Jack Bogle who? Why Buffett is all praise for this mutual fund king

Warren Buffett on Saturday thanked Jack Bogle for saving billions of dollars of investor money by creating index fund.

Address the 53rd annual general meeting of Berkshire Hathaway, he said index funds have bought down costs significantly for investors.

What are index funds?

Index funds, as the name suggests, invest in an index. These funds purchase all the stocks in the same proportion as in a particular index. This means the scheme will perform in tandem with the index it tracks, save for a small difference known as tracking error.

Who is Jack Bogle?

Jack Bogle is popularly known as king of index funds. He founded Vanguard Group, the largest US mutual fund house, in 1974 and created the first index fund that allows investors to passively invest in the stock market by tracking an index.

As of February 2017, Bogle had a net worth of $80 million, according to Business Insider.

According to CNBC.com, Bogle believes costs are everything in investing. Active managers would have a very difficult time outperforming the market after costs. But trimming management fees enough to compete with index funds would “decimate” profits and be “a slap in the face to the public owners who have become used to profit growth.”

Jack Bogle recently warned against the dangers of allocating money to smart beta funds, saying he was wary of new financial instruments that have not been tested by a big shock in the market.

Jack Bogle is also a writer. His book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor is a bestseller and is considered a classic within the investment community.
An Alabama shareholder asked Buffett if he has counselled his wife to buy index funds after he dies.

"She won’t be selling Berkshire shares to buy index funds, because they’re all going to charity," said Buffett. "The big thing she will want is to avoid problems. If she holds the S&P500, she’ll have all the money she needs with enough liquidity for cash if needed, while being more able to resist advice to buy or sell holdings."

Munger said he recognizes that the S&P500 is hard to beat, “but I’m just more comfortable” with his heirs holding Berkshire.