Changing the Investment Landscape with a Truly “Mutual” Mutual Fund

Back in 1988, I purchased my very first mutual fund, the Vanguard 500 Index Fund. At the time I didn’t know much about indexing or Vanguard, but I did know that Vanguard did not charge investors commission on purchases and their fees were drastically lower than any other investment company. The idea of my money working for me instead of paying a salesman intrigued me.  Vanguard was established in 1975 by John “Jack” C. Bogle as a different kind of investment company, a truly “mutual” mutual fund company. What Jack set out to do in 1975 was to build a better way of running a mutual fund company, one that would operate at cost, independent from directors, officers, and staff. A mutual fund modeled in this manner would directly benefit their shareholders. Not only was he successful with his Vanguard experiment, he also achieved legendary status for his relentless campaign to drive down the cost of investing in the interest of investors and introducing the first index mutual funds. Jack Bogle made an impact on countless investors saving for their futures and their children’s futures.

Today, the Vanguard 500 Index Fund has more than $500 billion in assets and Vanguard manages approximately $5.1 trillion in assets, 70% of which are index funds. What is so amazing about Vanguard is the fact that they have grown exponentially without paying commissions to a sales team or spending enormous amounts on advertising. Their growth can be attributed to their performance for investors.

I was fortunate to have the opportunity in 1996 to meet Jack Bogle during an advisor meeting at the Vanguard campus in Valley Forge, PA. He had returned back to work that week after undergoing heart transplant surgery.  During our discussions he told me how he came up with the Vanguard name, (after the HMS Vanguard that defeated Napoleon in 1798,) and the Vanguard campus’ nautical themed design in the shape of a ship. I was impressed with the energy and passion that he brought to the discussion, especially for someone who recently went through a heart transplant. He retired in 1999 and proceeded to write 11 books prior to his death this past January at the age of 89. Jack will be missed but the legacy he created will live on.