The Lemon Fool

https://www.bloomberg.com/news/articles ... dies-at-89

The Vanguard founder and advocate of passive investing has died.
I think his books are some of the best on investing he seemed like one of lifes good guys.

I didn't know until today that he had five heart attacks - the first when only 31 years old.

And a replacement heart 24 years ago.

A fighter, for sure.

Half my money is with the company he founded, Vanguard. Most of the rest is also in the index funds he pioneered.

Well done Jack.

Interestingly he was an active manager until corporate politics forced him into passive management as the only way he could stay in the game.
He then used the simplest way he could find to run a fund without any research into what was the best way. Even so it turned out pretty well.

More importantly he selected a business structure that benefited his investors far more than him. Hard to imaging that happening now.
Besides, current rules would make it virtually impossible to set up a mutual structure now.

OhNoNotimAgain wrote:Interestingly he was an active manager until corporate politics forced him into passive management as the only way he could stay in the game.
He then used the simplest way he could find to run a fund without any research into what was the best way. Even so it turned out pretty well.

I think you wholly underestimate his educational heritage.

He had done his graduate thesis on mutual funds demonstrating that they lost money to the average return The average return is the cap weighted return.
Samuelson his professor was a founder of the efficient market hypothesis the implication of which is that the cap weighted index cannot be beaten. He did not alight on it by chance his entire intellectual background pointed him in that direction.
Cap weighting is not the simplest way which is why the earliest indices such as the Dow are not cap weighted.

It did not turn out pretty well 'Even so' , there was a huge amount of research done in some of the top academic departments. indicating why it should be so.

Backache wrote:

OhNoNotimAgain wrote:Interestingly he was an active manager until corporate politics forced him into passive management as the only way he could stay in the game.
He then used the simplest way he could find to run a fund without any research into what was the best way. Even so it turned out pretty well.

I think you wholly underestimate his educational heritage.

He had done his graduate thesis on mutual funds demonstrating that they lost money to the average return The average return is the cap weighted return.
Samuelson his professor was a founder of the efficient market hypothesis the implication of which is that the cap weighted index cannot be beaten. He did not alight on it by chance his entire intellectual background pointed him in that direction.
Cap weighting is not the simplest way which is why the earliest indices such as the Dow are not cap weighted.

It did not turn out pretty well 'Even so' , there was a huge amount of research done in some of the top academic departments. indicating why it should be so.

Indeed yes, but he spend 20 years after his academic studies and before his passive fund as an active fund manager. His move to passive was forced on him by being kicked out of Wellington.

OhNoNotimAgain wrote:
Indeed yes, but he spend 20 years after his academic studies and before his passive fund as an active fund manager. His move to passive was forced on him by being kicked out of Wellington.

I'm not sure if it was the only way he could stay in the game, it sounds like he was a pretty persuasive person, but I certainly agree that it was serendipitous that he was booted out of managing Wellington.

Backache wrote:

OhNoNotimAgain wrote:Indeed yes, but he spend 20 years after his academic studies and before his passive fund as an active fund manager. His move to passive was forced on him by being kicked out of Wellington.

I'm not sure if it was the only way he could stay in the game, it sounds like he was a pretty persuasive person, but I certainly agree that it was serendipitous that he was booted out of managing Wellington.

Indeed, although it's significant that for its active funds Vanguard outsources the management of quite a few of them to Wellington, so there remains a close link between them. And Wellington has done very well as a result.

It gets overlooked but Vanguard has some very cheap active funds, the most successful of which are typically closed to new investors because they have grown so large. That's generally not a problem with passive funds.

But again a key component of Vanguard's active funds is that they have very low annual expenses. This is partly because of the mutual structure, and partly because of the outsourcing mentioned above - investors are effectively getting a retail fund at an institutional expense ratio.