John C. Bogle Has Died

If the private market gives index-funds at no cost to the state, why state owned index funds :S.

It is unclear how index funds would function without someone doing price discovery (i.e., active investors).

Don't say this too loud. US policy has been to[1] undermine[2] socialism[3] abroad[4], what's to say it won't do the same with my retirement savings :D

1. https://en.wikipedia.org/wiki/Salvador_Allende#Presidency

2. https://www.investopedia.com/terms/l/lia.asp

3. https://en.wikipedia.org/wiki/Iraq_Petroleum_Company

4. https://en.wikipedia.org/wiki/PDVSA

Aren't those called Sovereign Wealth Funds?

I'm not sure I see a connection between Bogle's work and putting public funds into index funds.

You could out public funds into any investment and end up with all the capital.

The way index mutual funds work is to distribute returns to everyone according to how much capital they have contributed.

The socialist version would be a find that everyone is required to contribute all their capital too. And then each citizen receives an equal share of the returns.

Matt Bruenig has a joke that the reason he named his company Vanguard is that it’s the vanguard of socialism.

Why would a country want to buy up only shares of companies in that country? You could have a large sovereign wealth fund, but most countries are very small and it would not make sense to only buy domestic stocks.

Can't mention this without posting an article by Matt Levine on this topic [1].

[1] https://www.bloomberg.com/opinion/articles/2016-08-24/are-in...

This makes no sense whatsoever. The state does not have sufficient resources to provide the services it has already committed to. The annual deficit is more than a trillion dollars. Suppose we were willing to double this to purchase securities, and further suppose that this had no knock on effects for security prices. It would still take half a decade to buy just the assets held by Vanguard. Although this is large, this is still far smaller than the assets in the public markets overall. At best you'd have achieved ownership of a small fraction of the means of production. But in exchange your sovereign debt would be staggering. It probably just wouldn't be possible, because nobody would be willing to lend enough money for such a project.

Something tells me you don't understand financial markets.

Vanguard is owned by its funds. This is sometimes referred to as "mutualized". It's a unique ownership structure.

As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs.

Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.

The point is he could have retained ownership of Vanguard itself.

What you describe is exactly the problem I have with index funds. I manage a decent amount of money through Vanguard. The index funds in my portfolio fell less and recovered sooner, but at the cost of raw gains. The managed funds I have basically fell apart because apparently the fund managers are idiots who didn't even try to keep up with market trends. I do expect those to recover quickly and have some decent gains again, but we'll see. More risk, more reward. 2019 better be good for the premium I'm paying.

I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying.

Don't get me started on bond funds. Total, total crap the last few years. REITs same way.

The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate.

Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time.

If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down.

Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses?

The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There.

RIP John.

You should look up the net worth of the Johnson family members who founded Fidelity. The President, Abigail, who is the daughter of the founder is worth 12 Billion.

If you are ever confused about what firm should manage your money, remember this posting.

The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.

It depends on how well established the market price is. If I sell you a $300k house for $150k, I've given you $150k of value. I'm either incompetent or purposefully gifting you $150k. There's a price that should be charged based on similar houses.

If I do that on behalf of a company by selling THEIR house, I'm either incompetent or embezzling money. If it turns out I sold it to a friend, it's clear I was embezzling. If I don't know the person (i.e. "arms length") I'm just incompetent.

In this case there is a market price for advisory services that you can figure out by looking at all the other similar advisers out there. You could make the argument that there are not enough similar advisers to establish what the price "should" be, or that it's not sufficiently below them to establish how much of a discount there is.

But mainly no one cares to go after the 401(k) balances of millions of middle class Americans on a technicality, so it's a non-starter.

I disagree with it, but the concept of "imputed rent" and "Home-Ownership Bias" is similar: https://en.wikipedia.org/wiki/Imputed_rent

> "More formally, in owner-occupancy, the landlord–tenant relationship is short-circuited. Consider a model: two people, A and B, each of whom owns property. If A lives in B's property, and B lives in A's, two financial transactions take place: each pays rent to the other. But if A and B are both owner-occupiers, no money changes hands even though the same economic relationships exists; there are still two owners and two occupiers, but the transactions between them no longer go through the market. The amount that would have changed hands had the owner and occupier been different persons is the imputed rent."

> "The government loses the opportunity to tax the transaction. Sometimes, governments have attempted to tax the imputed rent (Schedule A of United Kingdom's income tax used to do that), but it tends to be unpopular. Some countries still tax the imputed rent, such as Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland. The absence of taxes on imputed rents is also referred to as Home-Ownership Bias."

I had the privilege of working with Bill Fouse and other brilliant people at Wells Fargo Investment Advisors in the 70s. At the time, it was a huge technical challenge to crunch the numbers for a multi-million dollar investment, and to execute it without affecting the market prices of the target stocks.

