Wall Street Journal Profile of Jack Bogle, Founder of Vanguard
3 September 2006For those of you interested in the ongoing debate in the investment world over whether index funds are a good idea (and whether there are improvements that can be made to the strategy), the Wall Street Journal has an article profiling Jack Bogle, the guy who founded Vanguard. Vanguard is the company that was at the forefront of the modern shift among many investors to index funds as opposed to actively trading individual stocks. Bogle doesn’t believe in the “modified index funds” that try to find a slightly better deal by investing in companies with higher dividend rates than the market as a whole. He’s also predicting a decline in average stock market returns down to an average of 7 percent per year, which he thinks is more in line with history. I think that’s a little off-base - recent growth has been technology driven, and I see it snowballing rather than going away as a transitory phenomenon. As we get faster and faster computers due to Moore’s law and easier access to information due to the Internet, I only see the rate of growth getting faster. A giant, virtually free library of all mankind’s knowledge has just been dumped onto society in the last five years or so, and I find it hard to believe that this easy access to information won’t speed up the technological growth that has fed our economy since the early 1990’s. That’s neither here nor there, though, because if you think he’s right that you can’t beat the stock market as a whole by picking individual stocks, it doesn’t really matter how fast it grows. It’s a good article and worth the time to read.
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