Jack Bogle is nearing 90. He’s been more-or-less retired for decades. And each passing day brings more and more vindication. But he’s not quite done. He’s still got some piss and vinegar to spit in the direction of active managers (in spite of the fact that his company now employs some), and he’ll do it in the form of another book.
“This will be my last book,” Bogle says. The first part is an anecdote-rich history of Vanguard. The second is a history of the half-dozen funds that drove Vanguard’s growth—not just the Vanguard 500 Index (VFINX) but also Vanguard Wellington and the Windsor Funds. The third includes articles he’s published, including the latest one called “The Modern Corporation and the Public Interest.” The last two sections are the future of investing, and personal reflections—“how do I feel about the whole miscellaneous group of things as the end of my life comes?”
Recently, writing like a demon, he finished three chapters. Bogle writes longhand, then hands it to his longtime assistant, Emily, to type up. He hopes to have the manuscript in early next month.
But that’s not all. There are, after all, still corners of the Vanguard campus not adorned with a heroic portrait of the great man in costume.
There is, in fact, already a bronze statue of Bogle, striking a confident, commanding pose, outside Vanguard’s headquarters in Malvern, Pa., not far from Valley Forge. Inside, there’s an equally arrogant, ironic portrait of a hale Bogle as Lord Nelson, the great British naval officer.
But back to the future of indexing for a second. It has a hell of a future. Just not what is currently its fastest-growing part, exchange-traded funds, which to hear Bogle tell it aren’t index funds at all. In fact, they’re even worse than the worst thing in the world, actively-managed funds, because—and don’t make him say this twice—active managers are actually less stupid than the average moron buying and selling ETFs. And have you seen some of these things? They’re gonna ruin everything.
“I don’t see that indexing becomes a problem even at 70% of the market,” he declares. “We actually need more indexing.”
“The difference between traditional index funds [what he calls “TIFs”] and exchanged-traded index funds are like night and day,” he tells Barron’s tartly. ETFs, he says, are the way passive indexing “morphs into active management” and its attendant problems, including increased transaction costs and market timing….
The research shows that from 2005 to 2017, the average investor return from “Traditional Index Funds” was 8.4%. For actively managed funds, it was 7.2%. For ETFs, it was 5.5%, even worse than actively managed funds. That contains the seeds of the category’s demise. “How long are investors going to be happy with that? Sure if you double your money, why would you complain? But you could have tripled it. I am glad we continue to be primarily on the TIF horse, and not the ETF horse.” He also foresees that growth in ETFs will slow because “an awful lot of [market] niches have been populated.” Next up, “a lot of ETFs will go out of business along the way.”
And when they do, Jack Bogle will be there to kick dirt upon them. Because Jack Bogle does not intend to die until he has vanquished all of his many enemies.
Jack Bogle’s Battle [Barron’s]