博格heads 14

Bogleheads XIV As My 65th Anniversary and 87th Birthday Approach, Still an Active Life John C. Bogle Philadelphia, PA October 15, 2015 Welcome, Bogleheads… Why are you here?

Kiplinger’s journalist Daren Fonda asked: “Why would all those Bogleheads come all the way to Valley Forge when they must know exactly what you’ll tell them?”

My Response: When Pope Francis made his resent visit to the United States, everyone also knew what he would speak about: the importance of faith; keeping families strong; caring for those less fortunate; religious liberty; environmental issues. And yet wherever he went, tens of thousands— even hundreds of thousands—came to hear him speak.

Perhaps we don’t expect our leaders to say something new whenever they speak. We want them to reinforce the truth—to speak from the heart about the things they care about. We do not seek novelty in our leaders, but knowledge, conviction, passion, integrity, common sense, and some fun. These are the things that I will try to deliver during these next few days.

*** Of course, I’m no Pope, even though one of our veteran crew members thought that the analogy was fair: Note from a Veteran Vanguard Crew Member: YOU are Vanguard’s Pope. Your heart and soul has always been with Vanguard. No one knows what the future holds, but as long as you stay the course we here at Vanguard will strive to follow in your footsteps to keep Vanguard the best in the world. YOU are Vanguard’s Shepherd—past, present, and future—and may you always feel the presence of God with you!

WHATEVER THE CASE, I’M STILL HERE . . .

Despite the Empty Chair. Ouch!

Forbes, June 2015 Bloomberg Markets, April 2015 LET’S FIX THIS IMPRESSION . . .

Still in the Empty Chair. Yes!

Photoshopped by a Vanguard client, September 2015 NOW LET’S GET TO THE PAST YEAR . . .

A Year in My Life … I. Books and Papers • Wiley Investment Classics: Two more books with new introductions – Bogle on Mutual Funds: New Perspectives for the Intelligent Investor – John Bogle on Investing: The First 50 Years • A Book Chapter: Adam Smith: His Life, Thought, and Legacy (Princeton University Press, forthcoming) • Articles in Professional Journals – Journal of Portfolio Management – Financial Analysts Journal START WITH THE CLASSICS . . .

Wiley Investment Classics (April 2015) Dear Jack: I read your book from cover to cover and enjoyed it immensely. It is honest, sensible, and readable—a very rare combination. Your book is going to be an important one for mutual fund investors for many years to come.

—Warren E. Buffett Wiley Investment Classics (April 2015) Jack, I just re-read parts of “The First 50 Years”—and the remarkable thesis! Rest easy. It is an “investment classic.” Maybe the investment classic.

I take pride in my small part!

—Paul A. Volcker AND A NEW COVER . . .

Common Sense on Mutual Funds AND THEN THERE’S MY LITTLE BOOK . . .

The Little Book of Common Sense Investing The #1 best-seller on Amazon in the Mutual Funds category since its release on March 5, 2007, some 3,137 out of 3,162 days.

Why? It’s short, simple, and persuasive.

Number of Amazon Reviews: 362, 104 so far in 2015: 5 Star 77 4 Star 20 3 Star 5 2 Star 1 WHAT ABOUT 1 Star 1 THAT 1-STAR Total 104 REVIEW? . . .

The One-Star Review for The Little Book Keyed towards one set of answers rather than an exploration. A mutual fund company seems to have hired people to write books recommending it.

“THE BOGLE BOOKS”: REMARKABLE READERSHIP . . .

Bogle Book Sales Weekly Sales 1020 700 Little Book of Common Sense 600 Investing Common Sense on Mutual Funds (10th 500 Anniversary Edition) Clash of the Cultures Cumulative Sales: 300 Little Book: 202,415 Common Sense on Mutual 200 Funds (all editions): 113,838 100 Clash of the Cultures: 34,803 0 Enough.: 90,694 Sept. Sept. Sept. Sept.

