The Radical Invention of the Index Fund, with Robin Wigglesworth

#347: Back in the 1960’s, Jack Bogle thought that actively-managed mutual funds performed better than a passive indexing strategy. He pseudonymously published a paper saying so. But academic data from the University of Chicago challenged his preconceived notions. He attended seminars that showed how the drag on returns that come from management fees and trading costs, coupled with the reality that the bulk of gains come from a hard-to-predict handful of equities (a concept known as “skew”), lead to index funds holding long-term outperformance. At the time, index funds were only available to major institutional investors. Regular folks couldn’t access these winners. And that might have continued for a long time … … except history turned on a dime. In the early 1970’s, Jack Bogle got fired. Rather than accept defeat, he turned into a renegade. He launched Vanguard and began offering index funds to ordinary individual investors. And the rest, as they say, is history. In today’s episode, we learn about the revolutionary ideas that paved the path to passive investing. We learn about the radical invention of the index fund. We discover the drama, the tenacity, the betrayal and redemption behind it. And we discover the lessons that the history of the index fund holds. Enjoy! For more information, visit the show notes at https://affordanything.com/episode347 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Om Podcasten

You can afford anything, but not everything. We make daily decisions about how to spend money, time, energy, focus and attention – and ultimately, our life. How do we make smarter decisions? How do we think from first principles? On the surface, Afford Anything seems like a podcast about money and investing. But under the hood, this is a show about how to think critically, recognize our behavioral blind spots, and make smarter choices. We’re into the psychology of money, and we love metacognition: thinking about how to think. In some episodes, we interview world-class experts: professors, researchers, scientists, authors. In other episodes, we answer your questions, talking through decision-making frameworks and mental models. Want to learn more? Download our free book, Escape, at http://affordanything.com/escape. Hosted by Paula Pant.