This article has been updated to include further quotes. (18.1.19)
John Clifton "Jack" Bogle, the pioneer of index investing and founder of Vanguard, has died at age 89.
He leaves behind a legacy of passive investing, low cost money management and transparency. He towers alongside J.P. Morgan and Amadeo Giannini as one of the most influential figures in modern finance.
Born to a family lashed by the great depression, Bogle began his career working for the Boston-based fund manager Wellington Management Company. He worked up the ranks, becoming CEO after 13 years.
Due to a badly orchestrated merger which caused Wellington's share price to tank, the company directors fired him after 9 years in the top job.
Bogle took the firing as a chance to build Vanguard.
Seeking to lock in low fees and ensure investors' best interests were served, he built Vanguard as a not-for-profit owned by its investors.
A student of the Nobel prize winning economist Paul Samuelson, to whom Bogle dedicated his best-selling Little Book of Common Sense Investing, Bogle chose to base Vanguard's product suite around index funds.
Prof Samuelson's insight, which Bogle built on, was that it is impossible in aggregate for active managers to beat the index.
This is because the index measures the average performance of every money manager. For every manager that outperforms the market, there must be one that underperforms it.
"What logic can demonstrate is that not everybody, nor even the average person, can do better than the comprehensive market averages. That would contradict the tautology that the whole is the sum of its parts," Prof Samuelson wrote in a 1974 paper.
Samuelson went on to suggest "Some large foundation should set up an in-house portfolio that tracks the S&P 500 Index ‚Äî if only for the purpose of setting up a naive model against which their in-house gunslingers can measure their prowess."
Bogle listened and did exactly that.
Selling the world's first retail index fund proved difficult.
The initial capital raising for Vanguard's S&P 500 tracker was a miserable failure, attracting only $11 million - well short of the $150 million targeted. The failed capital raising meant Bogle could not buy 100 share lots of all 500 companies. The tracker therefore started with only 280 of the 500 companies and underperformed the index it aimed to follow.
With his famed perseverance, Bogle plodded on.
The S&P 500 tracker - now called the Vanguard 500 Index Fund - gradually gained momentum. So too did the second item on the menu: the Vanguard Total Stock Market Index Fund, which bought every company in the US not just the biggest 500.
Today, the two funds have a ridiculous $400 and $670 billion under management, making them the world's largest by far.
Their success turned Vanguard into an investment titan, which today managers $4 trillion in assets globally. However, because Vanguard was a not-for-profit Bogle never became ultra-rich like other founders of asset managers.
"He could have become a hedge fund multi-millionaire. But instead he chose to build something that transferred wealth from the industry to people‚Ä¶He's a complete legend in the industry," said Ilan Israelstam, head of strategy at BetaShares.
While Bogle was a thoroughgoing American and did not personally diversify internationally, his effects have been acutely felt around the world - including in Australia.
"Jack Bogle's death is a huge loss to the investment community‚Ä¶ many forget, or don't know, that when he began Vanguard he fought against the traditional investment concepts and stood firm around his views," said Kris Walesby, CEO of ETF Securities.
"It took courage and deep conviction to do so, something that very few can say they've accomplished. All investment managers, both active and passive, owe something to Jack Bogle."
Hamish Douglass, a co-founder of Magellan, wrote:
"Bogle is a hero of mine for the service he has done for society by lowering the cost of accessing the market index to negligible levels. I have named the office adjacent to my desk (open plan) the "Bogle room" in honour of Jack."
Arian Neiron, managing director of VanEck Asia Pacific said:
"Bogle was an investing juggernaut and his principles and investment teachings, particularly as a father of index investing, will continue to be read and taught for years to come."
Fond of poetry, Bogle taught young investors and students take counsel from Rudyard Kipling's IF:
IF you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:
‚Ä¶. If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man, my son!
He is survived by his survived by his wife Eve, six children, twelve grandchildren and six great-grandchildren.