Reflections on John Bogle’s legacy as Vanguard turns 50

By Vanguard

Investing strategy

 

This month, the Vanguard Group celebrates its 50th anniversary

Alongside the celebrations, it’s been a time to reflect on our history, including how Vanguard’s low-cost index funds and ETFs have revolutionised investing for many Australians.

Robin Bowerman is a Vanguard Super board member and former executive at Vanguard Investments Australia. In this interview, he shares insights from his experiences at Vanguard Australia over more than 20 years.

He reflects on Vanguard founder John C. Bogle’s enduring legacy, the meteoric rise of ETFs, and the significant shifts in the Australian investment landscape over the past two decades

 

The legacy of Vanguard’s founder John Bogle

Robin Bowerman: Warren Buffett said he thought there should be a statue erected to John Bogle on behalf of all retail investors. Bogle was a lifelong champion for retail investors getting a better deal — or, as he used to say, a better shake.

It’s hard, certainly from my point of view, to think of any other individual who has had such a profound effect on retail investors across the world.

When Vanguard was started, fund fees in the U.S. were high, mainly because of load commissions. As Vanguard has built scale from what was a very modest start, those fees have continued to come down.

Bogle’s legacy lives on, and in many ways, that’s because of the Vanguard mutual structure in the U.S. that has embedded this investor-first culture that’s stood the test of time for 50 years now.

Sometimes I think people forget that there were a lot of hard yards done in the first decade or two. Indexing took a long time to reach main street acceptance and the success it has today.

 

Why indexing isn’t always intuitive for investors

Robin Bowerman: One of John Bogle’s favourite expressions was “in investing, the more you pay, the less you get.”

That’s not true in other walks of life. We’re all taught at school that the more you study, the harder you work, the more hours you put in, the more training you do, the more education you have, the more you will succeed.

Then we get to investing and somewhat counterintuitively the best thing to do is to resist the temptation to react to every market move and trade frequently.

One of Bogle’s greatest messages was the idea that you trust in the power of the market, control the things you can, like fees, and then have diversification work for you in terms of risk management.

 

How ETFs have democratised investing

Robin Bowerman: What ETFs have done is really to take the disruptive technology — indexing — and democratised it. They’ve made it accessible to the wider world of retail investors, particularly on the share market but also on the fixed income market.

The low fees and access to markets you see in ETFs today were only available to institutional investors in the past. So, ETFs did a powerful good in bridging access to these types of products from the institutional world into the retail world.

ETFs have provided really simple, low-cost access to all sorts of markets via online brokerage services. Before ETFs, you had to fill out a several page application form to invest in a managed fund. Now, it’s much easier, and you can be invested in a few clicks.

That’s really made ETFs a powerful way for investors to be able to execute their asset allocation decision, and that’s arguably the most important single decision we all make as investors.