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Jack Bogle’s Legacy

Much has been written this past week about Jack Bogle, who passed away on January 16, 2019, and his achievements. In addition to founding fund giant, Vanguard, he has been credited with practically inventing indexed mutual funds. A few years ago, Warren Buffett credited him with saving investors tens of billions of dollars over time.

This led to the question of how much Bogle may really have saved investors. According to our calculations, Mr. Buffett may have understated the amount significantly. According to Morningstar, net assets in index mutual funds as of November 2018 stood at just over $3.5 trillion, while balances of ETFs were about $2.1 trillion. Average costs for index mutual funds are about nine basis points. For ETFs, they are about 21 basis points. So the all-in costs are:

The difference in costs in one year alone ($44.34 – $7.68 billion) is more than $36 billion. Imagine how much this would have added up to over Bogle’s career!

This leaves out the question of performance, of course, but does prove that a significant portion of investors strongly believe in the index fund concept. This is in sharp contrast to when Jack Bogle launched the First Index Investment Trust (now the Vanguard S&P 500 Fund) in 1975, known at the time as “Bogle’s Folly.” Let’s take a moment to honor the memory of a true investment management visionary.