2012 2013 2014 2015 Bogle Books Total: 875,000 A WORD ABOUT ENOUGH. TRUE MEASURES OF MONEY, BUSINESS, AND LIFE . . .

Competition for Enough.?

LOTS OF BOOKS, YES, BUT ALSO LOTS OF PAPERS . . .

Journal Papers by John C. Bogle Financial Analysts Journal (10 papers) The Index Mutual Fund— Forthcoming 40 Years of Growth, Change, and Challenge Jan/Feb 2014 The Arithmetic of "All-In" Investment Expenses Mar/Apr 2009 The End of "Soft Dollars"?

Jan/Feb 2009 * Markets in Crisis (Interview w/ Rodney Sullivan) Mar/Apr 2008 * Black Monday and Black Swans Nov/Dec 2005 The Relentless Rules of Humble Arithmetic The Mutual Fund Industry 60 Years Later: Jan/Feb 2005 For Better or Worse?

Institutional Investment Performance Compared… Jan/Feb 1980 (with Jan M. Twardowski) Mutual Fund Performance Evaluation: Nov/Dec 1970 Conventional vs. Unconventional * The Case for Mutual Fund Management May/June 1960 (as John B. Armstrong) *Graham and Dodd award winners AND THE JPM. . .

Journal Papers by John C. Bogle Journal of Portfolio Management (14 papers) Winter 2016 (Forthcoming) Putting Investors First Occam’s Razor Redux: Establishing Resonable Fall 2015 (Forthcoming) Expectations for Financial Market Returns (with Michael W. Nolan) Summer 2014 No Speed Limits: High-Frequency Trading and Flash Boys Fall 2013 Big Money in Boston… Spring 2011 The Clash of the Cultures Fall 2009 * The Fiduciary Principle: No Man Can Serve Two Masters Summer 2009 Peter Bernstein Commemorative Issue Winter 2008 * A Question So Important… Spring 2002 An Index Fund Fundamentalist Summer 1998 The Implications of Style Analysis… Summer 1995 The 1990s at the Halfway Mark Winter 1992 Selecting Equity Mutual Funds Fall 1991 Investing in the 1990s--Occam's Razor Revisited Spring 1991 Investing in the 1990s * “Outstanding Article” Award FROM “OCCAM’S RAZOR REDUX” . . .

HIGHLIGHTS . . .

From JPM Fall 2015 Cumulative Total Returns 17 Investment and Speculative Returns, 1900-2015 Value of Initial $1 $ 100,000 Cumulative Investment Return Initial Dividend Yield + 10-Year Earnings Growth 10,000 Cumulative Speculative Return Annualized Impact of P/E Change 1,000 9.2% Annual Real Return 0.4% DON’T FORGET REVERSION TO THE MEAN (RTM) . . .

From Common Sense on Mutual Funds 18 Real Returns: Stock Market* Versus Investment Fundamentals, Rolling 25-Year Periods, 1896-2015 8% Market Returns Revert to Fundamental Investment Returns 2001 6% 4% 1972 2008 2% 0% -2% 2011 1979 1983 -4% -6% *Stock Market Return = Investment Return + Speculative Return The Bogle Sources of Return Model for Stocks Correlation = 0.81 20 R-squared = 0.65 Actual S&P 500 Return -5 -4 -2 0 2 4 6 8 10 12 Estimated Return BUT I DO MORE THAN WRITE . . .

A Year in My Life . . . II. Vanguard Major Presentations and Events Washington, D.C.—Lead Witness, US Senate Finance Committee Hearing on 2014 September 16 Retirement System 18 PrimeCap 30th Anniversary Meeting with Principals. 22 NYC Bloomberg “Most Admired Investor” Forum (with AQR’s Cliff Asness).

October 17 Speech, Easttown (PA) Library.

22-24 BOGLEHEADS XIII!

31 Speech, Georgetown Law School (D.C.).

November 4 Visit from Georgetown Law Students.

