Bogle investing in the 1990s the republican

I just think the best way to do that is by building trust in a clientele by revealing to them honestly how this business works. It was , and revolution was in the air. Bank trust departments across the country were staffed by portfolio managers who, as I did at the time, believed that they alone possessed the investment formula that would enrich and protect the security of their customers.

But McQuown suspected they were pretty much all wrong. He had met Wells Fargo chairman Ransom Cook at an investment forum in San Jose, and at a later meeting at company headquarters, persuaded him that traditional portfolio management was merely an investment variation of the Great Man theory. McQuown accepted, and a few years later Fouse came on as well.

The two were like oil and water—McQuown even tried to have Fouse fired at one point—but their boss, Vertin, was the one who really was in the hot seat. The small initial fund performed well, and institutional managers and their trustees took note.

By the end of the decade, Wells had completely renounced active management, had relieved most of its portfolio managers, and was offering only passive products to its trust department clients. Fouse, now retired in San Rafael, explains why all this could have happened only in San Francisco.

Anywhere else, particularly on the East Coast, trust departments handled very large institutions—pension funds, university endowments, that sort of thing. As a result, the counterattack against indexing began to unfold. Fund managers denied that they had been gouging investors or that there was any conflict of interest in their profession.

That poster still hangs on the office walls of many financial planners and fund managers. Savvy investment consumers, however, were apparently catching on. As they began to suspect that the famous fund managers they were reading about in Business Week and Money magazine were taking them for a ride, index funds grew in size and number. And actively managed funds shrank proportionately. Even some highly placed industry insiders started beating the drums for indexing.

But now more experts are convinced that the amount pales in comparison to the tens of billions lost every year just to the fees and transaction costs by which mutual funds live and die. This is the most actionable, most mathematically supported, short-form investment advice ever. Those following this path are sure to beat the net results after fees and expenses delivered by the great majority of investment professionals.

So why is indexing catching on so slowly? A big reason, according to Geddes, is that putting investors into index funds is simply not in the interest of the industry that sells securities. You usually have to ask about them yourself. And it makes a certain kind of sense. And will he tell his client about the hidden transaction charges that further reduce the return on investment? I spoke to several, but no one was comfortable discussing the high cost of their practice, and few were willing to talk on the record.

But we do believe that some managers add value, and those are the ones we look for. If everyone invested in index funds, he points out, the market itself would die a natural death. Index funds simply reflect what the market is doing. Does this mean that, when we look at mutual funds, half our options would still be burdened with unconscionable fees and hidden costs? Hopefully not. But while Wall Street has considerable soul-searching to do, full blame for the gouging of naive investors does not lie with the investment management industry alone.

There is an innate cultural imperative in this country to beat the odds, to do better than the Joneses. In some ways the Leuthold Group was right when it said that index funds are un-American. Perhaps Solli and Geddes had it right when they selected the name for their company. So, the bulk of your savings is safely tucked away in a sensible index fund or two. But the road from Wall Street is scattered with the bones of bitter hedge fund investors.

Since , more than 1, known hedge funds have folded completely. In the last few months alone, two large funds—MotherRock and Amaranth Advisors—have gone south. The high failure rate should come as no surprise, given how hedge funds operate.

The industry is largely unregulated, and most funds involve private partnerships that operate in strict confidence. Though fees average just 2 percent of the investment, the same as in a typical Silicon Valley venture fund, managers also withhold a sizable chunk averaging 20 percent, but sometimes going as high as 50 percent of whatever profit the funds produce. The SEC periodically considers applying minimal rules to hedge funds, such as prohibiting pension funds from investing in them.

Last October, the call for reform came from Congress when Senator Charles Grassley, chairman of the Senate Finance Committee, asked administration officials and Congress members for their views on how to improve hedge fund transparency. But so far, the hedge fund lobby has managed to keep all regulators at bay.

Every fee that a mutual fund charges should be outlined somewhere in its prospectus. Hang tough in asking your broker for the full breakdown of what those fees will cost you each year. If you need help, the National Association of Securities Dealers has a useful tool for computing fees, called the Mutual Fund Expense Analyzer, on its website. You can also compare past fees for different funds before you invest. In some ways indexing is a no-brainer: invest your money and let it do its thing.

Bogle Is Wrong on Taxes Bogle is calling on Congress to raise capital gains taxes to the rates that apply to ordinary income. Ira Stoll 2. Bogle, who says he is a lifelong Republican, is calling on Congress to raise capital gains taxes to the rates that apply to ordinary income. Bogle said earlier this month in an interview with Bloomberg Television's Betty Liu. That should be the regular tax rate," Mr.

Bogle said. Bogle has a lot of wisdom about investing, which is one reason I originally invested in Vanguard funds back when he was running the company in the s. But on this tax question, I think Mr. Bogle's got it wrong, for the following reasons. In many cases, the capital gains come on money that's already been taxed at least once, when it was earned as individual income. If the money was then invested in shares of a publicly traded corporation, the corporation also probably paid tax at the corporate level.

Any capital gains come on top of those other layers of taxes. Second, that distinction Mr. Bogle makes between money "people earn by the sweat of their brow or the burrows of their brain" and money subject to capital gains tax isn't always as neat as he implies. Not all capital gains are made by people lounging on the beach as their money magically creates capital gains for itself.

If a person founds a company like Microsoft or Google, the founder's stock is subject to capital gains treatment, even though it is earned by sweat or brain work. Choosing investments that make money over the long term can often require considerable thought.

