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John C. Bogle Has Died (wsj.com)
1084 points by gdubs on Jan 16, 2019 | hide | past | web | favorite | 200 comments

From the Philly.com article:

> “Jack could have been a multibillionaire on a par with Gates and Buffett,” said William Bernstein, an Oregon investment manager and author of 12 books on finance and economic history. Instead, he turned his company into one owned by its mutual funds, and in turn their investors "that exists to provide its customers the lowest price. He basically chose to forgo an enormous fortune to do something right for millions of people. I don’t know any other story like it in American business history.”

Is this really true? Both Buffett and Gates' money didn't come from salaries or fees. For Gates, it was his ownership of Microsoft. For Buffett, it was his stewardship of Berkshire Hathaway. However, Buffett's Berkshire Hathaway never sought to gain an edge over shareholders. Buffett didn't compensate himself with lavish options or salary.

Bogle could certainly have been a multi-billionaire. He could have founded Vanguard as a for-profit company and charged high fees. However, that wouldn't be like Buffett. Berkshire Hathaway doesn't operate on a percentage of the company's value going to Buffett every year.

In fact, Bogle took a similar path to Buffett: an investor-friendly path that meant little salary or fees going to them, but a great value for investors. It seems like the difference between them would be attributed to difference in starting point and differences in returns. Since 1964 (when Buffett took over Berkshire Hathaway) through 2017, Berkshire had an overall gain of 2,404,748%. By contrast, the S&P 500 only hit 15,508%. If Buffett and Bogle both started out with $1,000,000, Buffett would have ended up with $24B while Bogle ended up with $155M.

I don't think Bogle could have been a multibillionaire like Buffett unless he either 1) charged a lot of fees for Vanguard; or 2) actively managed his money to do significantly better than the S&P 500.

Don't get me wrong: Bogle has done amazing things for society by pioneering low-cost index funds and offering investors the investor-owned Vanguard. I just think it's fair to point out that Buffett's billions don't come off the back of fees or salary. The thing that made Buffett richer was the fact that Berkshire Hathaway has hugely outperformed the S&P 500. If Berkshire had gotten the returns of Bogle's S&P 500 index fund, Buffett would be rich (as Bogle was), but not a multibillionaire.

Vanguard is owned by its funds. This is sometimes referred to as "mutualized". It's a unique ownership structure.

As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs.

Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.

> Better to compare him to Larry Fink of Blackrock

I thought this was a great point, and makes the comparisons to Gates and Buffett look really lazy. (The connection is...they are famous wealthy dudes.) For others wondering, Larry Fink has a net worth of about ~$1B versus Bogle's ~$80M. Vanguard is a bit older than Blackrock (1974 vs 1988), but I also think Vanguard would have been less successful, counterfactually, if it had charged higher fees that would have enriched Bogle. The low fees were part of what made it possible. So it's almost certainly true that Bogle left money on the table in order to make the world a better, but he probably left a factor of ~5x rather than 50x or something.

You should look up the net worth of the Johnson family members who founded Fidelity. The President, Abigail, who is the daughter of the founder is worth 12 Billion.

If you are ever confused about what firm should manage your money, remember this posting.

The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.

> If you are ever confused about what firm should manage your money, remember this posting.

I'm sorry but your comment didn't clarify this question for me. Do you mean I should invest in Vanguard because the money isn't all going to rich folks at the top, or I should invest in Fidelity because the wealth at the top is indicative is correlated to success for customers?

The point is he could have retained ownership of Vanguard itself.

What you describe is exactly the problem I have with index funds. I manage a decent amount of money through Vanguard. The index funds in my portfolio fell less and recovered sooner, but at the cost of raw gains. The managed funds I have basically fell apart because apparently the fund managers are idiots who didn't even try to keep up with market trends. I do expect those to recover quickly and have some decent gains again, but we'll see. More risk, more reward. 2019 better be good for the premium I'm paying.

I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying.

Don't get me started on bond funds. Total, total crap the last few years. REITs same way.

The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate.

Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time.

If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down.

Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses?

The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There.

RIP John.

Then you're not the customer for index funds. They are meant to be highly risk averse, and give decent gains to people who want safety of modest to low gains over high gains high risk.

The fact that they are indeed for the risk averse is why I found it quaint Bogle’s Funds have been called “Marxist” according to a quote from Barron’s last year. People would choose to suffer collecting paychecks and squirreling away their money instead of using their collected six figures in savings and taking a chance at starting a business, creating necessarily healthy market forces which leads to new demand in labor and services.

This is how capitalism is supposed to work from the ground floor. Toiling away 25 years in a cubicle eschewing social responsibilities like the FIRE subreddit ought to be morally reprehensible - that’s how strongly I feel about it (I’m active in two businesses I’ve co-founded and have enjoyed seeing economic theory from the ground up).

Not everyone is equipped to start and run a company. It's not a universal skill or anywhere near it. If more people invested their retirement savings in businesses, you'd mainly have more ill-conceived restaurants and T-shirt companies going bust.

I agree, but certainly those who are banking 30%+ of their gross six figure income have, in general, both the luxury to pick a market and the temperance to stick it out for several years before their momentum breeds its own growth and a long-tail retirement plan in itself. It’s only easier said than done by those who have never made the commitment to suffer to try.

From the same article:

>For more than 20 years, he donated half his annual income to philanthropic causes, particularly those institutions that helped develop his mind and form his character.

This almost made me teary eyed.

Everything I've read about the guy says he was a stand up guy that put a real dent in the world.

I hope his legacy lives on and his mission continues to be carried out.

Bogle's greatest legacy might be... socialism.

Index funds are slowly consuming more and more capital. To achieve democratic socialism smoothly, all we have to do is set up state-owned index funds, and let them keep growing until they've accumulated all of the capital.

Voila, full democratic ownership of the means of production!

This makes no sense whatsoever. The state does not have sufficient resources to provide the services it has already committed to. The annual deficit is more than a trillion dollars. Suppose we were willing to double this to purchase securities, and further suppose that this had no knock on effects for security prices. It would still take half a decade to buy just the assets held by Vanguard. Although this is large, this is still far smaller than the assets in the public markets overall. At best you'd have achieved ownership of a small fraction of the means of production. But in exchange your sovereign debt would be staggering. It probably just wouldn't be possible, because nobody would be willing to lend enough money for such a project.

