By Edward Wyatt
John C. Bogle, who founded the Vanguard Group of Investment Companies in 1974 and built it into one of the world’s largest mutual fund companies, with $4.9 trillion in assets under management, died Wednesday in Bryn Mawr, Pennsylvania. He was 89.
Vanguard announced his death. Bogle had received a heart transplant in 1996.
Bogle built Vanguard on a cornerstone belief that was anathema to most mutual fund companies — that over the long term, most investment managers cannot outperform the broad market averages. He popularized and became the leading proponent of indexing, the practice of structuring an investment portfolio to mirror the performance of a market yardstick, like the S&P 500 stock index.
“Indexing was the purview of institutional investors, but Jack Bogle came up with the consumer version,” said Daniel P. Wiener, the editor of the Independent Adviser for Vanguard Investors, a newsletter and website that for decades has tracked the company. “He made people aware of expenses, and told them that costs come right out of the bottom line.”
In later years, Bogle became a harsh critic of the mutual fund industry. Stock market investors, he said, were spoiled by average annual returns of more than 20 percent per year in the second half of the 1990s and therefore cared too little about the high expenses they were paying for fund managers’ presumed expertise at picking stocks. Mutual fund companies, he said, were all but immoral for accepting such fees.
“My ideas are very simple,” he told The New York Times in 2012. “In investing, you get what you don’t pay for. Costs matter. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won’t be foolish enough to think that they can consistently outsmart the market.”
In recent years, it has been hard to argue against him. The top four index mutual funds, with portfolios in the hundreds of billions of dollars, are offered by Vanguard.