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Happy Birthday Jack Bogle, the man Warren Buffett calls a 'hero'

Aprajita Sharma / New Delhi 08 May 17 | 01:00 PM

John Bogle

Everyone knows Warren Buffett and his idea of value investing, but not many have heard of John Clifton "Jack" Bogle, who the Oracle of Omaha himself calls a hero for investors.  

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Bogle, the retired founder and CEO of Vanguard Group, also a creator of first index fund, turns 88 today. During Berkshire Hathaway's annual shareholder meeting in Omaha on Saturday, Buffett lauded and extended early 88th birthday wishes to Bogle.   

"Jack Bogle has probably done more for the American investor than any man in the country," said Buffett, adding Bogle has put 10s and 10s and 10s of billions into American investors' pockets, and those numbers are going to be 100s and 100s of billions over time.

This isn't the first time Buffett has sung the praises of Bogle's efforts to popularise index fund investing. In a shareholder letter published in February, he called Bogle a "hero," and touted the benefits of low-cost S&P 500 index funds. 

Bogle, who has been quite vocal about his criticism against active mutual fund managers, started the first index fund Vanguard 500 in 1976. The index has given a compound annual growth rate (CAGR) of 7% since its inception, while the GDP growth in US rose 2.7% between 1976 and 2016. 

Bogle has written many books on investment that are considered classics within investment community. Common Sense on Mutual Funds, the Clash of the Cultures, Don't Count on It, Enough and the Little Book of Common Sense Investing, are to name a few. 

So what are the index funds and how do they differ from active funds?

Index funds are those mutual funds which invest in the components of index such as the S&P 500 in US and Nifty50 in India, unlike active mutual funds which consist stocks picked by designated fund managers. Needless to say, the return on index funds moves in tandem with the index it tracks. Since, index fund is a passive form of fund management, the expense ratio on them comes in way less than that on active funds.      

Among a plethora of active mutual funds, while some would definitely outperform index funds, a lot may also underperform. There is absolutely no way to judge which one would, and which wouldn't. That said, for a common investor who doesn't have time or knowledge to track markets, it makes sense to gain average market return keeping investing costs low instead of trying to beat the market for superior returns. 

Bogle keeps saying: Fund investors are confident that they can easily select superior fund managers. They are wrong.

In The Little Book of Common Sense Investing, Bogle aptly summarises his philosophy: Don't look for the needle in the haystack. Just buy the haystack. 

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