Advice from the index-fund mastermind
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Investing for everyone
You were the first to introduce index funds in the form of mutual funds for everyday investors. Would you say that this was your greatest contribution to the investing public?

Don't-miss insights:

• History of the index fund • Simplicity is key • Switching to indexing • Costs add up • How much to pay • Bogle's portfolio • Money market investing • ETFs vs. index funds • Investing for everyone

Vanguard 500 Index Fund is unequivocally the first index mutual fund. I don't dwell on my contributions such as they may be to the investing public. I've tried to do my best to build a better world for the average investor and, for that matter, for pension funds and institutional investors, too. Central to that was the creation of Vanguard, which was and is the only truly mutual mutual fund organization.

The management company is owned by the funds. Its profits, running about $12 billion a year (in 2007), are largely rebated -- 98 percent or something -- to our fund shareholders in the form of lower expenses. Without that kind of structure, it would be very difficult to bring out an index fund.

We went no-load around the time the index fund was introduced. We then focused on being a low-cost provider in the mutual fund industry. And therefore following, when we became effective operationally in May 1975, the first thing on my agenda was to start an index fund, which depended on low cost to work. The chicken-and-the-egg is that Vanguard was the chicken, and the index fund, the egg. But which was the most important?

We've been the most innovative company in this industry. And, I would argue quickly, soundly innovative. I don't give you points for innovation if you bring out an Internet stock fund at the height of the stock market boom in early 2000. That's bad innovation. In terms of good innovation, I think it's pretty clear we've led the way.