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What Jack Bogle's Legacy Means for My Family -- and Yours

Dan Caplinger, The Motley Fool

I never met Jack Bogle in person, but few people have had a bigger impact on my financial life. The founder of The Vanguard Group has been instrumental in helping millions of investors avoid paying more than they needed to pay to invest, letting them put and keep more money in their own pockets in their efforts toward reaching their long-term financial goals.

Bogle died on Jan. 16 at the age of 89. Yet his legacy will live on, and ordinary investors like you and me will continue to benefit from his life's work and long-term vision for generations to come.

Redefining the mutual fund

Bogle is widely recognized for his transformation of the mutual fund industry. With the introduction in 1976 of what would eventually become known as the Vanguard 500 Index Fund (NASDAQMUTFUND: VFINX), mutual fund investors got their first opportunity to track the well-known stock benchmark at minimal cost. In his draft prospectus in 1976, Bogle projected that the fund would be able to operate charging 0.30% annually to cover operating expenses, along with another 0.20% to pay for transactions. That compared with roughly 2% for typical funds at the time, and since those costs got passed through to investors, Bogle estimated that he'd be able to outperform his peers on average by 1.5 percentage points or more.

Over time, Vanguard has made even more progress toward cutting investing costs. The Vanguard 500 Index now charges just 0.04% to investors who can come up with a minimum investment of $3,000, and the company's similar exchange-traded fund has the same expenses but is available in increments of as little as a single share -- worth about $240 at current prices.

Vanguard logo of an old-style sailing ship with the company name in red.

Image source: Vanguard Group.

Yet Bogle's efforts did more than just cut costs for investors. He also redefined the entire business model for his mutual funds, steering clear of the models that most of Vanguard's competitors continue to use today. Bogle sought to have Vanguard's funds owned by investors, operating at cost and having their own corporate governance and workforce rather than relying solely on profit-driven external fund management companies.

He also offered mutual funds directly to investors rather than selling them through brokers, eliminating the need to charge costly sales loads in order to compensate those outside professional brokers. These moves helped align Vanguard's interests with the interests of its investors, offering a safe harbor for individual investors who until then had often seen financial professionals take advantage of their inexperience and vulnerability.

My one experience with Jack Bogle

Although I never met Bogle face to face, I did have the good fortune to attract his attention one time during my career. Last year, I wrote an article that was critical of the Vanguard founder, asserting that he had drawn the wrong conclusion from the stock market's volatility in early 2018. I believed that he had exaggerated the level of turbulence in the market's moves and suggested that he had become overly accustomed to the unusual lack of abrupt movements in prior years.

Bogle's personal response was just one example of his humility and respect for others, gently but firmly correcting my misimpression of his understanding of the market environment. "I've been around long enough to convert those big dollar swings in the Dow to percentages," Bogle said, "and I'm well aware that recent volatility, while rare, is hardly without precedent. But what I have never seen before is (1) those huge interday swings in which gains turn to losses and vice versa, and (2) those next-day turnarounds which seem bereft of momentum either way." Then he admitted that he couldn't offer quantitative proof of his impressions and asked me if I could.

No one has ever corrected my work more gracefully. I don't think anyone else ever will.

Thanks, Jack

My family owes a debt of gratitude to Jack Bogle, although he would never take credit for it. Over the course of 30 years of investing, using the funds that Bogle helped pioneer has saved me thousands of dollars in fees that would have otherwise needlessly gone to support profit centers for large financial institutions. Vanguard's business model has made me recognize what it means to be a part-owner of the funds in which I invest, teaching a lesson that I've carried to my individual stock investing as well.

The value of Bogle's contributions to the investing world comes from the fact that my personal story is just one of millions of similar experiences that have helped changed people's lives. Long after his death, Bogle's legacy will live on, and the values he espoused will remain an integral guidepost for new investors to follow for generations to come.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.