As you have likely heard, Vanguard founder John (“Jack”) Bogle passed away yesterday. He was 89. Bogle not only founded the mutual fund giant Vanguard, but his influence on the world of investing will be felt for generations to come. This week, I’m going to share some of my thoughts and memories of him. If you had the chance to meet him, see him speak or were influenced by him, let us know. We may compile your response with those of other AAII members into a future commentary.
I was among those fortunate enough to have both met and talked with Bogle. Meeting him almost didn’t happen. I was invited to join Bogle for breakfast in 2010 while we were both at the CFA Institute’s Annual Conference, but I didn’t get to hear the voicemail with the invite until after the fact. A few years later, I got a second chance to meet him, this time at a Morningstar Investor Conference. We spoke for a few minutes and agreed to talk further after he finished the book he was then working on. The following spring, I interviewed him for an article in the AAII Journal.
While I didn’t know him well (my correspondence with him was infrequent, but Bogle did respond whenever I reached out to him), I had the sense that he was slowing down. For instance, he turned down an invitation to speak at our 2015 AAII Investor Conference because it meant traveling from Pennsylvania—where he lived—to Las Vegas. (He told me that “it’s just no longer on my agenda to take substantial airline trips,” but graciously recorded remarks for us to play at the conference.) Bogle suffered his first heart attack at the age of 31 and underwent a transplant at age 65.
AAII Model Portfolio Update
No changes were made to the Model Shadow Stock Portfolio this month.
The Model Shadow Stock Portfolio, which is a real-money portfolio of micro-cap value stocks, fell 10.6% in December. The portfolio lagged the S&P 500 large-cap index, which fell 9.0% in December when including dividends (total return). It did, however, outperform two small-company benchmarks: The Vanguard US Small Cap fund (NAESX), which lost 11.1% on a total-return basis, and the DFA U.S. Micro Cap fund (DFSCX), which saw a total-return loss of 11.8% for December.
Since its inception in 1993, the AAII Model Shadow Stock Portfolio has a compound annual average return of 14.0% versus the Vanguard 500 Index fund’s (VFINX) gain of 8.9% per year on average over the same period. Over the same period, the Vanguard Small Cap Index fund posted an average annual gain of 9.4%.
More on AAII.com
- “Enhanced” Index Funds: Can They Beat the Market? – As indexes started to expand beyond their traditional market-cap weighting, John Bogle spoke out against them in this 2007 AAII Journal article.
- Six Questions With John Bogle – In late 2015, Bogle answered six questions about investing for us. You can read the transcript or scroll to the bottom of the article to see two videos he recorded for us.
Highlights from this month’s AAII Journal
- Steps You Can Take to Reduce the Risk of Behavioral Error – Psychologist Daniel Crosby believes combining a systematic, rules-based approach with an automated process to the extent possible is the easiest way to manage your emotions.
- Bucket Strategies Underperform Static Allocation Strategies – A study found that maintaining a fixed allocation of stocks and bills works better than bucket approaches for ensuring that retirees won’t outlive their savings.
AAII Sentiment Survey
Pessimism about the short-term direction of the stock market rebounded and is back above its historical average of 30.5% for the 17th time in 19 weeks. Plus, this week’s special question asked AAII members what they thought would most influence stock prices in 2019. More about this week’s results.
This week’s results:
- Bullish: 33.5%, down 4.9 points
- Neutral: 30.2%, down 2.0 points
- Bearish: 36.3%, up 6.9 points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
Take the Sentiment Survey.
What’s Trending on AAII
The Week Ahead
The U.S financial markets, and our office, will be closed on Monday in observance of Martin Luther King Jr. Day.
Nearly 60 members of the S&P 500 are scheduled to report as fourth-quarter earnings season gains steam. Included in this group are Dow Jones industrial average components IBM Corp. (IBM), Johnson & Johnson (JNJ)and Travelers Companies Inc. (TRV) on Tuesday; Procter & Gamble Co. (PG) and United Technologies (UTX) on Wednesday; and Intel Corp. (INTC)on Thursday.
The week’s first economic report will be the December existing homes sales released on Tuesday. December durable goods orders and new home sales are scheduled for Friday but are likely to be delayed because the U.S. Department of Commerce remains shut down.