No need to borrow, just nationalize.

Of course you could do that, but you can do that with or without index funds. The two are orthogonal.

If the private market gives index-funds at no cost to the state, why state owned index funds :S.

I'm not sure what you mean.

What is the interest in having the state manage something at a cost when it is already free for its citizens.

It wouldn't provide index fund services, it would literally own the funds and thus the assets.

An index fund without customers is not really an index fund. It's just a private investment trust.

Basically you are saying the state should just slowly buy stock in every company until it owns every company.

It would have a customer: the public.

> Basically you are saying the state should just slowly buy stock in every company until it owns every company.

That's right. The goal is full public ownership of the means of production.

Not sure you have really thought this through.

The state is not the public.

In a democratic society, it is.

No, in a democratic soceity the state is a servant of the public.

Can't get around paywall to read TFA right now, but Vanguard funds are famously cheap in terms of fees.

It is unclear how index funds would function without someone doing price discovery (i.e., active investors).

I'm not convinced by the index-funds-socialism thing, but I did once have a fun realisation about index funds owning the market.

Because of short-selling, index funds could own all the market or more and active funds could still exist. For example we could imagine that index funds grow until they're 105% of the market, and active funds own 5% of the market long and 10% of it short. That adds up: 105% + 5% - 10% = 100%. And the active funds would still be doing all the price discovery. Of course the index funds wouldn't have all the assets-under-management, those would be split in the ratio 105:15 (with 10 of that 15 being collateral for the shorts).

In other words: it doesn't matter if index funds own all the shares, active funds can just make side bets with each other.

Hmm. I wonder if the same thing could happen in the cryptocurrency markets, where literally 100% of Bitcoin holders lose their private keys and yet we still have active, liquid price discovery consisting of speculators making side bets on BitMex.

Gamblers gonna gamble.

Isn’t a mere 51% effective ownership?

Not for SNAP, Facebook, Google and others with gerrymandered share classes.

Simple: there will always be active investors.

With the progress AI is making, I predict a future where humans-run firms will mostly go out of business. What will emerge are companies that are great at training models that then act as active investors. These models bet against each other and some emerge as winners.

Ultimately, the models that make the most bank (sorry couldn't resist) will be the ones smart enough to make its decisions based on public data from companies, social media etc.

> I predict a future where humans-run firms will mostly go out of business. What will emerge are companies that are great at training models that then act as active investors. These models bet against each other and some emerge as winners.

This is already happening, HFT, Two Sigma Investments, many hedge funds. And they don't just use public data, they work really hard to get as much proprietary information as they can. Just one example: https://www.cnbc.com/id/38722872

For anyone interested in learning more, here’s a compendium on deep trading:


Can't mention this without posting an article by Matt Levine on this topic [1].

[1] https://www.bloomberg.com/opinion/articles/2016-08-24/are-in...

Why would a country want to buy up only shares of companies in that country? You could have a large sovereign wealth fund, but most countries are very small and it would not make sense to only buy domestic stocks.

Aren't those called Sovereign Wealth Funds?

They are. Think of Vanguard as a US sovereign wealth fund that hasn’t reached full participation yet (and without the natural resource extraction bootstrapping).

If that’s a strange thought, consider that the Bank Of Japan is a significant owner of equities on the Nikkei.

Disclaimer: Vanguard customer

An investor’s ownership of Vanguard is proportional to his investment. So no, not at all.

Wow. I never thought of it that way, but this is so true.

I'm interested in this question: would the US economy be where it is today without index funds? Or is it the index funds like Vanguard that allowed millions of Americans a cheap, safe way to predictably grow their wealth?

The reason I ask is that throughout American history, its the banking sector that was responsible for financial crises and a loss of wealth for most Americans. Have index funds plugged this hole and allowed the US to grow?

Yeah yeah I know about 2008 etc. but that _was_ caused mostly by active investors.

> would the US economy be where it is today without index funds? Or is it the index funds like Vanguard that allowed millions of Americans a cheap, safe way to predictably grow their wealth?


Something tells me you don't understand financial markets.

Something tells me your comment is motivated by class politics, rather than the mechanics of financial markets.

I'm not sure I see a connection between Bogle's work and putting public funds into index funds.

You could out public funds into any investment and end up with all the capital.

The way index mutual funds work is to distribute returns to everyone according to how much capital they have contributed.

The socialist version would be a find that everyone is required to contribute all their capital too. And then each citizen receives an equal share of the returns.

Matt Bruenig has a joke that the reason he named his company Vanguard is that it’s the vanguard of socialism.

I don’t get it.


(The company is actually named after Lord Nelson's flagship at the Nile, but who's counting?)

van·guard /ˈvanˌɡärd/ noun noun: vanguard; plural noun: vanguards

a group of people leading the way in new developments or ideas.

Don't say this too loud. US policy has been to[1] undermine[2] socialism[3] abroad[4], what's to say it won't do the same with my retirement savings :D

1. https://en.wikipedia.org/wiki/Salvador_Allende#Presidency

2. https://www.investopedia.com/terms/l/lia.asp

3. https://en.wikipedia.org/wiki/Iraq_Petroleum_Company

4. https://en.wikipedia.org/wiki/PDVSA

Bogle is remembered primarily for his role in launching index funds, but I think a more telling part of his legacy is the structure of Vanguard, the firm he started, now the world's most trustworthy (and among the very largest) investment firms.

Unlike most firms, Vanguard's funds own the firm, rather than the other way around. The funds are owned by Vanguard's customers, who transitively own the company. Vanguard "pays cost" for all the work its management and staff performs.

To illustrate how powerful this structure is, see Matt Levine's writing about "the fake moon landing of financial news stories": a claim by a former Vanguard insider that the savings accrued to the funds (and thus customers) as its result constitute billions of dollars of taxable income (under the IRS whistleblower rules, some percentage of those taxes would go to the insider!):


Bogle is a giant and a good guy in a field not packed full of good guys. RIP.

