Money and risk
John C. Bogle
Cost
John C. Bogle (United States · 1929–2019) — Cost.
What actually happened?
In January 1974 Bogle, then forty-four, was removed as head of Wellington Management. The partners he had pushed to bring in through a merger a few years earlier voted him out at the board. He did not leave. He proposed a new company to run the administration of Wellington's funds, owned by the funds' own shareholders and run at cost. He named it after Nelson's flagship at the Battle of the Nile, HMS Vanguard.
Owned by the people who buy the funds
Other fund companies belong to their own shareholders and live on the fees. Vanguard belongs to the funds it runs, and the funds belong to their investors. It has no separate profit to earn, so the savings go back to the people holding the funds.
Before buying any fund, ask who the company running it is making money for.
So cheap the rivals had to follow
Vanguard kept pushing its fees down. Rivals laughed at first, then had to cut their own. He changed more than one company; he moved the floor for what the whole industry charges.
One shop that prices at cost drags down the prices on the whole street.
He never became a billionaire
Because the company belonged to its fund holders, he did not take its profits the way his peers did, and his fortune was far smaller than theirs. That was the structure he chose.
When someone tells you to cut your costs, check how much of your costs they take.
How do I use it today?
This week find the yearly fee on every fund or savings product you hold, write them on one sheet, and add up how much they take from you in a year.
Deep read
Read alongside
Further
Lines to keep
Ask who the company managing your money is earning for.
The fee is in the contract. The return is in the advert.
He gave the profit away and got an industry in return.