John Bogle classics

Two of John C. Bogle’s books on investing have now been designated classics. They have been added to the Wiley Investing Classics series, joining such titles as Lombard Street, The Go-Go Years, Reminiscences of a Stock Operator, and The Alchemy of Finance.

Bogle on Mutual Funds: New Perspectives for the Intelligent Investor was originally published in 1993. Since then, investments in mutual funds as a whole have surged eight-fold, and Vanguard’s fund assets have grown 25-fold. They are now 50% larger than the entire industry was when Bogle wrote this book.

To readers who are familiar with Vanguard’s philosophy, this book may seem, as Bogle himself admits, “old hat.” That is only natural. A book isn’t designated a classic if only a handful of people ever read it. Or, in the case of investing books, if its message never resonated.

Bogle on Mutual Funds had two missions: to steer the individual investor in the right direction and to cajole the mutual fund industry into adopting more investor-friendly policies. On both fronts Bogle has had considerable success, even he would like to see even more reform.

His advice to the investor is pretty straightforward, but his arguments are definitely worth rereading, or reading for the first time. People have the bad habit of throwing money at the market without knowing anything about the basics of investing. So they invest in the wrong things, or at the wrong time, and curse their bad luck. No investor can be called “intelligent” who doesn’t understand the principles Bogle articulates in this book. The investor may still decide to try his hand at outperforming the market, but he should know what he’s up against.

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John Bogle on Investing: The First 50 Years is a collection of addresses Bogle delivered, mainly at investment conferences, along with his 1951 senior thesis (“The Economic Role of the Investment Company”). The book was first published in 2001. It reprises the themes of his first volume—investment strategies for the intelligent investor, taking on the mutual fund industry, and economics and idealism: the Vanguard experiment—and adds a section on personal perspectives.

Bogle wrote some of these pieces in the midst of dot.com bubble. The one he delivered at a conference in April 2000 was titled “Risk and Risk Control in an Era of Confidence (Or Is It Greed?).” As he said, “Even as ‘it is always darkest before the dawn,’ … it may well always be brightest just before evening begins to fall. When reward is at its pinnacle, risk is near at hand.” (p. 47) He went on to delineate the four key elements of investing: reward, risk, time, and cost. Investors, as he explained, can control all but the first.

Throughout the book Bogle elaborates on what he considers his most important contribution to the investing community: “the majesty of simplicity in an empire of parsimony.” I can’t think of a better legacy.