Stay The Course: The Story Of Vanguard And The Index Revolution by John C. Bogle

The Blurb On The Back:

Stay The Course is the gripping story of the creation of what would become the largest mutual fund organisation in the world, as told by its founder, John C. Boyle.  Readers will come to appreciate Bogle as a unique innovator in the world of mutual funds – an investor who used his market wisdom and business savvy to bring mutual fund investors their fair share of stock and bond market returns.  This book will delight anyone who enjoys a good story with a happy ending.

In 1974, when the story of The Vanguard Group began, the idea of a mutual fund that was truly mutual – owned by the fund shareholders themselves and operating on an “at cost” basis with no profits to outside shareholders – was viewed as anathema by many seasoned investors.  Not deterred by his colleagues’ caution and, sometimes, outright hostility, John Bogle persevered, building what would become a $5 trillion mutual fund complex.

Vanguard’s remarkable success is inextricably intertwined with the index revolution that has changed the way we think about professional money management.  Buying and holding the market portfolio turns out to be the simplest and soundest path to investment success.  Bogle’s creation – the S&P 500 Index fund – is the spark that ignited the flame of the index revolution.

Bogle concludes his book with some personal insights.  His memoir-like final chapter gives readers some valuable insights into the thinking of Vanguard’s legendary creator.  Bogle’s engaging tale overflows with business insights and inspiration that you won’t want to miss. 

You can order Stay The Course: The Story Of Vanguard And The Index Revolution by John C. Bogle from Amazon UK, Waterstone’s or UK.  I earn commission on any purchases made through these links.

The Review (Cut For Spoilers):

John C Bogle was the founder and former CEO of The Vanguard Group (creator of the world’s first index mutual fund).  This book is part corporate history on Vanguard’s origin and development and part life lessons drawn from his considerable experience but despite some interesting nuggets here neither part really satisfies as the corporate history dwells too heavily on fund performance and the life lessons are brief and superficial.  

I picked this up because I had heard of Bogle’s financial acumen and of his reputation for emphasising the difference between investment and speculation and promoting the former.  I’m also a bit of a sucker for corporate history because I enjoy reading about why companies were set up and then learning of the successes, stumbles and lessons learned as they go from start-up to established player.  So I came into it with high hopes, partly driven by the Blurb on the Back, which is unfortunately not what I found on the page.

The book is structured into 4 parts:

– Part 1 is the story of Vanguard, which is set out in a lineal fashion and starts with some personal information from Bogle about his student days and how his college thesis at Princeton was about mutual funds (which, in turn, landed him his very first job after university).  Each chapters generally focuses on a different time periods in Vanguard’s history (e.g. 1974-1981) although there are also chapters on Bogle’s legacy and a general chapter on how other fund providers picked up and sought to emulate Vanguard’s success with index funds of their own;

– Part 2 looks at a history of Vanguard’s funds.  This for me was dry and fairly pointless as Bogle literally goes through the various types of fund that Vanguard established and then looks at the performance of the same.  Given that so many of the funds are now closed, I really struggled to see who would benefit from this and although Bogle displays candour in admitting when he was wrong to have a product set up because of underperformance, he is very low in analysis as to why he made that wrong decision (usually dismissing it as giving in to the desire to market rather than invest, which seems strange given he was clearly a driven man who led from the front);

– Part 3 contains some of Bogle’s thoughts on the future of investment management, which I did find genuinely interesting as Bogle takes on academic critics who point to the concentration of ownership in index funds and what this might mean for competition going forward.  I actually wanted more of this as he gets stuck into what fund ownership means and what can be done with it; and

– Part 4 which is a loose collection of Bogle’s personal reflections on life and finance, all very short paragraphs, which for me didn’t bring a huge amount to the book and could easily have been cut.

What does come through the different chapters is that Bogle was firmly committed to the principle of maximising returns to investors and truly believed that index tracking mutual funds were the best ways of keeping costs down to keep returns solid.  I certainly didn’t disagree with his disapproval of more traditional fund structures where ownership is with the managing company, which can then cream off fees, thus reducing the amount available to the investors who are actually paying for it.  I also couldn’t argue with his points about how active managed funds generally fail to beat the market in the long term when compared with passive trackers – certainly this is a point that a number of UK based financial commentators have been highlighting for those interested in market investments.  He’s also good in taking apart exchange-traded index funds (ETFs), which he categorises as a speculation vehicle rather than an investment index fund product on the basis that investors are encouraged to trade them rather than hold onto the shares long-term, which is where the real value comes from. 

Some of the writing is a little dry (and the constant repetition of “stay the course” got very old, very quickly for me) and at times the book reads as if Bogle has some scores to settle as he seeks to prove wrong those who criticised what he was trying to do back in the day.  I don’t begrudge someone a little payback when they’ve been proved right, but again this is all done quite dryly and Bogle doesn’t really give a lot of himself away in the book – even in the final part, which is supposed to be more personal I didn’t get a huge sense of who he was as a person.  I would have liked some more detail about the internal company discussions at big points in Vanguard’s history (such as the decision to bring management in house) but it appears that Bogle was stymied by the decision of the board not to allow him use/visibility of board minutes from the time so the book instead relies heavily on Bogle’s more benign memories, which are broad and low on detail.  I was also a little frustrated that the book makes no comment on Vanguard since Bogle left the company in 1999 other than to discuss fund performance – again, I admire his discretion but it would still be interesting to know his views on the direction that the company is going in.

Ultimately I came away from this book feeling that it’s neither one thing nor the other.  It doesn’t really work as a corporate history because Bogle deliberately focuses on funds and figures rather than the corporation or its culture. Nor does it work as a “part-memoir” given that Bogle doesn’t seem keen to give too much of himself away.  There are some interesting nuggets in here but you have to go through some dry material to get there.  However, I have heard good things about his other books on investment and would be minded to check them out.  

Thanks to the Amazon Vine Programme for the review copy of this book.

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