13 Princeton/Federal Reserve Economics conference, with Paul Volcker. 14 Interview Session with Wharton Executive MBA Students. 20 Princeton—Business Ethics Seminar.

December 16 Full day’s visit from Stanford MBA Class. 30 White House Staff Re: DOL Fiduciary Standards.

2015 January 16 Skype Interview, Durham Bogleheads. 26 Phone Meeting with White House Staff Re: Fiduciary Duty. 28 Phone Meeting with White House Staff Re: Fiduciary Duty. 29 Presentation: Committee for Fiduciary Responsibility.

March 12 Jon Stein, Betterment (Robo Advisor) 17 Quarry Ridge (Vanguard) talk with Crew.

A Year in My Life . . . II. Vanguard April 7 NYC – “Great Debate” on Indexing, at publisher James Grant’s Forum. 16 Lecture, Aspen Institute, D.C.

20 Blair Academy—Speech to student assembly.

28 Lecture, SEC Enforcement Staff, D.C.

May 6-7 ICI General Membership Meeting.

June 4 Speech to the CFA Society of Philadelphia, “Putting Investors First.”

“Working Vacation” in Adirondacks. Editing book chapter on Adam Smith, AQR July/August extended interview, and JPM papers, correspondence; DOL and Labor Secretary Perez on fiduciary duty rule; and more.

September 24 Skype Interview, iMoney 29 SEC-Lead Presenter at 1940 Act 75th Anniversary Forum.

October 2 Princeton Humanities Seminar.

7 Princeton Lecture on “Business Ethics and Modern Religious Thought.” 14-16 Bogleheads XIV!

. . . . And the “Day-to-Day” Events: Awards for Excellence 21 TV Appearances 11 *Oh, yeah. Also 17 Client Visits 18 Crew/Team Meetings 84 appointments with doctors. PR Interviews 45 Speeches 32 And 40 physical therapy sessions.

TOTAL 211* NOW LET’S TURN TO THE INDUSTRY . . .

My Long Career in the Fund Industry How Many Hits, How Many Eras?

(“Follow the Money”) An Industry that Sells What It Makes • 1924-59. The mutual fund industry in its promising formative era An Industry that Makes What Will Sell • 1960-64. Public ownership of advisors—The New Paradigm • 1965-69. The “Go-Go” Era—Equity “junk” • 1970-74. The rise and fall of the “Favorite [Nifty?] Fifty” • 1975-90. Money market funds and bond funds—a new industry • 1991-01. The Information Age and the rise of technology funds • 1995-07. The TIF (Traditional Index Fund) Era • 2008-15. The ETF (Exchange-Traded Index Fund) Era What’s Next?

• 2015-25. The return to a new normalcy—The triumph of TIF indexing A GROWING INDUSTRY . . .

“I Was There (And I Am Here!)” 23 A Tiny Industry Grows into a Behemoth TOTAL ASSETS $10,000 August 2015 Equity $9.4T 58% 1981 Bond 3.7T 22 1,000 MMF + Bond 83% Money Market 2.6T 16 Balanced 704B 4 TOTAL $16.3T Equity 2015 100 87% Index Funds TOTAL ASSETS 1951 34% of Equity December 1951 Equity Fund Assets Equity $2.45B 78% 10 78% Balanced 680M 22 TOTAL $3.13B 1 Annual Growth Rate 1951-2015: 15% 1951 1960 1970 1980 1990 2000 2015 BUT A LARGELY UNRECOGNIZED EARLY FLAW . . .

Along the Way, a Funny Thing Happened 24 Ownership of 50 Largest Mutual Fund Management Companies—2015 Privately Owned (10) Plus Mutual (1) (Includes 3 largest firms) Conglomerate Publicly Owned 28 11 Total Firms with Public Ownership: 39 Note: Firms with Public Ownership in 1951: 1 BUT LOTS OF OTHER BIG CHANGES, INCLUDING THE RISE OF INDEXING . . .

