Back in the 1960’s, Jack Bogle thought that actively-managed mutual funds performed better than a passive indexing strategy.
He pseudonymously published a paper saying so.
But academic data from the University of Chicago challenged his preconceived notions. He attended seminars that showed how the drag on returns that come from management fees and trading costs, coupled with the reality that the bulk of gains come from a hard-to-predict handful of equities (a concept known as “skew”), lead to index funds holding long-term outperformance.
At the time, index funds were only available to major institutional investors. Regular folks couldn’t access these winners.
And that might have continued for a long time …
… except history turned on a dime.
In the early 1970’s, Jack Bogle got fired. Rather than accept defeat, he turned into a renegade.
He launched Vanguard and began offering index funds to ordinary individual investors.
And the rest, as they say, is history.
In today’s episode, we learn about the revolutionary ideas that paved the path to passive investing.
We learn about the radical invention of the index fund.
We discover the drama, the tenacity, the betrayal and redemption behind it.
And we discover the lessons that the history of the index fund holds.
Enjoy!
Thanks to our sponsors!
Indeed
If you’re looking for amazing talent to bolster your team, you need Indeed. There are no long-term contracts, you can pause your account at any time, and you only pay for what you need. Get a free $75 credit to upgrade your job post at indeed.com/paula
Faherty
Faherty makes the perfect clothes for layering in the colder months. They come in a wide variety of prints and they come with a lifetime guarantee of quality. Faherty will fix or replace your clothes for life. Get 20 percent off all your winter wardrobe when you use the code AFFORDANYTHING20 at checkout on fahertybrand.com.