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Vanguard Experiment: John Bogle's Quest to Transform the Mutual Fund Industry [Hardcover]

Robert Slater

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Book Description

1 Oct 1996
The first authorized inside look at a major mutual fund company! Vanguard is, in the eyes of man, the most influential mutual fund company in America. Now, the "Vanguard Experiment" chronicles Vanguard - from startup in 1975 to the second-largest mutual fund company in the nation today and the industry's number one service firm - reveals how John c. bogle, Chairman of the Vanguard Group, realized his remarkable vision to build a company with over $160 billion in assets and a reputation for keeping costs low and putting the interests of the investor first. Revolutionary, iconoclastic, and uncompromisingly committed to his founding principles, bogle stands alone in an industry that grows increasingly greedy for higher sales charges and management fees. The Vanguard Group is best known for shining a beacon on a low-cost, customer-oriented approach that other mutual fund companies cannot ignore - and may ultimately follow. The "Vanguard Experiment" reveals: the Vanguard philosophy, including Bogle's "press on regardless" motto that helps the company stand behind its revolutionary tactics despite criticism from the rest of the industry; Bogle's role as the "conscience" of the industry, and his desire to reform many of its practices; the three crucial decisions made at Vanguard over the last 21 years, including: the 1975 "Vanguard Experiment", the decision to "go no load" in 1977; and the internalization of a large part of Vanguard's investment management efforts in 1981; and background on John C.Bogle, including his early years at Princeton, his career with the Wellington Management Company during the '50s and '60s, and the first frustrating years of Vanguard; in-depth interviews with Jack Bogle, Jack Brennan, and other mutual fund leaders; and a rare inside look at the legendary money manager Joh neff and Vanguard's Windsor Fund.

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About the Author

Robert Slater has over 25 years of experience writing for Time, Newsweek, and UPI. Slater has written a number of bestselling business books, including Jack Welch and the GE Way; The New York Times business bestseller Ovitz: The Inside Story of Hollywood's Most Controversial Powerbroker; Get Better or Get Beaten: 31 Leadership Secrets from GE's Jack Welch, and Soros: The Life, Times, & Trading Secrets of the World's Greatest Investor. His latest book, Saving Big Blue: Leadership Lessons & Turnaround Tactics of IBM's Lou Gerstner, was published in September 1999.

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WILLIAM YATES BOGLE, JR., WAS BORN in Montclair, New Jersey, in 1896. Read the first page
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Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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Customer Reviews

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Amazon.com: 4.7 out of 5 stars  3 reviews
7 of 7 people found the following review helpful
4.0 out of 5 stars Excellent book for those interested in Vanguard 16 Mar 1999
By A Customer - Published on Amazon.com
Would recommend anyone intersted in this book to first read "Bogle on Mutual Funds" first as it's an excellent book and covers similar material. If you are still interested in learning more about Vanguard, then this book is an excellent compliment. It's not as critical of it's subject as I would have liked, and really doesn't cover the personal life of the subject so as a biograhy leaves a lot to be desired. It does, however chronicle the amazing story of Vanguard.
2 of 2 people found the following review helpful
5.0 out of 5 stars It is a great story of a great company founded by a great man 14 Aug 2009
By Mariusz Skonieczny - Published on Amazon.com
John Bogle is a pioneer who transformed the mutual fund industry. This book is the story of John Bogle and Vanguard, a mutual fund company he founded in 1974. He saw that the mutual fund industry was not there to serve its clients, but to make the people running individual companies rich. He believed that clients can be better served if they invest in all American businesses through index funds. This strategy is not only less costly, but also beats the majority of other mutual fund managers. The idea caught on so well that by 1996, Vanguard had over $200 billion in assets under management.