Old Times or New, The Durability of Index Fund Superiority 1945-1975 1985-2015 Presentation to Paper Submitted to Vanguard Board Financial Analysts Journal September 18, 1975 September 28, 2015 Average S&P 500 Average S&P 500 Equity Index Large-Cap Index Fund Fund* Annualized Return 9.7% 11.3% 9.6% 11.2% Index Advantage -- 1.6% -- 1.6% Cumulative Return 1539% 2402% 1548% 2494% Index Advantage --- 963% --- 946% Standard Deviation 16.4% 18.6% 16.8% 17.3% Sharpe Ratio 0.38 0.42 0.39 0.48 R-Squared 0.96 1.00 0.99 1.00 YES, THE U.S. INDEX FUND IS CHALLENGED. BUT . . .

Reversion to the Mean I. 26 S&P 500 / MSCI EAFE, 1970-2015 S&P 500 2.0 Outperforming 1.8 2001 MSCI EAFE 1.6 Outperforming 1.4 1.2 1.0 2007 0.8 0.6 1970-2007 1993-2015 Annual Annual 0.4 Return Return S&P 500 11.1% 8.8% 0.2 MSCI EAFE 10.9 4.7 0.0 1970 1980 1990 2000 2015 TRUE EVEN IN EMERGING MARKETS . . .

Reversion to the Mean II. 27 S&P 500 / MSCI Emerging Markets, 1987-2015 1987-2015 1993-2015 2.0 Annual Annual Return Return 1.8 S&P 500 10.1% 8.8% S&P 500 1.6 Outperforming Emerg Mkts 10.3 4.3 1993-1998 1.4 Emerging Markets 1.2 Outperforming 1998-2010 1.0 0.8 0.6 0.4 1993 2010 0.2 0.0 1987 1995 2005 2015 SO WHY NOT JUST BUY FUNDS THAT WIN? . . .

Equity Fund Returns: No, Pal, The Past Is Not Prologue. RTM Where they ranked Rankings for the 5 years ending 2009 in the subsequent 5 years 5-Year Number of Highest Lowest Merged/ Quintile Return* Funds Quintile Quintile Closed 1 Highest 1,091 14% 24% 10% 2 High 1,083 12 16 22 3 Medium 1,084 15 13 26 4 Low 1,085 14 10 38 5 Lowest 1,032 14 9 45 Total 5,375 14% 14% 28% *Excess return vs. benchmark.

Note: Number of failed funds—1,499 NOW LET’S TURN TO THIS CHANGING INDUSTRY . . .

Changes in Mutual Fund Leadership: Then and Now Total Total 1951 Assets* 2015 Assets Rank Fund Name (Millions) Manager Name (Billions) 1 M.I.T. $472 Vanguard $2,988 2 Investors Mutual 365 Fidelity 1,615 3 Keystone Funds** 213 BlackRock * 1,230 4 Tri-Continental 209 American Funds 1,216 5 Affiliated Funds 209 JPMorgan Funds* 519 6 Wellington Fund 194 State Street Global* 497 7 Dividend Shares 186 T Rowe Price 493 8 Fundamental Investors 179 Franklin Templeton 480 9 State Street Investment 106 PIMCO * 375 10 Boston Fund ** 106 Federated * 272 Total $2,239 Total $9,686 Percentage of Industry 72% Percentage of Industry 57% Total industry assets: $3.1 billion. Total industry assets: $16.9 trillion *Includes associated funds. ** No longer in business. ***New leaders.

THE NUMBER OF FUNDS EXPLODES . . .

