It might sometimes seem that I share every interview with Jack Bogle, but he speaks so well — so economically, articulately and intelligently — that I make no apologies for being one of his biggest fans.
This latest interview, by Michael Regan at Bloomberg, is a gem.
Here are just a few of the highlights:
The index revolution
“What’s clear is we’re in the middle of a revolution caused by indexing. It’s reshaping Wall Street, it’s reshaping the mutual fund industry. We’re beyond the beginning, but nowhere near the end.”
Has indexing peaked?
“I’ve seen many pendulums. But this isn’t a pendulum. People are going to be using more index funds in 2025 than they are today. This is an underlying, fundamental trend — not one built on opinion, but on the relentless rules of humble arithmetic.”
“Actively managed funds have been losing to index funds, in terms of cash flow, for eight consecutive years. And it’s cascading now. Investors love it; Wall Street hates it. Fund managers don’t like it either. Money is leaving them and coming to us every single day. We’re now doing a billion dollars a day. This is just totally beyond anything else in the industry’s history’.”
The zero-sum game
“If a salesman sells nothing in a month, he brings home nothing — so he has to sell something. He has to believe what he’s doing is right. And he may be doing what’s right, but as a rule he can’t be doing what’s right because there’s someone on the other side of every trade. And all that trading means zero until the croupier in the middle puts his rake down on the table and scrapes off his share of the winnings.”
“For every active manager who wins, there will be an active manger who loses at the same amount. It’s symmetrical. It has to be except for the costs in the middle. Indexing is the way. The math is the math, and I think the mathematics are inarguable.”
“The old Wall Street rule was, ‘If you don’t like the management, sell the stock.’ The index funds can’t follow that rule, so there’s only one rule left: “If you don’t like the management, fix it.” Vote, talk, discuss, cajole, applaud — and that’s actually starting to happen in a major way.”
“It doesn’t really matter in the long run whether there’s a fiduciary rule or not. With each passing day, shareholders get better educated, and they will move their money to people doing things right and serving them properly and away from people who are doing it wrong.”
Staying the course
“One of the nicest (letters I’ve had) was from an airline pilot who had retired. My advice to investors is just to throw their 401(k) statements into the wastebasket. Don’t peek. Open the envelope when you retire and have a cardiologist standing by, because you’re going to be totally amazed. “Dear Mr. Bogle,” this pilot wrote me. “I peeked. And all I want to do is thank you.”
Read the full article here:
ROBIN POWELL is a freelance journalist and the founding editor of The Evidence-Based Investor. Based in Birmingham, England, he founded Ember Television and Regis Media, and he specialties in helping disruptive financial firms to grow. He also campaigns for a fair, transparent and sustainable investing industry. You can follow him on Twitter at @RobinJPowell.