John Bogle on Investing: The First 50 Years

Part II

TAKING ON THE MUTUAL FUND INDUSTRY

OVER THE YEARS, I've become less and less constrained in speaking out with candor on what I perceive as serious shortcomings in the principles and practices followed by the mutual fund industry. While not all fund organizations are equally tarred by the broad brush with which I paint, a sufficiently large majority of firms is subject to these failings—high costs, excessive portfolio turnover, focus on marketing over management, delivery of inadequate long-term returns to shareholders, failure to hold stewardship as their defining characteristic—for me to comfortably take on “the industry.”

In this context, I'm reminded of what President Harry S. Truman said during his whistle-stop campaign aboard a train, a campaign that proved to be the key to his election in 1948. At each train stop, someone in the crowd would interrupt his scathing denunciation of “that do-nothing 80^th Congress” and yell, “Give 'em hell, Harry.” He would respond, “I'm not giving them hell. I'm just telling the truth and they think it's hell.” Whether the industry thinks I'm giving it hell or not, I've yet to hear a single serious rebuttal to my criticisms of the fund industry. So I conclude that, because their veracity is self-evident, my words are accepted as truths.

The first speech (“Mutual Funds: The Paradox of Light and Darkness,” Chapter 10) describes the bright ...