Followed the link to read about the taxes, but the framing doesn't make sense to me:

The Vanguard Group is a mutual fund company whose adviser is owned by the funds, rather than being an independent profit-seeking corporation, so it can charge its funds lower advisory fees than its competitors do. (Disclosure: I am a Vanguard investor.) But the adviser is a taxable corporation, while the funds themselves are not taxable (they just pass through taxes to investors). There is a theory that the adviser should be charging Vanguard higher management fees, to reflect the "arm's length" prices that an independent adviser would charge, rather than the "at-cost" prices that it does in fact charge. Or rather, there is a theory that Vanguard owes taxes on the fees that the adviser should have charged, which would have been profit to the taxable corporation.

Why is there any fee that "should" be charged? The premise seems flawed that fees need to anything more than cover costs to pay the employees to do their work.

"If this structure were different, they'd charge more and make a profit and pay tax" ... But it's not different, so it doesn't make a profit, so it doesn't pay tax. Pretty simple.

It depends on how well established the market price is. If I sell you a $300k house for $150k, I've given you $150k of value. I'm either incompetent or purposefully gifting you $150k. There's a price that should be charged based on similar houses.

If I do that on behalf of a company by selling THEIR house, I'm either incompetent or embezzling money. If it turns out I sold it to a friend, it's clear I was embezzling. If I don't know the person (i.e. "arms length") I'm just incompetent.

In this case there is a market price for advisory services that you can figure out by looking at all the other similar advisers out there. You could make the argument that there are not enough similar advisers to establish what the price "should" be, or that it's not sufficiently below them to establish how much of a discount there is.

But mainly no one cares to go after the 401(k) balances of millions of middle class Americans on a technicality, so it's a non-starter.

Well, almost no one does, but someone has filed a whistle-blower claim with the IRS that this pricing arrangement is an illegal tax dodge: https://www.nytimes.com/2016/02/07/your-money/vanguard-a-cha...

It seems as though that case is still pending resolution.

I disagree with it, but the concept of "imputed rent" and "Home-Ownership Bias" is similar: https://en.wikipedia.org/wiki/Imputed_rent

> "More formally, in owner-occupancy, the landlord–tenant relationship is short-circuited. Consider a model: two people, A and B, each of whom owns property. If A lives in B's property, and B lives in A's, two financial transactions take place: each pays rent to the other. But if A and B are both owner-occupiers, no money changes hands even though the same economic relationships exists; there are still two owners and two occupiers, but the transactions between them no longer go through the market. The amount that would have changed hands had the owner and occupier been different persons is the imputed rent."

> "The government loses the opportunity to tax the transaction. Sometimes, governments have attempted to tax the imputed rent (Schedule A of United Kingdom's income tax used to do that), but it tends to be unpopular. Some countries still tax the imputed rent, such as Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland. The absence of taxes on imputed rents is also referred to as Home-Ownership Bias."

If the owner-occupier can be taxed for inputed rent, then the owner-occupier should also be able to depreciate and expense every blasted cent put into any expense whatsoever made in connection with the property.

John Bogle created the index fund, and along with it a savings philosophy that enabled the average investor to build wealth by taking an appropriate amount of risk (with exposure to stock/bond markets) and minimizing fees.

The Bogleheads Wiki has great resources on topics related to savings, retirement and investing. Here are a couple entry points into what Bogle's method looks like:



Not quite sure we can credit Bogle with creating the index fund. He certainly popularized it, though.

Bill Fouse at Wells Fargo got a rather clunky version of an index fund started in 1971, based on equal weighting of all NYSE shares. It took a couple more years for various people, including Dean LeBaron (later of Batterymarch) and John Bogle to get everything working the right way with timely capitalization weighting and rebalancing. That's when the S&P 500 became the index of choice.

Getting index funds to track consistently over time takes a fair amount of market monitoring plus basic computing power. (Reinvesting dividends brings one set of headaches; so does adjusting specific stocks' weightings as individual companies either shrink their float by buying back stock or expand it by issuing new shares.)

All these calculations seem trivial today, but back in the 1970s, we didn't have up-to-the-minute electronic Edgar filings at the SEC. Or abundant computer power on everyone's desks.

I had the privilege of working with Bill Fouse and other brilliant people at Wells Fargo Investment Advisors in the 70s. At the time, it was a huge technical challenge to crunch the numbers for a multi-million dollar investment, and to execute it without affecting the market prices of the target stocks.

The tax reporting is also pretty nightmarish. I have a friend who once decided he could mimic an index fund without the fees by buying individual stocks in the same proportions as the index (I think his broker offered a free trades deal or something, otherwise this is an obviously bad idea). His Schedule D that year was about 60 pages long, and he decided never again. Of course, it took him years to finish unwinding all the positions and reporting all the taxes, since many times you're left with a small fraction of a share once dividends have been reinvested.

Buying individual stocks in proportion to the market-cap index is possible today as a service, and advertised by Wealthfront as "direct indexing" or stock-level tax-loss harvesting

The small tax advantage is that you can sell individual stocks for tax-loss harvesting. Fisher advisors also offers this for HNW folks.

This article criticizes this as a lock-in for wealthfront, unlike funds which can be easily transferred to brokerage "in-kind" (without 500 separate securities, or selling as a taxable event) * https://medium.com/@wwalser/the-trap-of-wealthfronts-direct-...

RIP Bogle, making the world a fairer place rather than being a billionaire. I'd like to bike from Philadelphia to Valley Forge again to make pilgrimage.

Oh man you definitely want to turn off dividend reinvestment in taxable accounts, the tax reporting makes it impractical. Take dividends as cash and then roll that cash into regular periodic contributions (or distributions).

Freakonomics did a great podcast about index funds with him http://freakonomics.com/podcast/stupidest-money/

> Warren Buffett, the most famous investor in the world, had this to say recently: “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”

I hope they build that statue.

And get Wall St. to pay for it.

Put it in front of the bull on Wall St.

Maybe riding the bull...

Though apparently the space in front of the bull has opened up again: https://en.wikipedia.org/wiki/Fearless_Girl

Riding the bull, taming it.

Matador style, about to kill the bull.

They did, it’s on the Vangurd Campus, it’s in the Quad between buildings.

