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Bogleheads and Large Portfolios: Silence from the Industry


"Bogleheads" are followers of Jack Bogle, who advocated for simple investing based on index funds. But does that advice work equally well for high-net-worth individuals? Don't ask the industry.

Man at computer

In early summer of last year, a Boglehead was kind enough to grant me an interview. For review, here’s the Financial Times’ Lexicon describes a Boglehead:

“Bogleheads are those who follow the investment principles of Jack Bogle, founder of Vanguard, the low-cost exchange traded fund (ETF) specialist. Boglehead principles aim at modest, simple, investment and savings plans. To invest like a Boglehead you should build a simple portfolio based on index investing.”

(For further explanation, continue reading FT’s definition here.)

Since interviewing the Boglehead investor, I have been trying to find an investment manager who would give me some pointers on why investing for high-net-worth individuals might be different than the Boglehead approach. I thought it would be easy—think again—not so.

First, I queried a previous colleague from an investment firm where we both worked. My enquiries involved not only e-mails but at least one telephone call. My questions seemed straightforward to me:

Do you use different strategies for different size portfolios? For example, are the components of a $2 million versus a $5 million versus a $20 million portfolio different under your management? If so, can you give me examples of how they differ and why? How would any difference be expected to play into better performance for each in your experience?”

After some frustration with the equivalent of “no comment” from him (which surprised me as we had been working colleagues and got along well), I looked elsewhere.

Next, I reached out to a Schwab representative who approached me after I went to a Schwab seminar that I wrote about in an earlier article. She referred me to someone else in their firm, who did not reply once she received my questions (above). I would interpret this as a second “No comment.”

Finally, I approached a representative from Ameritrade. The response was the same, nonexistent.

With three resounding silences under my belt, I gave up.

For me, one of several possibilities explains this behavior. Either the investment managers didn’t want to take time to respond for a variety of reasons or they couldn’t come up with an answer as to the advantage of handling larger portfolios in any way other than that suggested by the Boglehead. If the latter is true, a lot of people are paying a ton of money for expected performance that may not be materializing. In fact, one could conjecture that after the payment of expenses to the investment firm, their performance isn’t even as good as a Boglehead. This is supported by the fact that managed funds have done more poorly in the first quarter of this year, and, in fact, historically as well. No wonder they chose not to reply!

For more on this subject:Exchange-Traded Funds: Dumb Money? (Jack Bogle)Most Investors are Throwing Money Away (Performance of passive versus active funds in 2015)

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice