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Rekenthaler Report

Jack Bogle Was Wrong About ETFs

Exchange-traded funds have served his cause.


The King Does Not Approve
Vanguard founder Jack Bogle rarely erred. He was spot-on when popularizing indexing; bringing institutional pricing to retail investments; avoiding trendy fund launches; and recognizing that positive press would eventually benefit Vanguard more than hiring an expensive salesforce. He was even correct when arguing that U.S. investors didn’t need to own overseas equities. (Perhaps he was merely lucky there, given that American stocks have performed so well, but right is right.)

However, one of his strongly held beliefs--that exchange-traded funds were poor investments--has failed the test of time. Per Jeff Cox of CNBC, Bogle once called ETF investors "fruitcakes, nut cases, and the lunatic fringe." Regrettably, he was more circumspect when speaking to me, but his view never changed. ETFs endangered their investors, and Vanguard should not have adopted them.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.