quite the contradiction then, but what of Bogle? He’s also not as easily dumbed down as some of his adherents seem to think. Bogle took the career path that led Vanguard to $5 trillion under management almost on a whim. He was not against active investing per se – more high costs and poor results. He had money invested in his son’s active fund. Bogle was a market timer, and he was happy to say when he thought stocks looked expensive. He also invested all his money invested in the US market – an anathema to orthodox thinking today.

As we inevitably march towards a far future where the vast majority of people run their money with the market in cheap index funds – following prices set by a diminishing handful of thrill-seeking stock picking winners and losers – it seems fitting to me that the man who started it all also contained contradictions.

Thank you Jack

In as much as they’d heard of him, for most people Bogle was a man who synthesized the latest academic thinking and his own insights to dream up the low-cost funds that will leave them richer in retirement. Cheers Jack!

But really he was a philosopher king for the ages.

And as the Bogleheads say: “While some mutual fund founders chose to make billions, he chose to make a difference.”

Further reading:

• “You cannot measure the quality of a man by the size of his bank account, but in John Bogle’s case, you can measure it by the size of your bank account.” – Rick Ferri, Forbes

• John Bogle, who founded Vanguard and revolutionized retirement savings, dies at 89 – The Inquirer

• “My ideas are very simple,” Bogle once said. “In investing, you get what you don’t pay for.” – New York Times

• Praise for John Bogle compounds, like his returns – Bloomberg

• Jeremy Grantham: “What he meant to most people in the investment business was that he was a royal pain in the bottom… He was more concerned about the long-term benefits for society.” – Bloomberg

• CFA has made all Bogle’s papers free to read – CFA

• “The only people who come across his message and then subsequently disagree with it are those whose careers depend upon their not believing.” – Josh Brown

• “Without a doubt, John C. Bogle is the greatest man I’ve had the privilege of knowing.” – Jonthan Clements, The Humble Dollar

From Monevator

The Pension Protection Fund (PPF) explained – Monevator

From the archive-ator: The simplest, most effective investing decision you will ever make [First making the case for tracker funds back in 2008!] – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!¹

Record year for ETFs, as passive funds take a beating – Money Marketing

Lenders see sharp slowdown in demand for credit cards and mortgages – Morningstar

Pessimism about UK house prices worst in two decades: RICS – Bloomberg

Has the Brexit vote saved London tenants £1,800 pa in rent? – Guardian

Lords take aim at Statistics Authority’s failure to fix UK prices index [Search result] – FT

Nearly 400,000 new dollar millionaires created [globally] in 2018 – WealthX

(Click to enlarge)

Is UK property headed for a post-Brexit meltdown? [Search result] – FT

Products and services

Boost for savers as top one-year cash interest rates now match inflation – ThisIsMoney

HSBC cuts mortgage rates across its entire range, as price war rumbles on – ThisIsMoney

Ratesetter will give you a free £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Freelance Fintech: Can apps replace accountants? [Search result] – FT

Italian town puts dozens of homes on market for as little as €1 – Guardian

Comment and opinion

Invest like a JOMO sapien – Anthony Isola

Subtraction mode – Humble Dollar

Brexit and the risks of home bias – MSCI

When it’s time to do something – Morgan Housel

Careers and the hedonic treadmill – Fervent Finance

Are market moves happening faster? [Spoiler: No] – A Wealth of Common Sense

Why it’s the right time to consider a tracker mortgage – 3652 Days

Does the ‘bucket approach’ destroy wealth…? – Advisor Perspectives

…perhaps in theory, but the optimal portfolio is not the same as the best one – CFA

First post sent from the other side of early retirement – Retirement Investing Today

Unitizing a portfolio can bring home disappointing truths – Simple Living in Somerset

10 years ago, Warren Buffett bought a railroad – Buffett, Berkshire and Beyond

Why one value investor sold GlaxoSmithKline – UK Value Investor

Fund managers do well when they buy, not when they sell – Morningstar & Bloomberg

Equity investing is riskier than you think [Nerdy, research] – Alpha Architect

Brexit

It was never about Europe. Brexit is Britain’s reckoning with itself – Guardian

UK fails to close trade deals ahead of Brexit deadline [Search result] – FT

Richard Stone: Why I believe Brexit will not happen now – CityWire

“I don’t trust the Government”: Meet the Brexit stockpilers – Guardian

Stop worrying about Brexit — it’s time to invest in UK assets [Search result] – FT

A neat summary of how we got to this impasse – via Twitter

A reminder very few Britons fretted about the EU before they were asked to – Economist

Kindle book bargains

Creativity, Inc. by Ed Catmull – £1.99 on Kindle

Start Now, Get Perfect Later by Rob Moore – £0.99 on Kindle

Turning the Tide on Plastic by Lucy Siegle – £0.99 on Kindle

Off our beat

The most powerful person in Silicon Valley – Fast Company

Why one man lives homeless in the Alaskan wilderness – Guardian

Scientists unveil a ‘planetary’ diet that’s good for the world and our health – BBC

Tim Harford: Behavioural economics helped me kick phone addiction [Search result] – FT

The indie book blog is dead, the golden era of blogging is long past – Vulture (although…)

Strong and weak technologies – cdixon blog

Cool thread on the human body parts evolution left behind – via Twitter

And finally…

“The grim irony of investing, then, is that we investors as a group not only don’t get what we pay for, we get precisely what we don’t pay for. So if we pay for nothing, we get everything.”
– John C. Bogle, The Little Book of Common Sense Investing

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from Monevator https://monevator.com/weekend-reading-the-house-that-jack-built/