The tax reporting is also pretty nightmarish. I have a friend who once decided he could mimic an index fund without the fees by buying individual stocks in the same proportions as the index (I think his broker offered a free trades deal or something, otherwise this is an obviously bad idea). His Schedule D that year was about 60 pages long, and he decided never again. Of course, it took him years to finish unwinding all the positions and reporting all the taxes, since many times you're left with a small fraction of a share once dividends have been reinvested.

Put it in front of the bull on Wall St.

And get Wall St. to pay for it.

They did, it’s on the Vangurd Campus, it’s in the Quad between buildings.

Hold a two- (or three-) fund portfolio of low cost index funds; invest in it regularly and stay the course. It's OK to invest in individual stocks, but do it for fun, not as (or with) your retirement savings.

I like Bogle's "Little Book of Common Sense Investing"[0] a little more than the Bogleheads Guide, but they're both good :)

[0] https://www.powells.com/book/-9781119404507

Paying someone (a fund manager) a percentage of your investment every year to "pick the winning stocks" with your money is more often than not a money-loser.

Looking at mutual funds over a period of years showed that very few of them even out-performed the market.

Almost all of those that did out-perform the market actually still lost out when the fund manager's percentage was figured in.

Fidelity Magellan Fund managed by Peter Lynch is one of the few exceptions where the fund not only outperformed the market but still did so after the fees.

(But then that is why you have heard of Fidelity Magellan Fund and Peter Lynch.)

Furthermore, as everyone jumped on Fidelity Magellan Fund it became too big and moved the market when it moved — and not in a beneficial way for the fund investors.

tl;dr: a monkey throwing a dart (assuming he charges a fee below 1%) will outperform most of the Wallstreet fund managers. Put your money in an index fund, let the algorithm spread your money/risk out and wait a few decades.

"Stay the course"... a key phrase. You must be a fellow Boglehead!

(Bogleheads have a handful of short phrases that describe the simple foundations of Bogle's investment philosophy. As you say, it's simple but takes time.)

Index funds, dollar averaging.

I call it "get rich slow."

Bogle converted an action game into an idle game.

>it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least)

Doesn't Australia's superannuation work something like this? If I understand it correctly, a chunk of your salary is set aside, but instead of going into a pool like Social Security, it goes into a fund. I could be (and probably am) wrong as to how it works. That being said, I would love it if we could implement something like this in the US.

This is one of the arguments for privatizing social security. Instead of social security that doesn’t really help the economy, generate more wealth or increases capital this method is essentially the same thing but reinvests in our economy. Instead of the FICA contributions going to social security, they go into an index fund that you can track and that grows.

Whenever anyone brings up privatization of social security, everyone freaks out because the big money bags will steal it and the common man will be left with nothing...unfortunately they are kind of right. Intense lobbying every time privatization has had consideration makes it so those index funds are high expense, not optimal, and little choice. Goldman Sachs is writing the rules and doing so to benefit themselves. The exact opposite that Bogle stood for. If we were to stop that somehow then this would be fantastic.

What you’re saying though was brought up seriously in the tax bill discussions. They are already making it such that every small business gets a 401k option for employees. Not just tax breaks but forcing them to offer one with expenses covered by the state. That’s a good first step. I forget if it was California that is starting that 2020 or the country. The next step is what you’re saying, 1% tax employer funded. That would be extremely popular legislation and help people far more than a pseduotax break and cost a fraction of the price. In fact it will be a net positive if people were to save more. I think that has a great chance of becoming a reality. The correct way to privatize social security with maybe a cushion in case there’s a disaster would be far more reaching and better but anything that helps the middle class save is imperative.

Here in Australia, we have a thing called Superannuation. Your employer is forced to put away a minimum % of your income, typically 10%, into a fund of your choice. Often jobs will come with up to 15% superannuation.

I suspect the point though being that before Bogle's ideas we would expect the top 10% to own even more than 84% of stock.

Further, regarding investing in your home, since a home has a tangible value as well (you can live in it) no doubt the bottom 80% have first to invest in a home before they can have the "luxury" of investing in stocks.

(No doubt the top 10% own their homes as well.)

> with that said, if there's one social program that could reduce wealth inequality...

... it would be returning to a more progressive tax system, increasing inheritance tax, reducing regressive taxes like gasoline and sales taxes, etc.

Australia does something like that. https://en.wikipedia.org/wiki/Superannuation_in_Australia

Singapore has something vaguely related https://en.wikipedia.org/wiki/Central_Provident_Fund

The trouble is employees are already paying 12.4%* of their salary into Social Security, so additional savings would be a significant burden that bottom 90%. If the SS money went into a managed retirement program like* * TSP it would accomplish what you're proposing.

The rationale was stated quite frankly by FDR:

"We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."

He didn't anticipate an aging population, let alone index funds.

