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Bogle's Key Factors for Measuring Stewardship

The Vanguard founder touches on why fund investors need to closely monitor expense ratios, portfolio turnover, and manager independence, among other things.

Christine Benz: One of your passions, Jack, is talking about the stewardship of fund management companies, and in [your recently published book, The Clash of the Cultures], you go through what you call is a stewardship quotient where you look at some criteria that you think any company managing your money should have. And let’s talk about what you think are the key things investors should focus on when they are evaluating the quality of fund company stewardship.

Jack Bogle: Sure. And by stewardship, just to be clear, I mean to what extent is the firm putting the interest of its mutual fund shareholders ahead of the interest of its managers? And that comes down to, in many respects, issues of cost. So, you start off with expense ratios; if they are very high, the directors aren't doing their job. They should be competitive or low; maybe much lower. Nobody can reach Vanguard alas, and we're starting to drive that a little bit ourselves anyway. But that’s number one.