A wonderful interview with John “Jack” Bogle who founded the Vanguard Group of mutual funds, everything he says makes perfect logical sense, see the two key quotes that I found interesting from this below and a link to the rest of the article should you wish to read the interview in its entirety:
  • “Whether the market is efficient or inefficient doesn’t matter as long as you get costs out of the way”
  • “As a mathematical matter, having 100% equities is a good idea and being leveraged to some degree at least is a good theoretical idea. But the reality is that we, as human beings, have to live in the moment.”

Charles Rotblut (CR): Since you founded Vanguard, would you explain why you think investors should use index funds?

John Bogle (JB): Let’s start off with the obvious. Imagine a circle representing 100% of the U.S. stock market, with each stock in there by its market weight. Then take out 30% of that circle. Those stocks are owned by people who index directly through index funds. The remaining 70% are owned by people who index collectively. By definition, they own the exact same portfolio as the indexers do in aggregate, so they will capture the same gross return as the direct indexers. But by trading back and forth, trying to beat one another, they will inevitably lose by the amount of their transaction costs, the amount of the advisory fees they pay, and the amount of all those mutual fund management costs they incur: marketing costs, processing, technology investments, everything. When we look at the big picture of the costs of investing, including sales loads as well as expense ratios and cash drag, it is a foregone conclusion that active investors, in aggregate, will underperform index investors. It’s the mathematics.

Source:  AAII

  1. I have read several books by John Bogle and must say I was impressed with each one. He is truly a leader in his low costing style of indexed stock offerings from his company. How can foreigners living in Thailand benefit from his types of funds in Thailand? I have read that as a foreigner living outside of the US, you can not buy into these US funds. Why doesn’t Thailand offer such low cost indexed funds or at least one low cost index Thailand fund that covers the SET market? Most people here in Thailand do not know if such funds are available…and I am sad to say me included. Pon, is there any way you can inform us to what is available and the transaction costs?

    • Because there is no point for Thai Asset Management firms to do this, they are raking in tonnes of AUM every year because of the LTF and RMF schemes

      My best guess on where to find this information would be Morningstar Thailand, they have a fairly good database on information there.

      You can buy mutual funds in the US if you want to, just open an account there.

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