The motivation to pick up this book was thanks to my father who drew my attention to this book-review published in Business Standard.
I knew what Vanguard was and had a vague idea about Jack Bogle so this book seemed interesting and I put it on my to-read list.
Here are my takeaways from it -
Index Funds always have more inflows during Bear Markets.
No one regardless of their experience knows what the future holds.
As per Jack Bogle - the best way to make money through investment was to focus on -
Dividends
Earnings growth
I liked the analogy of Cost Matters Hypothesis (CMH) in contrast with Efficient Market Hypothesis. It makes perfect sense where one invests in a fund/ETF/individual asset.
Constant drip of costs will reduce your final payout.
The entry price (Costs) matters if one wants a good return.
Jack Bogle is the father of “low-cost” investing rather than “index funds” because index funds would have existed without him but not to such a low-cost degree.
The beauty of Buffet/Bogle is that they are financially conservative.
When things are good, they remind investors that it is not going to be this good forever.
When things are bad, they tell it is going to get better.
These days the index funds (passive investing) has become so big that people are highlighting the downside effects of it. One of them is that the big giants like Vanguard and Blackrock which own ~10% of every publicly listed company often vote as a monolith regardless of the millions of investors who invested through them and helped them build a big stake in it. Currently, Blackrock allows certain institutions to choose to vote on the management proposals themselves. Why not allow small investors to do the same and democratize the voting? A side-effect of this would be that the companies could no longer rely on Vanguard/Blackrock (their top two shareholders) to shepherd their proposals.
Another criticism of Vanguard is the lousy customer service. The author points out that low-fees is unfortunately the root of it. Low fees are good but the actual price the customer pays is sloppy customer service. And as Vanguard continues to grow - it’ll have to figure out how to allocate money towards system maintenance and system upgrade with a low-fee structure through all its funds.
Finally, the author makes a valid point that is known but often forgotten i.e the 95/5 phenomenon. 95% of media coverage is on companies that typically make up 5% of people’s portfolios. They are not your friends or have any fiduciary duty towards their viewers and readers.
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