Social Security is a wealth transfer from one generation to another, so after a generation has paid out to their elders, they (not unreasonably) feel entitled to collect from it. Even if they were feeling generous, they've generally planned their finances around those benefits. That's why reforming the system has been politically intractable.

* You're taxed 6.2% and the employer is taxed 6.2%. When employers are budgeting for salaries they're going to consider the full 12.4%.

* * TSP is essentially the military's 401k with a group of very low cost funds, only here you would require the assets stay in the program until retirement.

I read that as him having his first heart attack at 31 and many more later in life.

Aside from congenital issues, heart attacks at that age are typically complications of other issues.

I think it means the first of his lifetime six heart attacks was at 31.

I'm 38 and equally paranoid :)

>Congenital defects?

Almost certainly. If your diet and lifestyle are even remotely healthy, and you don’t have a history of heart disease in your family, it’s very unlikely you have anything to worry about.

Otherwise, a visit to a cardiologist should put your mind at ease.

Yes, congenital defects.

His first heart attack came at 31, he went on to have several more heart attacks. From his Wikipedia entry:

At age 31, Bogle suffered from his first of several heart attacks, and at age 38, he was diagnosed with the rare heart disease arrhythmogenic right ventricular dysplasia. He received a heart transplant in 1996 at age 65.[13][14]

https://en.wikipedia.org/wiki/John_C._Bogle#Personal_life

Lol. Really? How is it shorter?

I think it's just a nickname, which does not necessarily mean shorter.

You'll hear the same with John F. Kennedy. Some people refer to him as Jack Kennedy. Here's why the names are interchangeable:

https://dmnes.wordpress.com/2017/01/28/why-is-jack-a-nicknam...

"[Jack], the commonest pet-name for John, has caused a good deal of difficulty owing to the natural assumption that it must be derived from the French Jacques and should therefore logically represent James rather than John. The problem was cleared up by E. W. B. Nicholson in a little book entitled The Pedigree of Jack and of Various Allied Names (1892). He showed that there is no recorded instance of Jack, Jak, Jacke, or Jakke ever being used to represent Jacques or James, and that no statement in favor of the French connexion has been produced from any early writer. He then proceeded to elucidate and illustrate with examples the development of Johannes [the standard Latin nominative form] to Jehan [the standard Old and Middle French oblique form] and Jan [the standard Middle Dutch form], whence, by addition of the common suffix -kin [a uniquely English suffix], we get Jankin, which as a result of French nasalization becomes Jackin [this is the same nasalization that gets us Harry from Henry], and was finally shortened to Jack. There was a similar development from Jon to Jock (the Scottish form of the name)."

Okay, great, so link me to some of this non anecdotal evidence please :)

What are best numerical values for lifetime, how slowly can you withdraw money when you retire, what are the best lengths of retirement etc. I want to see which passive investment strategies work. We can all think of examples where someone buys indexes over time, and then chooses to retire in the wrong decade. I want to know how many good and bad outcomes there are over our known historical data, and see what percentage of the time passive investing works. How much better fo some passive investors do versus others, how much luck is involved? If you must compare to say buying and holding a commodity like gold. But really I'm just interested in how varryingly successful passive investing strategies can be. I was hoping for code, just because I wanted millions of examples, not just a couple success and dud stories.

Presumably the parent meant that Bogle popularized index mutual fund investing in 1976, thereby catalysing the passive investing industry.

And whereby there were previously only actively managed funds, the creation of that industry substantially lowered the cut money managers got from person wealth management.

Thereby leading to generations of people with more control over their money and willing to take risks, where a professional money manager would have little incentive to invest in startups with wealth locked up in their funds.

A lot of wealthy Silicon Valley entrepreneurs, engineers, and investors park their personal wealth in Vanguard funds while looking for the next wave to invest in. It's not that they're getting rich off of money invested in index funds, it's that index funds crowd out private wealth managers who might otherwise have been given carte blanche to invest their clients assets but not have the expertise to understand which new startups look promising.

I believe that the black bar is put up at the top of the site after someone who is considered important by HN readership dies.

See:

https://i.imgur.com/ZphvVST.png

This is done when someone passes who is considered especially (noteworthy|significant|involved|something) to/with the HN community. AFAIK there's no exact formula for determining who the mods deem worthy of that tribute, but I do know that they don't do it for everybody famous who dies. It's usually people who are particularly close to the HN world in some way.

No why would it its mirroring the way investment trusts /investment companies work in the UK and where set up in the 19th century to allow small investors to invest.

My thoughts on this is that index funds shouldn't vote in shareholder elections, for purely selfish reasons that mirror the reasons why they don't try to evaluate stock prices.

The remaining voters are already voting in the company's best interest. Index funds don't have a comparative advantage at making voting decisions, so they shouldn't pay people to do it.

Bogle himself had similar concerns: http://time.com/money/5468239/jack-bogle-index-funds-problem...