For others: An excellent picture of Bogle standing in front of his own statue is half way down this article from 2017:


If you don't know who Bogle is, and don't know much about individual investing for retirement, I would recommend you read William Bernstein's If You Can, a (free!) little 16-page booklet that just lays out the "Bogle method" for simple investing for retirement.

[0] https://www.etf.com/docs/IfYouCan.pdf

If you like that, I would also read Chapter 1 of Bernstein's Four Pillars of Investing. Bernstein's books are all more or less re-writes of the same book multiple times in an attempt to make the Bogle/indexing idea approachable for different audiences. In addition to If You Can, Chapter 1 of Four Pillars is a history of securities returns and is the best thing I've ever read in terms of getting into the right head-space for long-term investing and thinking about risk.


The rest of the book is good, too, but you can just read If You Can instead.

The story behind Bogle founding Vanguard is one of my favorite business stories and one of my favorite examples of contrarian thinking.


I don't generally like the idea of having personal heroes, but John Bogle would be on the short list.

I worked at Vanguard for about 5 years and Mr. Bogle was omnipresent on campus, working in his research area and dining (almost) every day in the on-campus cafeteria. In my few interactions with him, he was always nice and gentle. I only ever heard great things from my colleagues who had the chance to get to work with him closely or knew him better.

Also, I appreciated that he was willing to grow, even into his old age, regarding his thinking on asset allocation. For example, his stance on holding an international stock index changed over time (from "unnecessary because most S&P 500 companies are multinational" to "there is some value to allocate a percentage of one's account to a broader international index").

Additionally, he wasn't afraid to completely go or say something against Vanguard after retiring. He stuck to his beliefs and was willing to challenge the company he started (and, albeit, was forced to retire from). For example, he was not supportive of Vanguard's deep foray into ETFs as he viewed them as encouraging short-term trading.

All-in-all, he seemed like a wonderful person and the investment industry (and many other realms) are better because of him.

- Founded Vanguard and came up with the first index fund

- Became wealthy without exploiting his clients, foregoing millions, possibly billions

- Got a heart transplant at 65 and lived to 89

- Even in his recent interviews his voice always struck me as the voice of someone much younger, and he sounded very sharp mentally despite his age


I just finished reading "The Bogleheads' Guide to Investing", which opened my eyes up to how investing _really_ works -- turns out it's much simpler than I thought, which was an exciting realization to have. I'm sad to see him go.

It's simple, but requires a great deal of time to take advantage of compound interest. It's simple, but it requires dedication: you must say the course. Invest early, invest often, and invest for the long term.

It is a happy realization, though, to recognize how simple it really is.

"Stay the course"... a key phrase. You must be a fellow Boglehead!

(Bogleheads have a handful of short phrases that describe the simple foundations of Bogle's investment philosophy. As you say, it's simple but takes time.)

Index funds, dollar averaging.

I call it "get rich slow."

Dollar averaging does not actually give you any benefits in an efficient market.

(But if your money trickles in monthly, you might as well buy monthly if there are extra transaction fees.)

I hadn't heard of that book but I've now added it to my list.

Can you summarize the biggest thing you learned from it?

Hold a two- (or three-) fund portfolio of low cost index funds; invest in it regularly and stay the course. It's OK to invest in individual stocks, but do it for fun, not as (or with) your retirement savings.

I like Bogle's "Little Book of Common Sense Investing"[0] a little more than the Bogleheads Guide, but they're both good :)

[0] https://www.powells.com/book/-9781119404507

^ This! Also, the most valuable part of investing is asset allocation, i.e. how you split your money up between stocks and bonds (and optionally real estate). Take your age, and put that percentage of your money into bonds (if you're 30, put 30% of your money in bonds). Bonds are safer and you want to conserve your money as you age. Make sure the bond maturity dates aren't later than you're going to need them. Reallocate your assets every 18 months so that your diversification continues to match your age. Read fund prospectuses to learn about the fees and expenses they incur -- this is boring, but the lower the fees and expenses the better your portfolio will perform.

Regarding "your age in bonds", it's worth noting that Vanguard's all-in-one retirement funds don't follow this advice at all. For example, the Target Retirement 2050 fund has 10% bonds [1], while I would expect most people buying this fund to be 30+.

[1] https://investor.vanguard.com/mutual-funds/profile/VFIFX

I'd suggest ramping up bonds shortly before retirement (and then ramping them back down again afterwards, which the vanguard funds do not do -- mostly because they cannot tell if you have actually retired on your target date).[1]

[1]: https://earlyretirementnow.com/2017/09/13/the-ultimate-guide...

There's the "100 minus your age rule", the "110 minus your age" rule... Linear, simple, all easy to remember — not necessarily "tuned".

Unless you are borrowing at the risk free rate (levering your bonds), I don’t think this is the best advice, unless you are open to holding junk bonds. Your Sharpe ratio is largely irrelevant [(returns - risk free rate) / std dev]. What you want is to optimize your Sortino ratio [loss / std dev]. Or, put another way, it’s more preferable that you make 100% returns one year, and lose 25% the next than to make 25% each year.

The bonds are going to really drag on your returns and since bonds don’t seem correlated with equities anymore, they might not even be an equity hedge. Risk parity portfolios are designed to solve this problem through leverage.

I just back tested this to 2012. If you put $10,000 in in 2012, and just invested in the S&P500, you'd have $23,046. If you just did VTI (Vanguard Total Stock Market), you'd have $22,754. If you do 60% domestic and 40% international (VTI and VXUS) you'd have $19,325. If you did the recommended 3 stock portfolio (VTI 42%, VXUS 18%, and BND 40%) you'd have $16,668.

So while they all made money, the three portfolio made the least money. Unfortunately the Vanguard ETFs don't go back before the last recession, otherwise it would be interesting to see how the numbers invert.

Saying a portfolio allocation of 100% stocks 0% bonds outperformed 60/40 during the longest bull run in history is shortsighted. Here's a more thorough analysis - https://finpage.blog/2017/01/04/three-fund-portfolio-2016-up...

It's interesting that the 20y compound return are pretty close. I don't understand the STDev value in the tables, and it is not explained. Is that the the standard deviation of the annual returns?

The last few years are an outlier -- the US had a historic bull run and international stocks underperformed significantly. The point of the 3-fund is that it's a solid strategy no matter what the market looks like.

