“Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children’s futures,” Vanguard chief executive Tim Buckley said in a release accompanying the announcement.
Mr. Bogle, a pioneer known as “the father of index funds,” was a contrarian who took on Wall Street and the investment community through his advocacy of the cost-efficient index fund, which was widely ridiculed by stock pickers but came to dominate the investing world.
The concept, which began as his senior thesis at Princeton University, was simple: A tiny percentage of stock-pickers can beat the Standard & Poor’s 500 over a long period of time. Index funds own very broad holdings meant to mimic the market indexes. They do not seek to outperform the market by trying to pick winners; instead, they own stocks that represent a given market. It is better, and cheaper, Mr. Bogle said, for investors to own a basket of stocks that echo the S&P 500.
“Don’t look for the needle in the haystack,” Mr. Bogle wrote in “The Little Book of Common Sense Investing” (2007). “Just buy the haystack.”
Vanguard is now one of the world’s largest investment management firms, with $4.9 trillion in assets in 413 funds serving 20 million investors across the globe. The company to this day has among the lowest fees in the industry, spawning competitors that have copied the practice and gone even further to “no cost” mutual funds.
Index funds have become dominant, accounting for 43 percent of all stock funds, about $7 trillion. The pervasiveness of index funds has spurred a backlash by some in the financial industry who say the blindly operated funds contribute to huge, sudden swings in the market. Some went as far as to label index funds free riders undermining the stock market.
In a note titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism,” a team at the money management firm Sanford C. Bernstein made the case for active managers.
“A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management,” they wrote.
But Vanguard’s simplicity, low cost and transparency on fees made Mr. Bogle a hero to many, who saw him as the champion of the small-time investor.
“He democratized and simplified investing and made it affordable for the average American,” said Peter G. Fitzgerald, chairman of Chain Bridge Bank and former Republican U.S. senator from Illinois. “He was the original industry disruptor.”
Mr. Bogle’s “Common Sense on Mutual Funds” (1999) is considered one of the bibles of mutual fund investing. The 450-page book went into exhaustive detail explaining the advantages of index funds — in terms of tax exposure, low costs and performance — over stock picking.
Mr. Bogle started at Wellington Management and later left in a dispute following its merger with another investment firm. He formed Vanguard, which he named for British Adm. Horatio Nelson’s flagship at the Battle of the Nile in 1798 because he thought it conveyed leadership. Created as an experiment in low-cost mutual funds, the firm introduced the first index mutual fund for individual investors — First Index Investment Trust — in 1976.
That became the widely held Vanguard 500 Index Fund, the crown jewel of the entire company, with more than $441 billion in assets.
Vanguard was a unique entity, structured to be owned by the shareholders in its funds rather than outside stockholders or private owners. The purpose was to run Vanguard as cheaply and efficiently as possible, keeping costs at a minimum to the investors who bought its funds.
“Our challenge at the time,” Mr. Bogle said later, “was to build, out of the ashes of major corporate conflict, a new and better way of running a mutual fund complex. The Vanguard Experiment was designed to prove that mutual funds could operate independently, and do so in a manner that would directly benefit their shareholders.”
Mr. Bogle broke from industry tradition in 1977, when Vanguard eliminated upfront sales charges and marketed directly to investors instead of brokers. Costs dropped even further.
Mr. Bogle ran Vanguard until January 1996, when his lifelong weak heart forced him to appoint his assistant, John. J. Brennan, to run the company while Bogle waited for a heart transplant.
The transplant was a success, and Mr. Bogle returned to the Vanguard campus, where he maintained an office and remained outspoken on the industry’s practices, often to the chagrin of his successors.
In a Wall Street Journal essay he wrote last year, he warned of the danger of too much concentration in the mutual-fund industry as a result of the success of index funds. He went so far as to advocate federal regulation to prevent a handful of mutual funds from dominating the stock market.
“Public policy cannot ignore this growing dominance, and consider its impact on the financial markets, corporate governance, and regulation,” he wrote. “These will be major issues in the coming era.”
John Clifton Bogle was born in Montclair, N.J., on May 8, 1929. His family founded American Can but saw their fortune decimated by the market crash that year. He worked his way through Blair Academy, a prep school in Blairstown, N.J., and then Princeton University as a waiter and also managed Princeton’s athletic ticket office. He graduated in 1951.
A tall, athletic man who sported a crew cut for most of his life, Mr. Bogle played squash, tennis and golf, and also enjoyed sailing. He was a past chairman of the Investment Company Institute, a mutual fund trade group, and he served on the Securities and Exchange Commission’s Market Oversight and Financial Services Advisory Committee.
He married Eve Sherrerd in 1956. In addition to his wife, survivors include six children; 12 grandchildren; and six great-grandchildren.
Mr. Bogle spent summers at a home in the Adirondack Mountains in Upstate New York, where he wrote speeches and articles and about a dozen books. In his 2009 volume, “Enough,” which criticized a money-hungry culture that he said was destroying capitalism, he wrote an introduction that included an anecdote from a party given by a Shelter Island billionaire.
“Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel ‘Catch-22’ over its whole history,” Mr. Bogle wrote. “Heller responds, ‘Yes, but I have something he will never have . . . enough.”