The Clash of the Cultures: Investment vs. Speculation

Foreword

By Arthur Levitt

There is a motto that Jack Bogle uses from time to time (and he uses it in this book): “Even one person can make a difference.” And while he uses it to elevate and praise the contributions of a single, relatively powerless person, that motto applies uniquely to Jack Bogle.

Here is a man whose contribution to American finance was not just a well-executed idea—the index fund—but a well-executed philosophy of investing and life. It is a philosophy that has the dual merit of simplicity and proven success.

Having known Bogle for several decades, I have come to appreciate his unique ability to speak to investors in a language that is accessible, lyrical, and yet also bracing. He points out with clarity the inherent conflicts present throughout our financial markets, most notably between the investor’s interests and those of many financial professionals.

This is a critical complaint in his discussion of mutual funds. Many investors are under the mistaken impression that mutual funds are a secure and relatively matter-of-fact way to gain the benefit of diversification at low cost. In reality, as Bogle richly details here and elsewhere, mutual funds have a large incentive to benefit from the economics of their businesses, rather than look after their investors’ long-term wealth. Thus we see some mutual funds not only charge outsized fees, but also practice portfolio management strategies that leave investors behind market index averages and overexposed to certain ...