[Other Mountains' Stone] John Bogle - The Index Fund Revolution for Creating Wealth for Ordinary People

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"Don't look for a needle in a haystack, just buy the whole haystack."

In the arena of Wall Street, where excess returns are pursued, John C. Bogle chose a completely different path. The founder of The Vanguard Group, he created the revolutionary investment tool of index funds, driven by his deep care for ordinary investors and his disruption of Wall Street's traditional business model. His "index revolution" has saved global investors over $1 trillion in management fees to date, truly fulfilling the promise of "returning profits to investors."

Legendary Career: From Princeton Student to Financial Rebel

John Bog's investment career is a legend about the perfect combination of idealism and pragmatism:

Academic Enlightenment Period (1949-1951)

· While studying economics at Princeton University, I accidentally discovered the mutual fund industry and wrote my graduation thesis.
The concept of index funds has already emerged in the paper, which he referred to at that time as a "simple and direct" investment method.
· Joined Wellington Management Company after graduation, starting my career from the most basic position.

Concept Formation Period (1960-1974)

· Fired in 1974 due to merger conflicts, reaching the lowest point in his career.
· During the most difficult times in life, persist in improving the theoretical framework of index funds.
· Founded Pioneer Group in 1975 with a determination to break the pot and sink the boat, managing only 11 million dollars at that time.

Index Revolution Period (1975-2000)

· In 1976, the world's first index fund aimed at individual investors was launched - the First Index Investment Trust (later renamed the Vanguard 500 Index Fund)
· Initially ridiculed by Wall Street, referred to as "Borg's foolish act"
· The first round of fundraising raised only 11 million USD, far below the expected 150 million USD.

Achievement Acquisition Period (2000-2019)

· The scale of index funds has grown exponentially, with the Vanguard 500 Index Fund exceeding $1 trillion in size in 2019.
· Individual awarded the title of "100 Most Influential People in the World" by TIME magazine
· At the time of its death in 2019, the Vanguard Group managed assets exceeding $5 trillion.

Core Investment Philosophy: The Victory of Common Sense

Bogle's investment philosophy is based on a few simple yet profound principles:

Principle of Cost Minimization
"Compound interest is the miracle of mathematics, while cost is the greatest enemy of compound interest." Bogle believes that:

The average fee rate for actively managed funds is about 0.67%, while that for index funds is only 0.05%.
· This 0.62% difference will consume nearly 20% of the final returns for investors over 30 years.
Low cost is the only reason index funds outperform most actively managed funds.

Mean Reversion Law
Boge has demonstrated through a large amount of data:

· Funds that perform well in the short term will inevitably return to the average level in the long term.
The efforts to "select the winning fund" are basically in vain after deducting costs.
Investors should abandon the illusion of "beating the market" and instead pursue the returns of the market itself.

Long-termism belief
"Investing should be like planting a redwood tree." Bogle emphasized:

· Time is the most advantageous weapon for ordinary investors.
· By investing a fixed amount regularly, reduce costs by taking advantage of market fluctuations.
Patience is the only source of excess returns that does not require any cost.

Classic Battles: The Difficult Birth of Index Funds

The establishment process of the Vanguard 500 Index Fund perfectly embodies Bogle's persistence and vision:

Market environment

· The American stock market in the 1970s had just experienced the burst of the "Nifty Fifty" bubble.
· Actively managed funds have high management fees, yet 75% of funds underperform the benchmark index.
· Wall Street generally believes that "index investing equals accepting mediocrity"

Product Innovation

· Boge creatively adopts an internalized management model, significantly reducing costs.
· Establish a unique company structure "owned by investors", with all profits returned to fund holders.
· The fee rate is set at the industry lowest of 0.05%, which is one-tenth of the industry average at that time.

Development History

· The first 12 years saw slow growth and were continually mocked by the industry.
· Gained recognition from institutional investors starting in the 1990s.
· After 2000, it ushered in explosive growth, becoming the largest public fund in the world.
· Has saved investors hundreds of billions in management fees to date.

Three Stone Revelation:

The power of simplicity
"Only when you realize you cannot conquer the market do you truly begin to understand investing." In today's world where strategies are becoming increasingly complex, returning to the essence of investing may be the best choice for ordinary investors.

The compound effect of costs
Bogle once pointed out succinctly: "In investing, you get what you don't pay for." For modern investors, paying attention to fees—the only certain variable—is more important than predicting the market, which is uncertain.

The courage of reverse thinking
"Successful investing is essentially a contrarian behavior." Bogle persisted with the philosophy of index funds amidst ridicule, proving the value of independent thinking. In today's market environment, which chases trends, this quality is even rarer.

The sentiment of serving people
Boge has always believed that "asset management is a service industry, not a performance industry." His commitment to prioritizing the interests of investors has established a moral benchmark in the profit-driven financial sector.

Three Stone Conclusion

John Bogle once said a thought-provoking quote: "Investing may seem complicated, but simplicity is the ultimate sophistication."

On the stage of Wall Street, where complex strategies and excess returns are pursued, Bogle chose the simplest path—acknowledging the market's efficiency in most cases, abandoning the illusion of beating the market, and instead seeking to achieve market-average returns at the lowest cost. This seemingly humble choice, in turn, led to the most outstanding long-term returns.

What he left to investors is not just the tool of index funds, but a fundamental attitude towards wealth: investing is not for showing off intelligence, but for settling one's life; the core of management is not the pursuit of perfection, but the avoidance of foolishness.

In this noisy world, the greatest wisdom is often hidden in the simplest truths — cost matters, time is your friend, and common sense is your most powerful weapon.