John C Bogle, the man who pioneered cheap, index funds for the masses more than 30 years ago, says rampant greed on Wall Street has been siphoning billions of dollars that would otherwise go to investors.
In his latest book, “Enough -- True Measures of Money, Business, and Life”, the founder and former CEO of The Vanguard Group Inc examines the rise and subsequent fall of the modern financial industry model.
After two decades of excesses, he writes, the system now is marked by too much cost and not enough value; too much speculation and not enough investment; too much complexity and not enough simplicity.
“It doesn’t take a genius to figure out the more the financial sector makes, the less investors take home,” Bogle said in an interview. “Investors have been left at the bottom of this food chain with 100 percent of the risk, a huge portion of the costs, and only a fraction of the profit.”
Building on a commencement address Bogle gave in 2007 at Georgetown University, the book examines the risks inherent in a financial system that he says by definition subtracts value from society. It also explains the pitfalls that helped drag the same system into its worst crisis since the Great Depression.
But in the book, Bogle goes further in considering what “enough” means for him personally and challenges readers to examine their own lives and how their own misguided financial decisions may have contributed to the meltdown. “The rampant greed that overwhelmed our financial system and corporate world ran deeper than money,” Bogle said. “Not knowing what ‘enough’ is subverted many of our professional and personal values, and this confusion led us astray in our larger lives.”
“After all,” he added, “we have to remember that Wall Street croupiers didn’t make us do something we didn’t want to. We didn’t resist the temptation.”
However, Bogle says the book’s message is ultimately optimistic and he offers many insights into his legendary common-sense approach to money investment. The cornerstone of his strategy -- an age appropriate mix of bonds and stocks in low-cost index funds -- has remained the same for most of his life. And at 79, Bogle still swears by it.
“Simplicity has always been the key to successful investing,” he said. “Simple structures, index funds and lack of hidden costs all create value overtime. And in the long run, investors always beat speculators.” Reuters