John Bogle’s biggest contribution is yet to come.
The Vanguard Group founder and father of the index fund, better known as Jack, died on Wednesday at the age of 89. A lot will be said about his influence on the financial industry in the coming days, and deservedly so. He transformed money management, making investing cheaper, simpler and more accessible than ever before, lifting the financial well-being of millions of people in the process.
But the most remarkable thing about Bogle is that he created billions — and perhaps trillions — of dollars in value for others and kept relatively little of it for himself. That stands in sharp contrast to the unabashed accumulation of riches among corporations, even as wealth inequality rises to alarming levels. Bogle’s life is a reminder that business leaders have the power, indeed the responsibility, to shrink the wealth divide between their companies and the workers and consumers who sustain them.
If Bogle were anyone else, he’d be a billionaire. His brand of investing — buy low-cost, broad-based index funds and hold them forever — seems obvious now, but it wasn’t inevitable. When Bogle launched the first index fund available to individual investors in 1976, the industry ridiculed it, calling it “Bogle’s folly.” Bogle was undeterred, and today Vanguard is among the largest money managers in the world, with $5 trillion in assets, roughly two-thirds of which is invested in index funds.
Continue reading “John Bogle Showed Enriching Lives Goes Beyond Riches”
It’s time for FAANG stocks to break up, at least in investors’ minds.
Facebook, Apple, Amazon, Netflix and Google parent Alphabet can’t get away from one another. Every time one grabs the spotlight — as Apple did last week when it became the first U.S. company with a $1 trillion market value — it brings along the other four.
They’re alternately hailed as the hot stocks, technology’s brightest lights and indispensable growth companies, and jeered as a worrisome sign of a frothy and top-heavy market. But look closely and it’s no longer clear why they should be lumped together at all.
Let’s start with the technology moniker. Amazon is a retailer and Netflix is an entertainment company, which is why, contrary to popular perception, the Global Industry Classification Standard, or GICS, tags them as consumer discretionary companies, not tech. And as of the next GICS reclassification in September, Facebook will move from the tech sector to telecommunications, where it belongs. Only two of the five FAANGs, in other words, are true technology companies.
Continue reading “FAANGs Are More Solo Acts Than a Tech Supergroup”
The health-care industry may have finally met its match.
There have been many efforts to reform the U.S. health-care system over the years, but the one announced on Tuesday by the triumvirate of Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. may be the most ambitious yet.
The announcement was light on detail, but it hinted at big plans. JPMorgan CEO Jamie Dimon said the “goal is to create solutions” that deliver “transparency, knowledge and control” to the three companies’ employees “when it comes to managing their health care.” Those qualities are conspicuously missing from the U.S. health-care system.
As my Bloomberg Gadfly colleague Max Nisen pointed out, a key line in the release is that the new venture will be “free from profit-making incentives.” That’s a big deal. Just ask low-cost investing pioneer Vanguard Group what’s possible when profits aren’t a consideration.
The obvious question for investors is what impact the effort will have on the health-care industry. Amazon is a formidable foe, as every industry that competes against it will attest. But health-care companies are no pushovers. Or, as factor investing aficionados might put it, health-care companies are high-quality businesses.
Continue reading “Low-Cost Care Threatens High-Quality Health Stocks”