John Bogle’s latest book, as much a piece of history as is it a playbook for how to repair financial markets scarred by two bear markets in 10 years and a loss of confidence, is one of those books on finance that ought not be left unread.
“The Clash of the Cultures: Investment vs. Speculation” is the latest and perhaps best book by the now-83-year-old founder of Vanguard Group. You may not agree with everything he has to say, and you may be familiar enough with the Vanguard tale to want to be spared a new riff on it. But it’s hard to argue with the decades of experience in the fund industry that course through the entire narrative.
Because at the end of the day, the book seems to be the latest iteration of what Bogle first articulated in his 1951 thesis at Princeton; namely, that the mutual fund industry needs to be more mindful that its principal duty is to serve the interests of fund holders.
But the intervening 61 years have added a lot of punch to the argument, not least because of changes in financial markets, which he argues are increasingly dominated by a “short termism” that has come at the expense of true investing with a long-term focus.
“At a certain point in life, you start to get a little wisdom, so I think it’s maybe a little more impassioned now, and maybe a hair more sophisticated,” Bogle said in a recent interview with IndexUniverse. “But the basic value is and basic strategy has been really quite consistent throughout my long career. “
Plus, for those not familiar with Bogle’s prose, the man can turn a phrase, which makes the book all the more enjoyable. Moreover, he’s well aware that preaching the “cost-matters hypothesis” via the Vanguard story can get to be a bit much, and he wears his lack of impartiality regarding the Valley Forge, Pa.-based company he created on his sleeve. That, for me, adds credibility to what he has to say.
Additionally, it’s hard to poke holes in the Vanguard story, and if you’re going to do it, you have to do so with a fine-toothed comb. For example, you might ask whether the cap-market weighting that Vanguard favors is really the best way to organize an index fund. Might the fundamental indexing pioneered by Rob Arnott be the future of passive investing?
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