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“I can’t believe that the great mass of investors are going to be satisfied with an ultimate goal of just achieving average returns.” That’s what Fidelity Investments Chairman Edward C. Johnson III told The Boston Globe in 1976, the year Jack Bogle helped launch the index-fund revolution by opening Vanguard Group’s S&P 500 fund to investors.
Since then, of course, indexing has enjoyed stupendous growth, and today investors have more money in index mutual funds than in actively managed funds. But I’d argue that index funds deserve even greater popularity.
Forget Ned Johnson’s snarky comment to The Boston Globe, which clearly hasn’t aged well. In 2024, how do we sell “average returns” to everyday investors? Here are three suggested marketing slogans.
“Proven to beat 90% of competitors.” Among the nine U.S. stock fund “style box” categories, 90% of more of actively managed funds have failed to beat their benchmark index over the past 20 years, according to S&P Global. How’s that for being average?
“Save more than 90% off similar funds.” According to the Investment Company Institute, stock mutual funds—both active and index—charged an average 1.11% in annual expenses in 2023, equal to $1.11 a year for every $100 invested. Meanwhile, you can index the entire global stock market with Vanguard’s Total World Stock Index mutual fund (symbol: VTWAX) for a mere 0.1% a year, and the fund’s exchange-traded version is even cheaper (VT).
“Forget the rest and buy the best.” In touting Vanguard Total World Stock Fund, I’m revealing my fondness for that particular fund. But there’s a variety of ways that folks can build a great globally diversified portfolio using just one, two or three index funds.
The upshot: Today, prudent investors can safely ignore the endless array of stocks, funds and other investments on offer—and instead save themselves time and simplify their financial life by building a dirt-cheap, high-performing portfolio using just a couple of broad market index funds.
Thanks for adding “Like this Forum post?”, Jonathan.
Thanks! You can now also click on your name and see all your earlier comments, as well as any Forum threads you initiated.
These are great new features that add to the “fun factor” when engaging with the forum. Two thumbs up!
I often ask people to allocate a % (slider control) between a broad market fund (SCHB, VTI, etc) and a dividend fund (SCHD, VYM, etc) and encourage them that they don’t need a fund on either side unless their slider is pushed all the way one direction. I.e., bonds would be on the other side of the dividend fund and small cap, foreign funds, etc would be on the other side of the broad market fund. It’s an amazingly simple and effective approach and most people can make that decision themselves, and then negotiate a compromise with their partner if their funds are commingled.
Big hug,lots of luck with Your treatment and after all is said and done, thank you for the memories
I also love the Vanguard Total World Stock Fund. That’s the only holding in my substantial ROTH IRA account, which my son will inherit someday.
Great pitch. It’s remarkable that in most industries, the consumer pays more for better service and value. By contrast, the index fund delivers loads more for far less..
This sweet post is another good reason to add a 👍🏻 to Forum originals 😉
+1 Love VTWAX.
Thanks for the forum topic reinforcing your investment thinking. Yesterday I was in my city’s used book store and I happened upon The Path by Peter Mallouk with Tony Robbins. When I saw that Chapter 13 Pursuing Happiness was written by a guy named Jonathan Clements the book was bought.
Happy 4th.