‘I’m trying to work shorter days’

John C. Bogle, 81, is the founder of the Vanguard Group of Mutual Funds and president of its Bogle Financial Markets Research Centre.

Bogle graduated from Blair Academy cum laude in 1947 and Princeton University in 1951, magna cum laude in economics.

He has just published his ninth book, Don’t Count on It!: Reflections on Investment Illusions, Capitalism, “Mutual” Funds, Indexing, Entrepreneurship, Idealism, and Heroes.

Bogle lives in Bryn Mawr, Pennsylvania, with his wife, Eve. They have six children and 12 grandchildren.

Did you think you would get to where you are?

I never spent much time thinking about that. I thought that if I did my best every day, learnt a little every day and did a little more than what was expected, the future would take care of itself. I did not have a list of dates on my wall. As a young man, I had very little self-confidence, but I was ready to go out in the world and do my best. I always had a financial bent, though, no question of that.

Today Vanguard has $1.4 trillion worth of assets. It is just good fortune that got me into an industry I had never heard of until I wrote my thesis at Princeton University.

When you realised that you had made your first million dollars, were you tempted to slow down?

I have no idea. I could not even tell you when it happened. I am not much of a scorekeeper. Perhaps the time was in my 40s when I was moving up the ranks at Wellington Management, the company I joined on graduation.

I’m not much of a slowdowner either, though there were reasons why I should have slowed down. I was 31 years old when I had my first heart attack. I was on the tennis court when it happened. I later discovered that I had a genetic heart disease. I was told I would never work again and I might not see 40. I did not want to bother my mind about such predictions. I finally got a new heart in 1996.

What is the secret of your success?

I think life is much more about the journey than the destination, and, to me, success implies that
you’ve reached a destination and that your journey is complete. I’m not one to ever view my journey as complete.

That said, you need to have a bit of determination to get anywhere in life. We have a family motto: “Press on regardless.” By regardless I mean through tough times and easy times. You press on, no matter how things are going.

What is your basic business philosophy?

Two things. Number one, always put your clients first. You are a trustee of their money, and you
serve the client before you serve yourself.

Second, be mathematically correct, because if you have the maths on your side you will win. We all know that if the stock market delivers a 7 per cent gross return on your investment, an investor’s net return will be lower by the amount of the costs they incur. The average investor will lose 2.5 per cent to the Wall Street croupiers, who rake off their commissions, fees and administrative charges.

Over 50 years the impact of that annual fee is enormous. The investor will end up with less than 30 per cent of the market’s cumulative return, even though they put up all of the capital and took all of the risk. The idea is to reduce costs as much as possible. That is how Vanguard works. Our costs are two-tenths of 1 per cent.

Do you want to carry on till you drop?

I’m trying to work shorter days. I don’t go into the office until 8.15 and I try to get home before 5. I’ve cut back on weekend work and travelling. I think I have an obligation to my family to take things easier.

What are your key business interests today?

I’m trying to reform the whole financial services industry in a way that is much more favourable to individual investors, which means less favourable for Wall Street. Second, I would like institutional investors, who own 70 per cent of all shares in the US, to reform corporate governance, to ensure that the corporations they own are run in the interests of shareholders, not management. 

Do you allow yourself the odd indulgence?

Not particularly. I don’t get joy out of spending money on myself. I’m not into private planes and fancy clothes. I used to be much more athletic, but I still do a little golf. We buy a new car, a Volvo, every 10 years.

Do you believe in leaving everything to children?

Intellectually I follow Warren Buffett’s rule. Give them enough so they can do what they want but not so much that they can do nothing. I am making sure that my wife is taken care of and ultimately the children and grandchildren will get some nice stipends but a big chunk of my wealth will go into a charitable foundation.

What is your advice to investors?

I believe it is prudent to own a balanced index fund, with 60 per cent in the stock market and 40 per cent in the bond market. Then forget it. Don’t worry. Stay the course. An easy way of thinking about asset allocation is to make your bond allocation equal to your age. So, at my age, 81, I have about 80 per cent of my money in bonds and the rest in equities. I am very happy being conservative.

What is the most you have ever paid for a bottle of fine wine or champagne?

A few years ago it was
my daughter’s birthday and she liked this particular Californian Chardonnay. It was $50 at our local wine store and I thought it seemed terribly expensive. I’m in the $10-$12 range myself.

What are the lessons we should learn from the 2009 recession?

That our financial system is broken and creates enormous disservices to the investors it purports to serve.

 There is too much cost in this industry and not nearly enough value; too much speculation and too much complexity. There is also too much salesmanship and not enough stewardship. The sooner we can correct those excesses, the better.