Yeah if I can find the data I'd back test further, but I suspect you'd be right.


You can backtest it there. BTW 100% stock will likely beat the stock+fund, but at the cost of higher volatility (which can be an issue if you need the money eg during retirement)

I really like this site for backtesting different mixes: https://portfoliocharts.com/portfolios/

A big part of that is that the average punter knows nothing, and that approach is likely to avoid losses.

When people go all VTI, they tend to freak out when the market goes down, sell near the bottom and forget about it, only to buy it again after the value goes up.

You are giving the average punter too much credit. If they could time the bottom like that, you could harness them to beat the markets.

It's easy to pick in retrospect but the 3 fund portfolio also carried less risk and will probably win in the longer term. Which one wins over the past 3 months? :)

Seven years is a short window in the span of a lifetime.

Google "VTSAX". I originally had 3 funds but now holding just one - VTSAX. But of course, that will change as I get closer to retirement (still far :-))

The 3 fund portfolio is better, which also includes international stocks and bonds. https://www.bogleheads.org/wiki/Three-fund_portfolio#Vanguar...

Maybe, depending on the definition of better. The single VTSAX fund has substantially outperformed the three-fund mix.

In my case, I believe we're in a rising rate environment, therefore I'd rather not hold bonds; I'm realistically investing for my kids' consumption rather than our own (we have the basics well-covered already); VTSAX holds companies that have substantial outside the US exposure and most of my future expenses are tightly tied to the fortunes of the US economy.

If your timeline is > 35 years, you're in the US, and intending to stay in the US, I could argue that pure VTSAX is better. Any of them are better than a "professional" financial advisor, IMO.

Not so far. VTSAX and VTI are basically the same thing.

If you put $10,000 in in 2012, and just invested in the S&P500, you'd have $23,046. If you just did VTI (Vanguard Total Stock Market), you'd have $22,754 (and VTSAX would be $22,731). If you did the recommended 3 stock portfolio (VTI 42%, VXUS 18%, and BND 40%) you'd have $16,668.

So while they all made money, the three stock portfolio made the least money. Unfortunately the Vanguard ETFs don't go back before the last recession, otherwise it would be interesting to see how the numbers invert, or if they do.

It has one of the LOWEST fees and has great returns I put my full 401k into VTSAX, as I have other diversified savings elsewhere.

My 401K is on a different fund only because VTSAX is not one of the options (but it's on an index fund tracking S&P 500). My IRA is fully on VTSAX. If I have an option, I'll put all my investments on VTSAX - I'm rooting for the US economy!

Paying someone (a fund manager) a percentage of your investment every year to "pick the winning stocks" with your money is more often than not a money-loser.

Looking at mutual funds over a period of years showed that very few of them even out-performed the market.

Almost all of those that did out-perform the market actually still lost out when the fund manager's percentage was figured in.

Fidelity Magellan Fund managed by Peter Lynch is one of the few exceptions where the fund not only outperformed the market but still did so after the fees.

(But then that is why you have heard of Fidelity Magellan Fund and Peter Lynch.)

Furthermore, as everyone jumped on Fidelity Magellan Fund it became too big and moved the market when it moved — and not in a beneficial way for the fund investors.

tl;dr: a monkey throwing a dart (assuming he charges a fee below 1%) will outperform most of the Wallstreet fund managers. Put your money in an index fund, let the algorithm spread your money/risk out and wait a few decades.

I too am a Boglehead.

RIP. One of the biggest reasons the investment class was able to expand to the common person. Exorbitant fees, lack of knowledge of investments were huge barriers of entry to making passive income. Only the really wealthy really had access to both. The index fund and the low fees associated with it are huge reasons why savings aren’t lower than they already are. Upper middle class especially benefited greatly.

> "One of the biggest reasons the investment class was able to expand to the common person."

not to nitpick too much, but the top 10% own 84% of stock [1] so the investment class hasn't reached very far down to the common person, who own most of their wealth in their homes (why the housing crisis disproportionately hit the bottom 80%).

with that said, if there's one social program that could reduce wealth inequality, it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least). it could be employer funded, or even funded by lotteries or sin taxes for the bottom 80%.

[1] https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

Here in Australia, we have a thing called Superannuation. Your employer is forced to put away a minimum % of your income, typically 10%, into a fund of your choice. Often jobs will come with up to 15% superannuation.

Similar to the 401K in the U.S. But U.S. employers are not forced.

The compulsory nature of it is amazing. I had a gap year before I went to university, and when I checked earlier today I found that my superannuation from that single year is now worth over $15k. From a single year, I worked a manual labour job when I was 18....

This is one of the arguments for privatizing social security. Instead of social security that doesn’t really help the economy, generate more wealth or increases capital this method is essentially the same thing but reinvests in our economy. Instead of the FICA contributions going to social security, they go into an index fund that you can track and that grows.

Whenever anyone brings up privatization of social security, everyone freaks out because the big money bags will steal it and the common man will be left with nothing...unfortunately they are kind of right. Intense lobbying every time privatization has had consideration makes it so those index funds are high expense, not optimal, and little choice. Goldman Sachs is writing the rules and doing so to benefit themselves. The exact opposite that Bogle stood for. If we were to stop that somehow then this would be fantastic.

What you’re saying though was brought up seriously in the tax bill discussions. They are already making it such that every small business gets a 401k option for employees. Not just tax breaks but forcing them to offer one with expenses covered by the state. That’s a good first step. I forget if it was California that is starting that 2020 or the country. The next step is what you’re saying, 1% tax employer funded. That would be extremely popular legislation and help people far more than a pseduotax break and cost a fraction of the price. In fact it will be a net positive if people were to save more. I think that has a great chance of becoming a reality. The correct way to privatize social security with maybe a cushion in case there’s a disaster would be far more reaching and better but anything that helps the middle class save is imperative.

“ Instead of the FICA contributions going to social security, they go into an index fund that you can track and that grows.”

That works fine until a) you pick the wrong index fund (and most people don’t know anything about finance) or b) the US hits a japan level stagnation and you can’t retire at all.

The point of Social security is to be a safety net (that’s also why as a rich person you get less benefits from it).

