Podcast Episode 14 – John Bogle Pulls NO Punches And I LOVE IT!

John Bogle, founder of Vanguard, is one of the hero’s in all the investment world.

If it were not for him, investors would be losing well more than the billions they already are due to management fees and trading costs.

Here’s his book that changed the course of my investing life:

Bogle has claimed for many years that the investment business EXTRACTS wealth. And that it does nothing to add value.

That’s a very threatening statement, of course. But it’s no longer controversial.The facts are that the vast majority of actively managed accounts do not, and can not, outperform the market averages with any consistency.

When you think this through, it makes perfect sense. What is the average record of an NFL team?  The answer is 8-8.  Are there some teams that do better than 8-8? Yup. Are there some that do worse? Yup.  But the average will always be 8-8.

Now let’s say each team that spends over $100 million a year in expenses forfeits a game.  Thus, those teams start the season at 0-1.  What’s the likelihood those high expense teams are going to beat the averages?

Not very high, actually.  Some may on any given year. But it’s impossible to know that in advance.  In fact, after a few years of this new  numbers we’d find that average record for teams that spend over $100 million is  probably 7-9, a full game behind the league average.

Now this isn’t a precise anecdote.  It’s actually WORSE in the investment industry.  At least a high spending football team is theoretically spending that money on the best player salaries and may be rewarded with their open checkbook.

In the investment world it’s a sure bet that the MORE the cost of the fund, the WORSE the fund does relative to market averages!  This has been proven year over year and it’s because of John Bogle we all know this now. Wasn’t always like that, though. Bogle had many-an-arrow aimed at him. But he withstood and the world is a much better place for his persistence.

In this podcast I point out a few of the highlights from his interview:

  1. Considering Social Security and other sources of guaranteed income as a bond.
    1. Moshe Milevsky’s work discusses this a lot.
  2.  Current state of the markets.  High valuations???
  3. How much should financial advice cost?
  4. Taking on some of the largest titans in the industry…BY NAME!  And lots more!

Should be informative for you.

Here is link to the video: https://www.youtube.com/watch?v=VBdE0nV94Q8


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