How Did John Bogle's 'Buy Everything' Philosophy Change the History of Investing?

Hello, Master. Today's topic is the core insights of John Bogle, the creator of the index fund. He is also known as the 'Saint of Wall Street.' The three of us will now take a deep dive into why his philosophy is still considered gospel by countless investors today.

Mew

Master, first, I will brief you on the key data regarding John Bogle and his philosophy.

John C. Bogle (1929-2019) was the founder of The Vanguard Group, one of the world's largest asset management companies. His greatest achievement was creating the world's first index mutual fund for individual investors in 1975 (now the Vanguard 500 Index Fund). At the time, everyone ridiculed this idea of tracking the average of the U.S. market, calling it 'Bogle's Folly.'

His philosophy is simple and clear. Here is a summary of the key points:

• The Principle of Minimizing Costs: Bogle preached the simple truth that "investment returns minus costs equal net returns." He saw costs as nearly the only variable an investor can control and believed that low costs are the most critical factor in determining long-term returns.
• The Futile Effort to Beat the Market: He argued that most active fund managers fail to beat the market average over the long term. The reason is simple: transaction costs from frequent trading and high management fees eat away at returns.
• Don't Look for the Needle in the Haystack: "Don't look for the needle in the haystack. Just buy the haystack." This saying best summarizes his philosophy. It means don't try to pick the few winning stocks; just buy the entire market at a low cost and hold it.
• Long-Term Holding and Patience: He emphasized that market timing is impossible and that impulse is the investor's greatest enemy. He said the best strategy is to buy a broadly diversified index fund and hold it forever, unfazed by market fluctuations.

Kurumi

Myu-tan, that was a perfect briefing! Devilish! Master, did you hear that? This is nothing short of a 'democratization revolution in investing'! It's a great invention that allows ordinary people like us to ride the market's growth, not just the smart fund managers on Wall Street!

I think of grandpa John Bogle as a hero to all investors! Why?

First, he shattered the magic of the sneaky fee-mongers! In the old days, fund managers would buy and sell stocks, whispering, 'We'll beat the market for you!' while taking hefty fees. But Bogle shouted the truth: 'That's all a lie! You can't even match the market average, yet you're just pocketing fees!' Think of how much money investors like you have saved because of him!

Second, he taught us that 'doing nothing is the best strategy'! There's no need to constantly watch the stock market, tremble with anxiety, and repeatedly buy and sell. Just buy an entire index like the S&P 500 and steadily add more on every payday. This is the most powerful magic that makes time your ally. The power of compounding will make your assets snowball on their own!

Third, he gave us peace of mind! You don't have to worry about which stock will rise or fall. The belief that as long as the entire U.S. or world economy doesn't collapse, my investment will trend upwards! What a reliable and comfortable way to invest! This is just like Bogle's saying, "Go for the nutritious bagel of sound investing instead of the sweet donut of short-term speculation!"

💖 Kurumi's Heart-o-Meter Investment Score: 100/100

This is the golden rule every individual investor should follow! Forget all the complicated stuff and just remember this one sentence: 'Long-term investment in low-cost index funds'!

Mikael

Kurumi, your pure faith is admirable. It is an undeniable fact that Bogle's philosophy has brought enormous benefits to the majority of investors. However, it is dangerous to consider his method the 'only right answer.' There are a few points to consider.

First, the meaning of 'settling for the average.' Investing in an index fund means you are aiming for the market's 'average return.' This also means you can never 'beat' the market. Of course, since most fail to beat the market, even achieving the average puts you in the top tier. But it also means completely giving up the opportunity for excess returns from explosively growing companies or sectors. If the goal of investing is not simply the 'average' but to 'maximize wealth,' index investing may not be the best option.

Second, the trap of having to buy the entire market bubble. A market-cap-weighted index fund holds the largest companies in the highest proportions. If certain Big Tech companies are in a massive bubble, an index investor ends up buying those overvalued stocks at the highest allocation. In other words, there is a structural risk of having to follow the market's irrationality when it becomes irrational. Bogle himself expressed concern about the concentration of power, where a few giant funds like Vanguard or BlackRock could control the voting rights of the entire market.

Third, the lack of flexibility. When market conditions change rapidly or a clear crisis hits a specific asset, an active manager can respond flexibly by selling risky assets and increasing cash positions. However, an index fund merely follows the index mechanically according to set rules and cannot make strategic judgments to avoid a crisis. This means in a downturn, you must bear the full brunt of the market's collapse.

Even Bogle himself was critical of the 'excessive liquidity' of ETFs, suggesting it could encourage frequent trading among investors. The core of his philosophy is 'long-term holding,' yet ETFs have paradoxically made 'short-term trading' far too easy.

🚨 Mikael's Risk Score: 30/100

Human, Bogle's method is closer to 'not losing' than 'winning big.' Blindly following it without considering your own goals and risk tolerance is just another form of 'mental inertia.' The strategy itself has low risk, but its limitations are clear, which is why I've assigned it a score of 30.