6 ms·

Is this really true? Both Buffett and Gates' money didn't come from salaries or fees. For Gates, it was his ownership of Microsoft. For Buffett, it was his s

by mdasen 8y ago

Is this really true? Both Buffett and Gates' money didn't come from salaries or fees. For Gates, it was his ownership of Microsoft. For Buffett, it was his stewardship of Berkshire Hathaway. However, Buffett's Berkshire Hathaway never sought to gain an edge over shareholders. Buffett didn't compensate himself with lavish options or salary. Bogle could certainly have been a multi-billionaire. He could have founded Vanguard as a for-profit company and charged high fees. However, that wouldn't be like Buffett. Berkshire Hathaway doesn't operate on a percentage of the company's value going to Buffett every year. In fact, Bogle took a similar path to Buffett: an investor-friendly path that meant little salary or fees going to them, but a great value for investors. It seems like the difference between them would be attributed to difference in starting point and differences in returns. Since 1964 (when Buffett took over Berkshire Hathaway) through 2017, Berkshire had an overall gain of 2,404,748%. By contrast, the S&P 500 only hit 15,508%. If Buffett and Bogle both started out with $1,000,000, Buffett would have ended up with $24B while Bogle ended up with $155M. I don't think Bogle could have been a multibillionaire like Buffett unless he either 1) charged a lot of fees for Vanguard; or 2) actively managed his money to do significantly better than the S&P 500. Don't get me wrong: Bogle has done amazing things for society by pioneering low-cost index funds and offering investors the investor-owned Vanguard. I just think it's fair to point out that Buffett's billions don't come off the back of fees or salary. The thing that made Buffett richer was the fact that Berkshire Hathaway has hugely outperformed the S&P 500. If Berkshire had gotten the returns of Bogle's S&P 500 index fund, Buffett would be rich (as Bogle was), but not a multibillionaire.

anonu 8y ago
Vanguard is owned by its funds. This is sometimes referred to as "mutualized". It's a unique ownership structure. As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs. Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.
- jessriedel 8y ago
  > Better to compare him to Larry Fink of Blackrock I thought this was a great point, and makes the comparisons to Gates and Buffett look really lazy. (The connection is...they are famous wealthy dudes.) For others wondering, Larry Fink has a net worth of about ~$1B versus Bogle's ~$80M. Vanguard is a bit older than Blackrock (1974 vs 1988), but I also think Vanguard would have been less successful, counterfactually, if it had charged higher fees that would have enriched Bogle. The low fees were part of what made it possible. So it's almost certainly true that Bogle left money on the table in order to make the world a better, but he probably left a factor of ~5x rather than 50x or something.
sethev 8y ago
The point is he could have retained ownership of Vanguard itself.
ataturk 8y ago
What you describe is exactly the problem I have with index funds. I manage a decent amount of money through Vanguard. The index funds in my portfolio fell less and recovered sooner, but at the cost of raw gains. The managed funds I have basically fell apart because apparently the fund managers are idiots who didn't even try to keep up with market trends. I do expect those to recover quickly and have some decent gains again, but we'll see. More risk, more reward. 2019 better be good for the premium I'm paying. I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying. Don't get me started on bond funds. Total, total crap the last few years. REITs same way. The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate. Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time. If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down. Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses? The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There. RIP John.
- prometheuspk 8y ago
  Then you're not the customer for index funds. They are meant to be highly risk averse, and give decent gains to people who want safety of modest to low gains over high gains high risk.
  - achillesheels 8y ago
carboy 8y ago
You should look up the net worth of the Johnson family members who founded Fidelity. The President, Abigail, who is the daughter of the founder is worth 12 Billion. If you are ever confused about what firm should manage your money, remember this posting. The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.
- coryfklein 8y ago
  > If you are ever confused about what firm should manage your money, remember this posting. I'm sorry but your comment didn't clarify this question for me. Do you mean I should invest in Vanguard because the money isn't all going to rich folks at the top, or I should invest in Fidelity because the wealth at the top is indicative is correlated to success for customers?

by mdasen 8y ago

anonu 8y ago

Vanguard is owned by its funds. This is sometimes referred to as "mutualized". It's a unique ownership structure. As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs. Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.

jessriedel 8y ago
> Better to compare him to Larry Fink of Blackrock I thought this was a great point, and makes the comparisons to Gates and Buffett look really lazy. (The connection is...they are famous wealthy dudes.) For others wondering, Larry Fink has a net worth of about ~$1B versus Bogle's ~$80M. Vanguard is a bit older than Blackrock (1974 vs 1988), but I also think Vanguard would have been less successful, counterfactually, if it had charged higher fees that would have enriched Bogle. The low fees were part of what made it possible. So it's almost certainly true that Bogle left money on the table in order to make the world a better, but he probably left a factor of ~5x rather than 50x or something.

sethev 8y ago

The point is he could have retained ownership of Vanguard itself.

ataturk 8y ago

What you describe is exactly the problem I have with index funds. I manage a decent amount of money through Vanguard. The index funds in my portfolio fell less and recovered sooner, but at the cost of raw gains. The managed funds I have basically fell apart because apparently the fund managers are idiots who didn't even try to keep up with market trends. I do expect those to recover quickly and have some decent gains again, but we'll see. More risk, more reward. 2019 better be good for the premium I'm paying. I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying. Don't get me started on bond funds. Total, total crap the last few years. REITs same way. The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate. Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time. If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down. Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses? The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There. RIP John.

prometheuspk 8y ago
Then you're not the customer for index funds. They are meant to be highly risk averse, and give decent gains to people who want safety of modest to low gains over high gains high risk.
- achillesheels 8y ago

carboy 8y ago

You should look up the net worth of the Johnson family members who founded Fidelity. The President, Abigail, who is the daughter of the founder is worth 12 Billion. If you are ever confused about what firm should manage your money, remember this posting. The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.

coryfklein 8y ago
> If you are ever confused about what firm should manage your money, remember this posting. I'm sorry but your comment didn't clarify this question for me. Do you mean I should invest in Vanguard because the money isn't all going to rich folks at the top, or I should invest in Fidelity because the wealth at the top is indicative is correlated to success for customers?