Number of Funds—1951 & Today Major Mutual Fund Groups 1951 2014 Total No. of Total No. of Assets Funds Current Assets Funds Original Name (Millions) Managed Name (Billions) Managed M.I.T. $472 2 MFS $180 78 Investors Mutual 365 3 Columbia 165 116 Affiliated 209 3 Lord Abbett 108 37 Wellington 194 1 Vanguard 2,988 140 Eaton & Howard 90 2 Eaton Vance 101 130 Fidelity 64 1 Fidelity 1,615 321 Putnam 52 1 Putnam 81 77 American 27 2 American 1216 35 T. Rowe Price 1 1 T. Rowe Price 493 116 Dreyfus 0.8 1 Dreyfus 248 151 Total/Average $1,475 1.7 Total/Average $7,195 120 FUND EXPENSES EXPLODE TOO . . .

Mutual Fund Expense Ratios 1951 and 2014 1951 2014 Change Conventional Industry Model MIT/MFS (C) 0.42% 1.29% +208% Investors Mutual/Columbia (C) 0.56 1.15 105 Eaton Howard/Eaton Vance (SH) 0.64 1.27 99 Putnam (C) 0.66 1.31 98 Fidelity (P) 0.63 1.06 68 T. Rowe Price (SH) 0.50 0.84 68 Affiliated/Lord Abbett (P) 0.75 1.12 49 American (P) 0.84 0.99 17 Average 0.62% 1.13% +80% New Industry Model Wellington/Vanguard (M) 0.55% 0.17 -69% 1951 Assets 1951 Expenses 2014 Assets 2014 Expenses Conventional Model (above firms) $1B $7M $3.8 T $40 B New Model -- -- $3.0 T $5 B Ownership types: (C) Conglomerate, (SH) public shareholders, (P) private, (M) mutual EQUITY FUNDS BECOME LESS HOMOGENOUS, MORE RISKY . . .

Equity Funds—Less Relative Predictability More Risk Relative Volatility* 1951-56 2009-15** Difference Over 1.11 0% 18% +18% 0.95-1.11 34 53 +19 0.85-0.94 30 16 -14 0.70-0.84 36 10 -24 Below 0.70 0 4 +4 *S&P 500 = 1.00 **Sample of the 200 largest equity funds.

FUND INVESTOR HOLDING PERIODS SHORTEN DRAMATICALLY . . .

Do You Like These Odds?

Percentage of Active Funds Outpeforming Their Benchmarks 15 Years through 2014 30% 30% 25 Average: 20% Outperform 15 14% Small Value Small Growth Large Value Small Blend Mid-Cap Blend Mid-Cap Value Mid-Cap Growth Large Blend Large Growth Source: Vanguard, Morningstar.

AND SO, THE TRIUMPH OF INDEXING . . .

Vanguard Dominates Industry Cash Flow Mutual Fund Industry Net Cash Flow YTD Through August 2015 $200 Vanguard 150 accounted for Industry Total 141% of the mutual $119 Billion 100 Vanguard fund industry’s +$168 Billion year-to-date net Series2 50 cash flow through Series1 August 2015 All Other Firms -$48 Billion -50 -100 OUR CASH FLOW EXPLODES . . .

Vanguard Cash Flow, 1988 – 2015 Annually, in billions $300 Index Stock and Bond Funds $251B Active Stock and Bond Funds Money Market Funds Billions of Dollars $100B $58B $57B $46B $18B $4B -50 1988 1995 2000 2005 2010 2015* *Annualized based on actual data through 8/2015. DRIVEN BY INDEX FUNDS . . .

The Triumph of Indexing: Rolling 3-Year Net Cash Flow Net Cash Flow $2,000 2009-2015 "The Indexers" Vanguard, $1.3 T BlackRock, and State Street The Rest of the Industry -$4.5 B 1,500 Billions of dollars 1,000 -500 2000 2005 2010 2015 RESULT: COMPETITION’S LEFT IN THE DUST . . . SO FAR . . .

Competition! 38 Largest U.S. Mutual Fund Managers, 2000-2015 $ 3500 V vs. F +$1.4 T Vanguard: $3.0 T Billions of Dollars Fidelity: $1.6 T V vs. F BlackRock: $1.2 T -$204 B American: $1.2 T F: $765 B V: $561 B JP Morgan: $525 B 500 B: $270 B A: $334 B J: $154 B 2000 2005 2010 10/ 10/ 2014 2015 RESULT: OUR MARKET SHARE GROWTH CONTINUES . . .