I recommend this book to readers. It is a great story of a great company founded by a great man.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
5.0 out of 5 stars thank you, mr. bogle 14 Mar 2011
By muddy glass - Published on Amazon.com
john "jack" bogle is one of the few decent souls in the sordid world of money, who is all the more remarkable when juxtaposed with the many scumbags on wall street that pretend to be human beings. saint jack made it his life's mission to offer the average person a "fair shake" when he could've just as easily exploited his clients like the typical predators in the financial sector would. bogle gave robert slater full access in the preparation of this biography and the final result does not disappoint. the reader is told the extraordinary story of the birth of the vanguard group without glossing over bogle's own shortcomings and errors of judgment.

the vanguard group was founded in 1974 as the first (and still the only) truly *mutual* mutual fund company. typically, mutual funds are owned by a management company and so there's an extra layer of pockets to fill at the end of the day. the way the vanguard group is set up, the shareholders own the funds, and the funds in turn own vanguard. as such, it is written into vanguard's very structure to put the shareholders' interests first. this was the revolutionary difference that allows vanguard to do what other companies fail to do: give back to investors as much of the rewards of investment as possible.

bogle was ridiculed when he first touted the idea for the vanguard group, even being called "unamerican" by some of his critics. it should be made explicit that bogle does not have anything against the profit motive. one can believe in the power of capitalism and free markets to transform society for the better while still condemning the excesses of the mutual fund industry.

mathematics readily reveals the injustice in the industry. for example, the average expense ratio for a mutual fund is around 1.4% industry-wide, while the average expense ratio at vanguard is around 0.2%. it might not seem significant at first glance, but that 1.2% difference lost to the average mutual fund compounds over the years to roughly a third of your retirement money! for concreteness, imagine you have $10,000 to invest and assume the stock market performs at 8% annualized returns. then after 30 years, you'll get a $68,032 expected return from the average mutual fund. not bad, right? well, if you invested that $10,000 with vanguard, then you'd get $95,184 instead. that's the difference 1.2% makes. you actually *lost* $27,152, or 28.5% of your retirement money, due to that 1.2% difference in expense ratios. actually, the whole story is even worse than this. we haven't factored in sales commissions (loads), annual 12b-1 fees, and taxes from higher portfolio turnover in the average mutual fund, all of which are not reflected in the expense ratio. in short, the vast majority of mutual funds charge more money and yet *underperform* the low cost no-load index fund over 30 years. conservatively, you'd lose well over a third of your retirement money after factoring in these extra costs, not just the 28.5%. this is outright theft of investors' dollars in bogle's eyes for financial "services" that don't add value. i hope this example suffices to show why the creation of the vanguard group was so important. (check out bogle's books for more details, e.g. "common sense on mutual funds" or "the little book of common sense investing.")

with all that money for the taking, what motivated bogle to build vanguard in the first place? it seems to be a combination of things. bogle grew up in a well-to-do family that was struck with poverty when he was still a boy, forcing him to learn the value of a dollar from a young age. bogle was also infused with a military discipline, austerity and the belief in hard work from his time at the blair academy. blair was an all-boys private high school that was ran like a military school when bogle attended. blair's influence on bogle was so great that blair receives much of bogle's charity money; in fact, bogle is blair's top contributor. the military spirit is also evident in vanguard's naval imagery and meshes nicely with the simplicity of the concept of an index fund itself. bogle suffered a heart attack in 1960 at the age of 31, while playing tennis with his brother-in-law. this episode and the subsequent heart attacks over the years undoubtedly gave bogle a greater sense of urgency and purpose. as bogle grew older, spirituality became an increasing influence in his life, contributing to his sense of purpose. finally, ego played a significant role.

ego has always been a double-edged sword. bogle is admittedly an egotistical and competitive person. bogle did not like to lose and some of the circumstances surrounding vanguard's creation can be construed as a power play on bogle's part to retain control of the wellington funds after he was forced out of the wellington management company. those wellington funds eventually morphed into vanguard's first funds. even after vanguard's creation, bogle always wanted to be number one and this desire for greatness has been a driving force behind vanguard. the vanguard story was not all pretty roses and saint jack is human after all. nevertheless, whatever character flaws bogle may or may not have, they pale in comparison to what bogle has contributed to all of us.

thank you, mr. bogle, for your service to humanity.
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