Bogleheads On Investing Podcast Episode 044: Eric Balchunas on the Bogle Effect, host Rick Ferri
Mar 29, 2022
Eric Balchunas, Senior ETF Analyst at Bloomberg Intelligence and author of 'The Bogle Effect', discusses the monumental influence of John Bogle on the investment landscape. He reveals the paradox of Bogle's initial skepticism about ETFs and how his principles ultimately shaped the industry for better investor benefits. Balchunas dives into the origins of Vanguard and the rise of index funds, detailing the evolution from active management to low-cost strategies. He also highlights the legacy of Bogle, emphasizing the shift towards ultra-low fees and enduring investor trust.
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Vanguard Forced ETF Prices Down
- Steve Bloom told Eric that SPY was priced at 20 bps because Vanguard's 500 index mutual fund was 20 bps at the time.
- That pricing pressure from Vanguard shaped ETF fee expectations and helped make the ETF industry viable for retail.
How Vanguard Was Born
- Jack Bogle engineered Vanguard by mutualizing back‑office operations after getting fired at Wellington.
- He kept control as chairman of the funds and launched Vanguard as a low‑cost administrator.
Indexing Needed Vanguard
- Vanguard's mutual ownership and low fees enabled indexing to scale in ways other firms couldn't match.
- Eric argues indexing needed Vanguard more than Vanguard needed indexing.
