Jack Bogle, an investor and philanthropist largely known as godfather of the index fund amassed a following known as the Bogleheads. The Bogleheads follow Jacks teachings regarding passive investing for the long term and his following has only grown since his passing in 2019. Mr Bogles fans aren’t just from a forum on the internet either, Warren Buffett addressed Jack directly at a shareholders meeting for Berkshire Hathaway back in 2016 stating that Jack Bogle has done more for the average American Investor than any other individual he’s known. We discuss why you should consider joining the Boglehead army below (along with Warren Buffett).

Jack Bogles investing strategy is simple, and that’s exactly why many people should take notice. There’s probably tens of thousands of people out there who wanted to invest money, but after a quick google search closed the laptop confused and decided to go with a savings account consisting of an eye watering 0.01% interest rate. Considering inflation is on the rise your money is losing value in savings (or under your mattress).

Mr Bogle founded Vanguard, an investment platform that consists of low-cost index funds, ETFs and bonds which can be a great place to get your feet wet (you can buy Vanguard funds on other platforms as well just to make you aware). Jack recommends that instead of investing in individual companies and trying to beat the performance of the stock market just invest in the stock market itself, he even has a well-known quote to go with his mantra – ‘don’t look for the needle in the haystack, just buy the haystack’. By investing in index funds which track a market index you can still see a very healthy return over the long term, especially as management fees are kept low comparative to active or mutual funds. According to this article from CNBC active funds cost about five times more than passive index funds.

Index funds also help with another aspect of investing, diversification. By investing in hundreds or sometimes even thousands of companies in one fund you can decrease risk, if one company in your fund was to go broke tomorrow it would have a very small effect on your overall portfolio. You may be rolling your eyes here quoting some of Charlie Munger’s not so nice things to say about diversification but he also agrees that diversification isn’t a bad thing if you’re trying to hit the market average. This is exactly what the Bogleheads are trying to do, passively investing requires very little skill, effort or time and matching market returns at a low cost still provides great returns through compound interest.  

Many mutual fund managers didn’t like Mr Bogles idea of the index fund in the 1970s and he was subject to some derisive remarks, this was probably because they knew he would be stealing some of their loyal customers. As Jack and many others have pointed out (including Warren Buffett) the market tends to outperform mutual fund managers over the long-term. According to a study by Vanguard, only 37% of active stock fund managers have outperformed their benchmark over the last 15 years or another way to look at it is 63% have underperformed their benchmarks.

Another important, often overlooked aspect of the Boglehead strategy is in relation to risk tolerance. Many people are happy to invest money when the market is green everyday but when those red days set in and your portfolio is dropping in value it can be much harder than you think to stay the course. You can utilise bonds to help minimise the impact of a market crash or correction to your portfolio as they tend to have a zig-zag relationship to equities. According to the following article, bonds increased 12% in 2008 meanwhile equities fell close to 60% from 2007 to 2009. Your risk tolerance probably isn’t as high as you think it is so investing in bonds (even if it’s just a small percentage of your portfolio), especially closer to retirement can help make those market corrections that little bit less stressful.

So the fees are low, the risk is low(er) than active funds and you’ll probably outperform the active fund guys, what’s not to like?

If you want to learn more about Jack Bogle, you can find his book ‘The Little Book of Common Sense Investing’ on Amazon here.

The views expressed in this post are the authors and should not be construed as financial advice

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David is an Engineer and Finance Writer educated to masters degree level with sound knowledge in investing, the stock market and personal finance. We hope the information provided on this site can help you achieve your financial goals.

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