> That works fine until a) you pick the wrong index fund (and most people don’t know anything about finance)

The irony of this posted in a Bogle thread is hilarious. Bogle subscribes to the research done in a Random Walk Down Wall Street.

Take all of the people who know the most about finance in the world (run the best funds) and they have a ~50% chance of beating the broad based index (S&P 500) any given year; If you expand that 10 years, the number of funds approaches 0. If you include the fees, it's ~42% beating the market any given year.

The "secret" and why bogleheads work is there is no picking. You pick the total stock market. But, if SS has regulatory concerns, it'll do just fine in VOO, representing the S&P 500.

>Instead of social security that doesn’t really help the economy, generate more wealth or increases capital

SS assets are invested daily by law into safe securities (special US bonds) and the cash is immediately put back to use in capital markets. Here [1] you can look through the data to grasp the scale of it.

[1] https://www.ssa.gov/oact/progdata/investheld.html

The trouble is employees are already paying 12.4%* of their salary into Social Security, so additional savings would be a significant burden that bottom 90%. If the SS money went into a managed retirement program like* * TSP it would accomplish what you're proposing.

The rationale was stated quite frankly by FDR:

"We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."

He didn't anticipate an aging population, let alone index funds.

Social Security is a wealth transfer from one generation to another, so after a generation has paid out to their elders, they (not unreasonably) feel entitled to collect from it. Even if they were feeling generous, they've generally planned their finances around those benefits. That's why reforming the system has been politically intractable.

* You're taxed 6.2% and the employer is taxed 6.2%. When employers are budgeting for salaries they're going to consider the full 12.4%.

* * TSP is essentially the military's 401k with a group of very low cost funds, only here you would require the assets stay in the program until retirement.

I suspect the point though being that before Bogle's ideas we would expect the top 10% to own even more than 84% of stock.

Further, regarding investing in your home, since a home has a tangible value as well (you can live in it) no doubt the bottom 80% have first to invest in a home before they can have the "luxury" of investing in stocks.

(No doubt the top 10% own their homes as well.)

> with that said, if there's one social program that could reduce wealth inequality...

... it would be returning to a more progressive tax system, increasing inheritance tax, reducing regressive taxes like gasoline and sales taxes, etc.

I suspect that a lot of stocks are owned by pension funds

>it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least)

Doesn't Australia's superannuation work something like this? If I understand it correctly, a chunk of your salary is set aside, but instead of going into a pool like Social Security, it goes into a fund. I could be (and probably am) wrong as to how it works. That being said, I would love it if we could implement something like this in the US.

Australia's superannuation is more like the US 401k but with a Government mandated minimum contribution level.

Individuals are free to pick their own fund providers or even create their own superannuation funds (with some caveats).

Also the govt encourages additional voluntary contributions by allowing a certain amount to be salary sacrificed (paid directly without tax) into super.

This is purely for the pension; unemployment benefits are completely separate. You cannot access your super funds until you reach retirement age or become critically ill.

Or leave the country, if you are not a 'strayan. But then you pay back taxes on it.

Australia does something like that. https://en.wikipedia.org/wiki/Superannuation_in_Australia

Singapore has something vaguely related https://en.wikipedia.org/wiki/Central_Provident_Fund

Index Fund made it possible for the layman to get into the game of investing.

Bogle converted an action game into an idle game.

Hard to fully apprehend the impact this guy had on investing for regular people. In a very real sense, imagine the aggregate savings in fees he created for millions of people over the course of decades -- savings that were likely plowed back into people's retirement and total returns. Who else has done something for investors like this? I can't think of anyone even close.

Having had the extreme pleasure, and honor to work with Mr. Bogle I am truly saddened by his passing. He was selfless to a fault, a great man.

May I ask how you worked with him?

He could've been a billionaire. Instead he made hundreds of thousands of us investors millionaires. Thank you, Jack! RIP

Bogle is the reason a lot of bad investing decisions are passively avoided.

RIP, Mr. Bogle. Does anyone know how Bogle concretely thought of the existence of samples like Warren Buffett who have outperformed the market over decades, granted the outperformance may not continue in the future [1]. I presume Bogle's view on this would be nuanced.

[1]: https://qz.com/1216260/warren-buffett-doesnt-beat-the-market...

He probably did more than anyone else to safeguard American's retirement.

Highly recommend listening to the bogleheads podcast ep 1 that interviews John Bogle. He turned out to be much more interesting than I thought:


As people are sharing resources related to John, the Freakonomics podcast, where John makes an appearance, on investing I found was informative as well.


Very sad. Millions of people will live comfortable, dignified retirements thanks to him. Mr. Bogle will be remembered as the Patron Saint of retirement investing.

I wish I learned about Index Funds when I was younger. Thanks, Jack! I'm a happy Vanguard customer holding a single Index Fund fund.

Due to his heart transplant, he was sometimes dubbed as the only man in Wall Street with a heart. Rest in peace.

Bogle was certainly a visionary, though I always find it odd that he never got on the ETF bandwagon. They are the next logical step in his vision for finance.

Granted, they carry some risks that index funds don’t (liquidity and market risk), but they provide many advantages (like taxes). They also can be repurposed for any kind of investment vehicle as they essentially are just an “API.”

Bogle said in an interview that I cannot find but i's probably on YouTube that he saw nothing wrong with ETFs as an investment product, simply that they encouraged non-passive behavior for most investors, and he thought temptation to time the market or liquidate/buy at the wrong time were tremendous stumbling blocks or get hoodwinked by grandiose promises of some arcane sector, and ETFs made that easier to give in to. (I'm paraphrasing.)

A non-paywalled alternative story: https://www.cnbc.com/2018/12/14/jack-bogle-founder-of-vangua...

Reaching 89 seems pretty good for someone who had his "first of a half-dozen heart attacks at age 31" and got a heart transplant at 65.

"If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle," billionaire investor Warren Buffett wrote in his annual letter in March 2017.

How does one have multiple heart attacks at 31? Congenital defects? Just curious - I'm not too far from 30 and it makes me paranoid...

Yes, congenital defects.

