JUST PLAIN TALK: A great American is gone

Buz Livingston
Buz Livingston

Earlier this month an American legend died. John Bogle, Vanguard’s founder, passed away at age 89. Bogle did more for the average smuck trying to save for retirement than anyone else on planet Earth. His 1951 thesis at Princeton University pointed out investment companies should reduce charges and management fees because over time most actively managed funds fail to outperform market averages. Yes, Warren Buffett can but I submit neither you nor your investment advisor is Warren Buffett. Even if you don’t use Vanguard, 401K providers have to address plan costs. Retirement plan fee transparency sprang from Bogle’s relentless proselytizing. Whether you realize or not, he saved you money.

The explosion of index mutual funds and exchange-traded index funds throughout my third career has been nothing short of astonishing. Twenty years ago when I decided to leave Georgia and my job behind, passively managed assets accounted for less than 10 percent of all stock and bond fund investments. Today, almost 40 percent of stock and bond funds follow Bogle’s passive management strategy.

Things were not always rosy. When Bogle rolled out the S&P 500 index fund in 1976, it flopped, picking up the derisive moniker “Bogle’s Folly.” Rival Fidelity’s chief Edward Johnson III predicted investors wouldn’t be satisfied with average returns. Johnson was wrong. Fidelity recently launched a series of zero-fee index funds targeting Vanguard’s market.

An online group of Vanguard adherents formed Bogelheads to honor their mentor. At last year’s meeting, Mr. Bogle shared his thoughts on markets for the next 10 years. He predicted corporate profits growing at 4 percent annually coupled with 2 percent dividend gains. He warned though falling profit/earning ratios could knock 2 percent off. With 2 percent inflation, do the math. For fixed income, he predicted 3.5 percent returns or 1.5 percent after inflation. Lower returns mean you have to save more he warned. Take his words with how many grains of salt you like, but he has been right more often than wrong.

In a tribute, Harold Evensky, the father of financial planning, noted Mr. Bogle’s focus on realistic expectations. The market or your investments don’t care what return on investment you need. You get the market return minus fees and adjusted for risk.

Forget Gordon Grecko. Morningstar’s Christine Benz, who for years interviewed Mr. Bogle at Bogelhead conferences, called him the financial services industry’s conscience. In a world of lousy products pushed by organizations focused on their self-interest, Vanguard is a beacon.

While I never shook Mr. Bogle’s hand mentors like Bill Bernstein and Rick Ferri did. “Twenty Feet from Stardom” was an Acadamy Award winning movie about back-up singers. It was a different stage, but I’ve been there, too. I’m grateful for Mr. Bogle. We never met, but he helped me immeasurably and left the world a far better place than he found it.

You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit or drop by 2050 West County Highway 30A, M1 Suite 230.