The investment that gave up on winning, yet never loses

In 1951, Princeton senior John Bogle wrote his thesis on mutual funds. His conclusion: there was no basis for saying funds did better than the market average. The founder of the asset manager Wellington read that thesis and hired him. He became president in 1967 and chief executive in 1970.

In January 1974, after a merger went wrong, he was fired from that post. But he still held the chair of the funds' board. The proposal he made from that seat was Vanguard. Normally an asset manager creates a fund, runs it, and collects fees. Vanguard works the other way around: the funds own the manager. The funds belong to investors, so the company belongs to investors too. What the company earns goes back to investors not as dividends but as lower costs. The name came from HMS Vanguard, Nelson's flagship that defeated Napoleon's fleet, and it opened in 1975.

On August 31, 1976, First Index Investment Trust, the first index fund individuals could buy, launched. It did not pick stocks. It bought shares of 500 leading American companies in proportion to their market weight. The goal was $150 million; it raised $11.3 million. Bogle himself called it 'a complete failure,' and the industry called it 'Bogle's Folly.' The underwriters wanted to shut it down, but Bogle did not.

The math is simple. What investors keep is the market's return minus costs. Funds that pick stocks spend money on managers and trading. A fund that buys the whole market does not. Even without trying to beat the market, lower costs leave more money in your hands. This fund's annual cost is now 0.04%.

In April 2000, this fund became the largest mutual fund in the world. Vanguard became the world's second-largest asset manager by assets under management, with 50 million people entrusting it with their money. Warren Buffett wrote in his 2016 shareholder letter: "If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle. He is a hero to them and to me." Bogle died in 2019. $10,000 put into this fund in 1976 is worth more than $2.4 million this year.

Worth adding: the method of buying the whole market already existed among institutional investors. What Bogle did was open that door to individuals.
Because it never tried to beat the market, it never missed the share the market gave.
Between winning and not missing out, which one lasts longer?