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I read a very interesting article about John Bogle. John Bogle is famous for inventing the index fund. He was amazing in that he had multiple near fatal heart attacks, but still went on to form the largest asset manager with 4.9 trillion of assets.

What I find most interesting, is I wonder if he is a hypocrite.

In 1960, he trashed the idea of an index fund. He claimed it would underperform mutual funds by .75%. He quoted a critic saying that the relative inflexibility of index funds makes them undesirable for the average investor. In 1973, he said, studies critiquing fund performance were wholly invalid. “I don’t see how the mutual funds performance could be very much better. Funds had delivered excellence to their investors. “


In 1974, he was fired as CEO of Wellington Management. He realized he needed a radical new way to do business, and created Vanguard, which was a mutual company, meaning, the share holders owned the company. He also deliberately designed Vanguard to drive fees as low as possible.

He was also a harsh critic of fund companies. “The way fund companies treat their clients is larcenous, trying to beat the market is a fools game, brokerage commissions are like highway robbery.
Whether you think he believed what he said, or not, he created a war between companies to charge the lowest fees, and he helped retail investors immensely.
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I have great respect for Jack Bogle. My sister and I benefited immensely from Vanguard in our IRAs over the last decades. And he was a real mensch!
From Shawn Carter CNBC:
"My only regret about money," Bogle said in 2012, per the Times, "is that I don't have more to give away.
https://www.cnbc.com/2019/01/18/jack-bogles-only-money-regre...
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What I find most interesting, is I wonder if he is a hypocrite.
In 1960, he trashed the idea of an index fund...


Well, I think "hypocrite" is perhaps a bit harsh.


He thought one thing for a while.
A few years later he starting thinking another thing...his One Big Idea, which seems to have had value. He stuck with that.

Having a change in stance is OK.
In 1960 he was 31 years old. I certainly don't espouse all of the notions I held strongly at age 31.
Mr Bogle describing the Mr Bogle of 1966: "I was naive, overconfident, full of every kind of bad attitude."

Had he clearly believed one thing yet advocated the other at the same time, or believed the low-fee index idea while paying himself billions, then more harshness would be appropriate.

Jim
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Well, I think "hypocrite" is perhaps a bit harsh.


He thought one thing for a while.
A few years later he starting thinking another thing...his One Big Idea, which seems to have had value. He stuck with that.

Having a change in stance is OK.
In 1960 he was 31 years old. I certainly don't espouse all of the notions I held strongly at age 31.
Mr Bogle describing the Mr Bogle of 1966: "I was naive, overconfident, full of every kind of bad attitude."

Had he clearly believed one thing yet advocated the other at the same time, or believed the low-fee index idea while paying himself billions, then more harshness would be appropriate.


But the timing is suspect. He lost his job with Wellington in 1973, and immediately became a convert to passive management.
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What’s that old saying, “Necessity is the mother of invention”?
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But the timing is suspect. He lost his job with Wellington in 1973, and immediately became a convert to passive management.

There are a few experts in various fields that I'm aware of.
I think those who have gone through serious challenges to their way of thinking, and as a result changed views completely, deserve particular attention.
Further, these changes take significant time, and so I don't see a necessary problem with being labeled a hypocrite.
Most people at the start of a career don't know that much, and may hold certain views that naturally change as they gain experience and hopefully wisdom.
The test of time is the important one.


Mark
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But the timing is suspect. He lost his job with Wellington in 1973, and immediately became a convert to passive management.

I suppose.
But you could look at the same event another way.

I gather he got fired from Wellington specifically because of poor performance, resulting from a specific move:
he had gone heavily in with a team of hot traders who he thought could beat the market, and emphatically didn't.

Such a pointed demonstration of the difficulty of beating the market could certainly lead one to consider the notion of it not being worthwhile to try.

So, yes,
(1) First he was a believer in high-fee stock picking while at a fee-based stock picking firm.
(2) Later, no longer doing that, he was a believer in the reverse: low fees and no picking. Sounds bad.

But it's worth noting the event that happened in between:
(1.5) he got his head handed to him (in both fund performance and his job) by trying, and failing spectacularly, to beat the market.

Jim
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"he got his head handed to him (in both fund performance and his job) by trying, and failing spectacularly, to beat the market."

For those of us who are not doing too well at MI, we may be in the same boat as he was. We think we can beat the market, but fail badly. Maybe we will come to the same conclusion as he did- passive beats active.

DoesMIWork
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"he got his head handed to him (in both fund performance and his job) by trying, and failing spectacularly, to beat the market."

For those of us who are not doing too well at MI, we may be in the same boat as he was. We think we can beat the market, but fail badly. Maybe we will come to the same conclusion as he did- passive beats active.


That thought has come up of late.

My ultimate plan for going "Passive" has been in Asset Allocation (fund of funds). But still thinking about it.


Such as:

FFNOX = Fidelity Four-in-One Index
AOK = iShares Core Conservative Allocation
AOM = iShares Moderate Allocation
AOR = iShares Core Growth Allocation
AOA = iShares Core Aggressive Allocation

GD_
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For those of us who are not doing too well at MI, we may be in the same boat as he was. We think we can beat the market, but fail badly. Maybe we will come to the same conclusion as he did- passive beats active.


Yeah.....problem is, without the active their *is* no passive. What a conundrum. If there are no active traders, then there is nothing that sets the price.
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Yeah.....problem is, without the active their *is* no passive.

Even worse.
Without the existence of *dumb* active, you can't do well at *good* active.
Beating the market is a roughly zero sum game, so for me to win that game I have to find some sucker to lose against me.

Maybe MI works less these days not because of the quant funds, but because too many of the muppets have bought index funds.
You can get rich stealing lunch money, but only if a certain minimum number of people buy lunch rather than brown bagging it.


As a distant aside, I heard a thing on the radio about how almost all "exclude X" diet programs fail. Their conclusion was you might as well eat what you like and be happy.
I was thinking about analogies in investment management rules.
Would there be a diet book (sorry, investing book) that promised you'd do better if only you DON'T do a certain thing?
But otherwise letting you continue doing any and all stupid things you like.

Here's my first inspiration:
Buy and sell whatever stocks you want, on gut feel, charts, astrology, Cramer, or any other reason.
If you have no method in mind then dartboards and dice are recommended, but any method is fine.
But you have to follow these rules:
(1) Keep total trading costs under half a percent of portfolio a year, preferably lower.
(2) You can sell whatever you like, any quantity you own, but it has to be on a day that the market is its highest in the last month. You can't buy on those days.
(3) You can buy whatever you like, any quantity you can afford, but it has to be on a day that the market is its lowest in the last month. You can't sell on those days.

If on some random day you decide to trade, about 10% of the time you'll have to wait more than 7 weeks before you're allowed, average about 2.6 weeks.

Jim
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