His first heart attack came at 31, he went on to have several more heart attacks. From his Wikipedia entry:

At age 31, Bogle suffered from his first of several heart attacks, and at age 38, he was diagnosed with the rare heart disease arrhythmogenic right ventricular dysplasia. He received a heart transplant in 1996 at age 65.[13][14]


I read that as him having his first heart attack at 31 and many more later in life.

Aside from congenital issues, heart attacks at that age are typically complications of other issues.

>Congenital defects?

Almost certainly. If your diet and lifestyle are even remotely healthy, and you don’t have a history of heart disease in your family, it’s very unlikely you have anything to worry about.

Otherwise, a visit to a cardiologist should put your mind at ease.

I think it means the first of his lifetime six heart attacks was at 31.

I'm 38 and equally paranoid :)

Imagine how paranoid he must have been after his 3rd or 4th, knowing that it's probably going to happen again and may be his last...

Just yesterday I watched this video on YouTube interviewing him: https://www.youtube.com/watch?v=zrCo0m5gSfc

I found the clarity of his voice and the mental sharpness astonishing, given his age. Further, I wish information about index funds would be better explained in school.

Was going to post the same link. He was an extremely smart guy. RIP Jack.

Thank you Jack. Signed, Vanguard investor.

Anyone know why some sites are naming him as Jack Bogle while others use John Bogle?

[1] https://www.cbsnews.com/news/jack-bogle-index-fund-pioneer-a...

Jack is short for John.

You'll hear the same with John F. Kennedy. Some people refer to him as Jack Kennedy. Here's why the names are interchangeable:


"[Jack], the commonest pet-name for John, has caused a good deal of difficulty owing to the natural assumption that it must be derived from the French Jacques and should therefore logically represent James rather than John. The problem was cleared up by E. W. B. Nicholson in a little book entitled The Pedigree of Jack and of Various Allied Names (1892). He showed that there is no recorded instance of Jack, Jak, Jacke, or Jakke ever being used to represent Jacques or James, and that no statement in favor of the French connexion has been produced from any early writer. He then proceeded to elucidate and illustrate with examples the development of Johannes [the standard Latin nominative form] to Jehan [the standard Old and Middle French oblique form] and Jan [the standard Middle Dutch form], whence, by addition of the common suffix -kin [a uniquely English suffix], we get Jankin, which as a result of French nasalization becomes Jackin [this is the same nasalization that gets us Harry from Henry], and was finally shortened to Jack. There was a similar development from Jon to Jock (the Scottish form of the name)."

Lol. Really? How is it shorter?

I think it's just a nickname, which does not necessarily mean shorter.

“Short” is short for “nickname”, in this case.

Yeah, and if you say them out loud, "Jack" sounds a slight bit faster than "John" I think.

For those who want to hear Bogle's voice and a summary of his career in his own words check out this 2007 interview of EconTalk: http://www.econtalk.org/bogle-on-investing/

This being a coding community, has anyone ever created an ipython notebook or similar that uses historical data to see how these passive investing products perform over all possible long intervals?

I'm curious what are the conditions for doing well with passive investing depending on your buy/sell strategy and times? I suspect it can't just be a long enough interval of holding the indexes, it also depends on when you retire, or at what rate you buy indexes over your lifetime, or some other things that perhaps is just dependent on your life schedule and not really under your control. This is what some traders tell me, and I've never done the work myself to prove them wrong. How much chance is there in doing well with passive investing over a whole lifetime?

I don't understand what you're contrasting with. The evidence is that passive investing works over a lifetime. It may not perform well over a particular decade. The strategy is simply buy and hold. Somewhat better is to buy small amounts periodically, to average the cost. Don't sell.

This may change in the future, of course, but that's not really actionable knowledge.

Okay, great, so link me to some of this non anecdotal evidence please :)

What are best numerical values for lifetime, how slowly can you withdraw money when you retire, what are the best lengths of retirement etc. I want to see which passive investment strategies work. We can all think of examples where someone buys indexes over time, and then chooses to retire in the wrong decade. I want to know how many good and bad outcomes there are over our known historical data, and see what percentage of the time passive investing works. How much better fo some passive investors do versus others, how much luck is involved? If you must compare to say buying and holding a commodity like gold. But really I'm just interested in how varryingly successful passive investing strategies can be. I was hoping for code, just because I wanted millions of examples, not just a couple success and dud stories.

> link me to some ... evidence

Google will help you better than I. Search for Boggleheads, passive index investing, etc. There's a nice book titled, "A Random Walk Down Wall Street."

Very sad to see this.

Bogle spent a lot of time (and gave up the opportunity for a lot of money) preaching to people about how wealth can be accumulated. He really had a heart for helping people.

Watch some of his interviews on YouTube. He speaks very clearly, but it's easy to see he was a brilliant man.

Unless you're already a 'Boglehead': If you get ONE thing out of today's Hacker News, take an hour and learn the simple message John Bogle preached. Your future self will thank you profusely.

Truly a saint. His index funds and passive investing school of thought probably saved trillions of dollars and made investing in the markets accessible to millions of everyday citizens.


I admire John a great deal and have been a lifelong, very happy Vanguard client. RIP.

It is quite possible that thanks to John millions of people today enjoy financially secure retirement. A huge VOO position (+some BRK.B) has certainly served me well as a volatility attenuator.

It is important to note that John Bogle or Vanguard did not invent ETFs. They popularized it.

The first rudimentary ETF was probably Toronto 35 Index Participation Units (TIPs 35) traded on Toronto Stock Exchange. The first fully mature ETF was State Street Global Investors's S&P 500 Trust ETF (SPDR). State Street company is still a major player in the ETF space today.

Why is there no black bar on the HN main page? I thought it was an algorithm that searched for the word “died”.

AIUI, the black bar is a manual process, not automated.

This is black-bar worthy — he did touch a lot of us with his work, and I’d like to think that he’s one of the few reasons the wealth generated in Silicon Valley largely stays to fund the next generation of startups (like mine). I’ve lost count of how many times I’ve recommended Vanguard personally.

> and I’d like to think that he’s one of the few reasons the wealth generated in Silicon Valley largely stays to fund the next generation of startups (like mine).