Growth of Equity Fund Assets—Active vs. Index $5.3T $10,000,000 $1.1T $6.4 Trillion Active $3.3 Trillion 1,000,000 $10.6 Trillion Index $257B $1.2T Index Share 100,000 $39B 33% Index Share Millions of Dollars $49B 19% $3B 10,000 Index Share 4% 1,000 Index Share $14M 1% Index Share 0% 1975 1985 1995 2005 2014 YET THE ORIGINAL PRINCIPLES OF INDEXING HAVE BEEN CHALLENGED . . .

The Rise of the ETF Equity Index Fund Assets 1995-2008 2009-2015 Annual Annual 1995 2015 Increase Increase TIFs* $48B $1.63T +19% +19% ETFs $1B $1.68T +59% +19% Total $49B $3.31T +25% +19% *Traditional Index Funds THERE IS A DIFFERENCE . . .

Yes, There Is a Difference 42 Traditional Index Funds vs. Exchange-Traded Funds First Index Mutual Fund (1974)—Principles • Own the U.S. stock market • Diversify to the Nth degree • Minimize transaction costs • Tiny expense ratio—500 Index: 0.05% (Admiral) • Bought to be held “forever” (redemption rate 10%) Exchange-Traded Index Funds (1993)—Principles • Pick your own index (1,100 now available) • Diversify within sector you chose • Lower expenses … but not too low (0.50%) • Bought to be traded (average annual turnover of large ETFs: 1244%) “BUY AND HOLD” vs. “TRADE IN REAL TIME” . . .

Speculation or Investment? A Tale of Two Strategies Trading in the 100 Largest Stocks and ETFs 100 Largest Stocks 100 Largest ETFs $ Trading Turnover $ Trading Turnover ETF $ Vol Volume Ratio Volume Ratio % of Stock $2.4 T 128% $4.5 B 90% 0.2% (Low) 2000 17.0 T 222 1.2 T 292 7 2005 10.6 T 166 4.7 T 1879 44 23.0 T 326 23.7 T 5410 103 (High) 2010 18.3 T 262 16.7 T 2838 92 2015* 19.2 T 167 17.1 T 1411 89 Growth 11% 51% Rate Average 188% 1895% *Annualized HOWEVER, WITHIN ETFs, MANY DIFFERENCES All ETFs Are Not the Same Assets, Institutional Ownership, and Turnover Largest Total Institutional Annualized Annualized ETF Sponsors Assets Ownership Turnover Turnover % BlackRock $809 B 62% $4,910 B 606% Vanguard 469 43 908 193 State Street Global 409 63 8,692 2,122 Total $1,687 B 56% $14,510 B 859% Most Active ETF Sponsors PowerShares $97 B 40% $928 B 953% ProShares 25 12 873 3,444 Direxion 9 5 506 5,551 VelocityShares 3 7 299 10,308 Total $134 B 16% $2,606 B 1,936% TIFs MAY HAVE CLOSE “ACTIVE” COUNTERPARTS . . .

In 1974, “Relative Predictability.” Now, “High R2.” Vanguard Fund Name R2 R2 (10-Year) (3-Year)* Fund Index Funds Total Stock Market Index 1.00 1.00 Correlations Total Bond Market Index Active Funds 0.99 0.99 STAR Fund 0.99 0.99 Explorer Fund 0.99 0.97 The Triumph of Wellington Fund 0.97 0.97 Intermediate-Term Tax-Exempt 0.97 0.99 Indexing (and Windsor Fund 0.95 0.94 Virtual Indexing) PRIMECAP Fund 0.93 0.88 Health Care Fund 0.92 0.90 Average Vanguard Active 0.95 0.93 R2: The percentage of a Equity Fund fund’s return explained by Average Industry Active 0.88 0.79 the return of its best-fit Equity Fund index.