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Even into the early s, it was not unusual for mutual funds to charge 1. In , he created the first index fund built around the , initially operating under the name First Index Investment Trust. Bogle, who died Wednesday at age 89 , outlined the reasons for the creation of the trust in a paper: "The facts are: a most professional managers fail to outpace appropriate market indexes, and b those who do so rarely repeat in the future their success in the past.

He sought to outperform by keeping costs as low as possible. He said, "You want to be average and then win by virtue of your costs. Brendan McDermid Reuters In that same paper, Bogle outlined the essential theory of why the high fees charged by active managers were the enemy of long-term investing. And therein lies its advantage. That, essentially, is all you need to know to understand why index funds must provide superior long-term returns. From the outset, Vanguard had many actively managed funds, including Vanguard Health Care, run for 30 years by legendary investor Ed Owens.

But even his actively managed funds were cheaper than those of competitors. It was a double whammy: Vanguard attracted passive investors who simply wanted to invest with the markets, but at a lower cost, and it attracted active investors who were seeking alpha but also wanted in at a lower cost.

Bogle's idea was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively managed funds. The main difference between investment and speculation lies in the time horizon and the risk of capital. Investment is concerned with capturing returns on the long run with lower risk of destruction of capital, while speculation is concerned with achieving returns over a short period of time, with potentially destructive risk to capital.

The speculator is often only concerned with the price of a security and not the underlying business as a whole, while the investor is concerned with the underlying business and not the price of the security. Even if a business is steady in cash flow, the market quotations of a security are anything but, as a result of speculators driving up prices and bringing down prices based on hope, fear and greed.

Bogle believed this is an important analysis to be taken into account as short-term, risky investments have been flooding the financial markets. He contended that it is folly to attempt to pick actively managed mutual funds and expect their performance to beat a low-cost index fund over a long period of time, after accounting for the fees that actively managed funds charge.

Below are his eight basic rules for investors: [17] Select low-cost funds Consider carefully the added costs of advice Do not overrate past fund performance Use past performance to determine consistency and risk Beware of stars as in, star mutual fund managers Beware of asset size Don't own too many funds Buy your fund portfolio — and hold it His investment philosophy is the founding principle of the eponymous "Bogleheads" forum. Bogle Center for Financial Literacy and hosts national conferences in addition to its online forum.

Members of the group have collaborated to write three books expanding upon Bogle's investment philosophy. Bogle was a member of the board of trustees at Blair Academy. Bush was named chairman. Bogle said the current system in the US had "gotten out of balance", and advocated for "taxes to discourage short-term speculation, limits on leverage, transparency for financial derivatives, stricter punishments for financial crimes, and a unified fiduciary standard for all money managers".

Bogle Jr, Bogle's son. The fellowship sponsors 20 first year students in each class. Named one of the "world's most powerful and influential people" by Time magazine in

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They were famous precisely because it was so rare for anyone to outperform for more than a few years. That was when I became a Jack Bogle disciple. It was not just that active managers didn't outperform. A large part of the problem was the high expenses. Even into the early s, it was not unusual for mutual funds to charge 1. In , he created the first index fund built around the , initially operating under the name First Index Investment Trust. Bogle, who died Wednesday at age 89 , outlined the reasons for the creation of the trust in a paper: "The facts are: a most professional managers fail to outpace appropriate market indexes, and b those who do so rarely repeat in the future their success in the past.

He sought to outperform by keeping costs as low as possible. He said, "You want to be average and then win by virtue of your costs. Brendan McDermid Reuters In that same paper, Bogle outlined the essential theory of why the high fees charged by active managers were the enemy of long-term investing. And therein lies its advantage. Bogle's idea was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively managed funds.

The main difference between investment and speculation lies in the time horizon and the risk of capital. Investment is concerned with capturing returns on the long run with lower risk of destruction of capital, while speculation is concerned with achieving returns over a short period of time, with potentially destructive risk to capital. The speculator is often only concerned with the price of a security and not the underlying business as a whole, while the investor is concerned with the underlying business and not the price of the security.

Even if a business is steady in cash flow, the market quotations of a security are anything but, as a result of speculators driving up prices and bringing down prices based on hope, fear and greed. Bogle believed this is an important analysis to be taken into account as short-term, risky investments have been flooding the financial markets. He contended that it is folly to attempt to pick actively managed mutual funds and expect their performance to beat a low-cost index fund over a long period of time, after accounting for the fees that actively managed funds charge.

Below are his eight basic rules for investors: [17] Select low-cost funds Consider carefully the added costs of advice Do not overrate past fund performance Use past performance to determine consistency and risk Beware of stars as in, star mutual fund managers Beware of asset size Don't own too many funds Buy your fund portfolio — and hold it His investment philosophy is the founding principle of the eponymous "Bogleheads" forum.

Bogle Center for Financial Literacy and hosts national conferences in addition to its online forum. Members of the group have collaborated to write three books expanding upon Bogle's investment philosophy. Bogle was a member of the board of trustees at Blair Academy. Bush was named chairman. Bogle said the current system in the US had "gotten out of balance", and advocated for "taxes to discourage short-term speculation, limits on leverage, transparency for financial derivatives, stricter punishments for financial crimes, and a unified fiduciary standard for all money managers".

Bogle Jr, Bogle's son. The fellowship sponsors 20 first year students in each class. Named one of the "world's most powerful and influential people" by Time magazine in