If Vanguard Group founder Jack Bogle, who died this week at the age of 89, represented the pinnacle of American success, his success is one that includes a counter-intuitive lesson. Mediocrity can be its own form of excellence.
Americans have long been taught to reach to keep up with the Joneses, that paying more means getting more and moving up the societal ladder on the way to the elite class. But in investing, mediocrity (or the average return produced by a broad market index) has consistently beaten the active stock pickers' search for excellence. At a time when the historically striving American culture has become equally obsessed with fears of its own decline, Bogle's success shows that there are situations in which being average is actually the best bet.
Bogle brought the concept of low-cost index funds to the individual investor, and brought it to them directly, upending the way asset managers construct and charge for their fund products, and how and where they are sold.
"Jack did more for American investors as a whole than any individual I've known. A lot of Wall Street is devoted to charging a lot for nothing. He charged nothing to accomplish a huge amount," Berkshire Hathaway chairman and CEO Warren Buffett said of Bogle.
Buffett, who generated returns for his investors over the past half century that have few equals, has warned his own shareholders for years that it has become increasingly difficult to outperform the index. And Buffett has put his money where his mouth is to make this point, through a winning charity bet against hedge funds that they would not be able to beat the S&P 500 Index over a decade, and in the advice to his own wife to invest in the S&P 500 after his death.