“Relative Predictability” Dominates Vanguard’s Asset Base 91% of Vanguard’s Assets Have High Relative Predictability (Average pre-cost returns . . . superior post-cost returns) Active Funds Virtual 9% Index Funds 19% Index Funds Note: “Virtual Index Fund” – R-Squared of 0.96 or higher relative to best-fit index.

NOW LET’S LOOK AHEAD AT FUTURE RETURNS ON STOCKS AND BONDS . . .

Looking Ahead 1.—No Great Alternatives Reasonable Expectations for Stocks—Below Long-Term Norms Sources of Annual Returns on Stocks Historical Prospective 10% Returns Active Index 9.1% Gross Return 9% 6% 6% 8% Costs -2 -2 -0.05 6% 4.7% Net Return 7% 4% 5.95% 6% 5% 4% Earnings Growth* 2% 4% 2% Dividend Yield 0% 0.4% -1% Speculative Return* -2% Historical Next 10 Years *Assumed decline in P/E from 20x to 17x WHAT ABOUT BONDS? . . .

Looking Ahead 2.—No Great Alternatives Reasonable Expectations for Bond Returns—Below Long-Term Norms Source of Annual Returns on Bonds—Initial Yield 5% 4.6% 4% 3% 3% 2% 1% 0% Historical Next 10 Years* *Assumes accepting slight additional credit risk and interest rate risk vs. the broad bond market YET, REAL INTEREST RATES CLOSE TO LONG-TERM NORMS . . .

Looking Ahead 3.—No Great Alternatives 50 Balanced Portfolio Returns Also Below Norm of 7% Reasonable Expectations: Nominal Gross Return (50/50 Stock/Bond): 4.5% Don’t Forget These Deductions -1.5% Active Fund Costs or -0.05% Index Fund Costs * * * -2% Inflation -0.5% Taxes -1.5% Investor Behavior YET MUTUAL FUNDS WILL CONTINUE TO DOMINATE INVESTOR SAVINGS. WHY? . . .

Mutual Funds Are the Only Practical Investment Option for Individual Investors “The vast majority of American families are sentenced to a lifetime of investing in the existing mutual fund penal system. But if they’re smart, they’ll do their time in an index fund.”

John Bogle Grant’s “Great Debate” April 7, 2015 AS YOU CONSIDER YOUR FUND STRATEGY, REMEMBER THESE WORDS . . .

Four Closing Quotations: 1. Tibble v. Edison Unanimous ruling of the U.S. Supreme Court reaffirming fiduciary duty for retirement plans From The New York Times, 2/24/2015: Jonathan Hacker, a lawyer for Edison, said it can’t be the case that companies have to “constantly look and scour the market for … cheaper investment options,” for retirement-plan participants.

“Well, you certainly do, if that’s what a prudent trustee would do,” Justice Anthony Kennedy responded.

2. Andrew Ang Professor, Columbia Business School; Author, Asset Management “… Fund managers’ real loyalty lies with the firm that runs the funds, rather than with the investors who are the owners of the fund. The relationship is incestuous, and investors lose. Many directors of the mutual fund—especially the board chair—are insiders of the investment advisory firm. Fund directors usually do not, and in many cases cannot, independently verify the information given by the advisor. Separating the fund’s governance from its sponsor is not enough to ensure protection of the investors.”

3. David Swensen Manager, Yale University Endowment Fund “Ultimately, a passive index fund managed by a non-for-profit investment management organization represents the combination most likely to satisfy investor aspirations. … Out of the enormous breadth and complexity of the mutual-fund world, the preferred solution for investors stands alone in stark simplicity.”

4. Adam Smith From The Wealth of Nations, 1776 “The interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. … The interest of the consumer must be the ultimate end and object of all industry and commerce.”

Yes, the interests of fund shareholders (consumers) will, finally, triumph over the interests of fund managers (producers). Thank you for your confidence. “STAY THE COURSE”