Missing Name on Forbes 400 List

Forbes released its annual list of 400 richest Americans last week. There is one prominent name missing on the list.

His name is John Bogle, founder of The Vanguard Group. Mr. Bogle started Vanguard in 1975. Vanguard created the first index fund for retail investors a year later. Today, Vanguard manages over $1 trillion assets. The Vanguard 500 Index Fund (VFINX) is the world’s largest mutual fund. Millions of investors benefit from the low cost Vanguard index funds you hear about everywhere. For such an achievement, John Bogle has very little to show for himself. He’s not on the Forbes 400 list.

Edward (“Ned”) Johnson III and his daughter Abigail Johnson are on the Forbes 400 list. Between the two of them, they have more than $25 billion. They made their fortune from Fidelity Investments, which manages mutual fund assets similar in size to Vanguard’s. Charles Johnson and his brother Rupert Johnson Jr. are also on the Forbes 400 list. They have $11 billion. They made their money from Franklin Resources, which manages Franklin Templeton Funds. With about $620 billion under management, Franklin Resources manages 40% less assets than Vanguard.

There’s nothing wrong with Fidelity and Franklin making a lot of money for their owners. That’s capitalism. They offered a service that customers wanted and they should be rewarded for their success. John Bogle has also been successful. Had John Bogle made himself the owner of The Vanguard Group when he founded it, I’m sure he would be as rich as the Johnsons of Fidelity or the Johnsons of Franklin, if not richer. Instead, from the very beginning, he gave the company to the Vanguard mutual fund investors. He made Vanguard a mutual mutual fund company which provides mutual fund management services to the fund investors at cost. Over the years, Vanguard investors saved billions of dollars of mutual fund management fees. The billions of dollars that went to the owners of Fidelity, Franklin, and all other mutual fund management companies, didn’t go to Mr. Bogle. He only drew a salary as an employee.

Rich people like Bill Gates usually make money first, then give to charity. Mr. Bogle has been giving what could’ve been his to the investing public every since he started the index funds revolution. Until this day, after retiring from Vanguard, Mr. Bogle is still making speeches advocating for “owner’s capitalism” as opposed to “management’s capitalism.” He is the lone voice for the “small guys” in the financial services industry.

I recommend these books by Mr. Bogle:

The Little Book of Common Sense Investing – The latest book by Mr. Bogle about index fund investing. If you know about these already, diversify, keep the costs low, buy index funds, give one to your brother then. If you don’t, read directly from the person who started the index funds phenomenon.

John Bogle on Investing: The First 50 Years — A collection of Mr. Bogle’s speeches. The only place where Mr. Bogle’s 1951 Princeton senior thesis is reprinted. The 1951 thesis was the paper that started it all. Mr. Bogle was 21 at that time. Used copy of this book is selling on Amazon for $6 shipped. What a bargain for owning a piece of history.

The Battle for the Soul of Capitalism — Outlines why managers are reaping disproportional benefits at the cost of shareholders and what should be done.

Last but not the least, Mr. Bogle has a blog. He answers “ask Jack” questions there. How cool it is to have your question answered by John Bogle himself!

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Comments

  1. [email protected] says

    Yes, all well and good for the US Vanguard investors, but what about us Aussies? The Australian Vanguard funds all charge much higher fees than the US equivalents (as far as I can tell), although they are still cheaper than the ‘actively managed’ Australian funds. I suspect that the Australian Vanguard investors are either a) paying for Vanguard’s costs to market the funds extensively in Australia and try to capture market share, or b) making a profit for the US parent company.

    I’m still a fan of Vanguard in Australia, but I wish my investments with them didn’t have to pay 0.7% fees (the fee drops to “only” 0.35% on balances PER FUND over $100,000)…

    Regards
    http://enoughwealth.com

  2. Ted says

    It goes without saying that Mr. Bogle is an extraordinary person.

    My reason for commenting is tangential to your post related to the Forbes 400 list.

    I was reading Benjamin Graham’s book The Intelligent Investor, and it compared the Forbes lists from 1982 and 2002. I think only 15% of the people on the list in 1982 were still on the list in 2002.

    The kicker is that someone on the list in 1982 only had to average a measly money market 5% ROI on their net worth to remain on the list in 2002. Note that the S&P 500 during this period went from 120 to 1148, which is about 12% annual growth rate.

    What’s the point? I don’t know, maybe the majority of the Forbes class of 1982 invested with the Fidelities and the Templetons instead of with Jack and his 500 index fund.

  3. Harry Sit says

    @enoughwealth, I don’t know enough about the investing environment in Australia. The cost of doing business may be higher there or perhaps Vanguard doesn’t have the kind of economy of scale they enjoy here in the U.S. I’m glad to know Vanguard is still cheaper than alternatives in Australia. I’m curious to know who owns Vanguard Australia. The Australian funds, or the Vanguard funds in the U.S.?

    @Ted, a point of clarification. Ben Graham died in 1976. The Forbes 1982-2002 story could not have come from Ben Graham. Jason Zweig inserted that as his annonation to Graham’s book. I hate it. It’s like having someone scribble over a masterpiece of art. I think you should read straight Graham, not Graham interlaced with someone else’s interpretation.

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