This is not directly true. Vanguard mutual funds provide 0.05% annual fee rather than ~1% annual fee to access the average return of an index (whether the index is the S&P500, or every publicly listed company in the US). While the low-cost has empirically provided a better (compounding) return for investors over the decades, Silicon Valley angel investors and VCs have generated their wealth from their own businesses, and re-invest some portion of it directly into the next generation of unlisted companies. The extra 1% annual return gained by accepting the average stock market return (at exceptionally low cost) is not what's driving startup investment.

That said, the lower expected average market return (because the stock market being relatively highly valued, after the recovery from the 2008 crash, due to both record low interest rates, and to some degree a blind movement of capital towards index funds) may have some impact on temporarily increased VC dollars, trying to chase some kind of reasonable return.

A lot of wealthy Silicon Valley entrepreneurs, engineers, and investors park their personal wealth in Vanguard funds while looking for the next wave to invest in. It's not that they're getting rich off of money invested in index funds, it's that index funds crowd out private wealth managers who might otherwise have been given carte blanche to invest their clients assets but not have the expertise to understand which new startups look promising.

Presumably the parent meant that Bogle popularized index mutual fund investing in 1976, thereby catalysing the passive investing industry.

And whereby there were previously only actively managed funds, the creation of that industry substantially lowered the cut money managers got from person wealth management.

Thereby leading to generations of people with more control over their money and willing to take risks, where a professional money manager would have little incentive to invest in startups with wealth locked up in their funds.

It's really amazing work he did considering that after the move to 401k and away from pensions in the private sector, there really are now few alternative paths to secure retirement.

The move away from pensions could have been a veritable smorgasbord of fees for actively managed funds, but Vanguard provided broad access to something just as good (and more often than not, better[1]).

1. https://www.fool.com/investing/mutual-funds/mutual-fund-basi...

Agreed. Truly a hacker in the broader sense of the word - a simple automated kludge that does the trick, despite seeming inelegant to the experts.

Not sure how many HN people follow the Bogle philosophy, but to me it feels not inappropriate to turn on the black bar.

I think there's a ton of people here who follow Bogle's ideas. It's the go-to investment advice for anyone in tech that everyone parrots.

That said, I think the discussion of a black bar every time someone dies is a little repetitive and kind of sours the process.

On a related note, I was looking for the list of people who got black bars, and I couldn't find one. Does anyone know if there's an (un)official list?

I'll start:

Aaron Swartz

Gerald M. Weinberg

Steve Jobs

Stephen Hawking

Andy Grove

Marvin Minsky

I seem to remember Terry Davis didn't, which disappointed me, but made sense as there was confusion around if he was dead at first.

What is the black bar? My GoogleFu/DuckDuckGoFu returned nothing but articles about his passing.



This is done when someone passes who is considered especially (noteworthy|significant|involved|something) to/with the HN community. AFAIK there's no exact formula for determining who the mods deem worthy of that tribute, but I do know that they don't do it for everybody famous who dies. It's usually people who are particularly close to the HN world in some way.

I believe that the black bar is put up at the top of the site after someone who is considered important by HN readership dies.

I vote for black-bar

Could not agree more.

Wow. Thus passes a legend. Deserves the black bar IMHO, if you consider the debt owed to him by roboadvisors and such.

Jack Bogle is a legend and I have the majority of my money in Vanguard investment funds, but did you know that its corporate structure just might be a tax scam?


It sounds crazy at first, but after reading it's hard not to come away agreeing with the thesis.

If Vanguard is a tax scam, perhaps I am evading taxes when my kids do chores, when I cut my own grass or repair my own car, or when DW and I have adult time instead of hiring a pro for that...

Perhaps the local soup kitchen is acting improperly when they don't charge retail rates and sales tax for the prepared meals they serve.

And the other fun "is it a conspiracy theory or maybe actually true?" thing about Vanguard/Index investing is the idea that it might be undermining capitalism itself because diversified owners aren't incentivized to compete.


My thoughts on this is that index funds shouldn't vote in shareholder elections, for purely selfish reasons that mirror the reasons why they don't try to evaluate stock prices.

The remaining voters are already voting in the company's best interest. Index funds don't have a comparative advantage at making voting decisions, so they shouldn't pay people to do it.

By that logic you also shouldn't vote in elections, because the remaining voters are already voting in the country's best interest.

Everyone thinks they're right, even though only some of them can be. :-)

If Vanguard had an option where I could control my share of shareholder votes then I might sometimes do that. I can imagine there being the occasional shareholder vote where I have different views or values than the rest of the shareholders, even after reflecting on the fact that they're thinking the same thing.

But I don't see why I should expect Vanguard to be systematically better than other investors. The same way that I don't allow Vanguard to vote for me in political elections.

Vanguard (and other large fund companies) often uses ISS (Institutional Shareholder Services) for advice on how to vote their shares. ISS has some standing "policies" if you will about director and executive compensation and other matters that do matter to fund shareholders.

Vanguard does not obligate themselves to follow ISS recommendations, but on the whole ISS advice/recommendations are/try to be pro-shareholder.

Leaving voting only to active shareholders doesn't seem to improve shareholder representation, IMO. I'm happier to have Vanguard vote my shares than to abstain as abstaining provides an excess of power to the inside shareholders and company execs.

> Everyone thinks they're right, even though only some of them can be. :-)

No, even if everyone were right, that logic doesn't work, because interests simply aren't aligned. To make it really obvious: If Vanguard held 99% of company A while company B, a competitor of company A, held the other 1% of company A, and Vanguard abstained from voting, company B might simply vote to shut down their competitor.

No why would it its mirroring the way investment trusts /investment companies work in the UK and where set up in the 19th century to allow small investors to invest.

I don't think UK investors in the 19th century were buying index funds where they owned a tiny piece of every company in the market. The current situation is quite a bit different.

Its more the principal that the investment company doesn't pay tax the owners do

Ah, I think you replied to my "destroying capitalism" comment when you meant to reply to my "tax scam" comment. Two different things.

But anyways, the issue isn't about the company vs the owners paying the taxes because in this case the owners are the company. The issue is that these owners are (via the company) are (perhaps illegally) manipulating how their earnings are counted to lower their tax rate.

Well its what I do as a part owner of a uk investment trusts the company doesn't pay tax on gains but I pay tax on CGT and Dividend income.

A lot of American industry rail roads in particular was funded by British investment trusts.

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