The common-sense cult of John Bogle

  • Article by: KARA MCGUIRE , Star Tribune
  • Updated: November 21, 2007 - 7:29 PM

Meet the Bogleheads, devotees of John Bogle. Despite the name, these investors have level heads on their shoulders.

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Jeff McComas used to actively manage his investments, trying to time the market to boost his portfolio's returns. But then he happened upon an online forum seven years ago. Figuring he'd visit once and that would be it, he registered as "Chuck D"-- like the rapper from Public Enemy. But after spending hours on the forum, he ditched his former ways and became a Boglehead.

Boglehead?

He and thousands like him are devotees of John Bogle, the 78-year-old founder of the Vanguard Group. The Pennsylvania-based mutual fund giant is known for its low-cost index fund investing. Index funds are passively managed investments designed to meet, not beat, the market.

McComas, 38, founded a local group, the Minnesota Diehards, one of 28 such clubs around the country that adhere to the "boring is good" investment philosophy. He considers the Diehards, as Bogleheads are also known, to be a movement -- against stock picking, against high fees and against what he says is the mostly self-serving investment industry.

"We're doing it ourselves, we're doing it cheap, we're helping others peer-to-peer, without any kind of conflicts of interest," McComas said proudly.

Bogle, like Berkshire Hathaway billionaire Warren Buffett, is among a handful of investment professionals who have a cult-like following. He's shared his philosophy in numerous books such as "Bogle on Mutual Funds" and "The Little Book of Common Sense Investing," and has managed to grow his company into one of the largest mutual fund providers in the world, with assets of roughly $1 trillion.

Taylor Larimore, a retired small-business administrator who lives in Miami, became a Vanguard evangelist and in 1998 helped form the Vanguard Diehards forum on investing website Morningstar.com. After "30 years of obeying Wall Street's marketing machine, I eventually realized our brokers were making more money than we were," he said this week via e-mail. At first, Morningstar was reluctant to give a forum to devotees of a single mutual fund company, but it acquiesced after relentless pressure from Larimore and his peers. Hence, the Diehard name.

According to Morningstar, the Vanguard Diehards is its most popular forum. Larimore, who co-wrote "The Bogleheads' Guide to Investing" with Mike LeBoeuf and Mel Lindauer, describes the Diehard philosophy as: "Create a low-cost, diversified, simple, long-term investment plan. Then stay the course."

In February, the Diehards migrated to a moderated forum at diehards.org. In that short time, 4,100 members have registered, and about 20 people join daily. Two to three times as many guests read the forum, according to Lindauer.

The forum boasts roughly 103,000 posts, some from as far away as South America and Australia. It also attracts investment professionals to the site.

Larry Swedroe is a principal at a St. Louis investment firm and the author of several books. He spends an hour or so a day dispensing free advice on the site as a way to keep him on his toes. "People will challenge you and, boy, you have to have good answers," Swedroe said.

But it's also his way of giving back. "I grew up sleeping in a kitchen in the Bronx [in New York City]," the former Citicorp senior vice president said. "I'm a big believer that Wall Street's mostly out to rip people off."

Talking investing

McComas' group first met face to face in 2005. About a half-dozen members showed up. Today, the diverse group -- which includes engineers, a doctor, a retired electrician, a secretary and retirees -- has grown to 50 people on the mailing list; quarterly meetings commonly attract 15 to 20 members. Many converse online at the forum daily and keep up with the local chapter through its blog: mndiehards.blogspot.com.

Arleigh Clemens drives five hours to attend. The Iowa City resident believes the group's value is well worth the drive, and his wife likes to play video poker at Mystic Lake Casino.

Longtime member Jim Doherty is happy to have found a group of smart folks willing to talk investing. "After 10 seconds, 95 percent of people's eyes glaze over," the 61-year-old Roseville resident said. "To sit down with a group of people who are really interested in investing and all sorts of topics -- I think it's really kind of fun."

Some are new to investing and are eager to soak up the wisdom of more-experienced investors. Others are so knowledgeable that they could hang up a shingle as an investment adviser. Not that they think most investors need one.

Most Bogleheads can remember their "come-to-Bogle" moment -- the point when they realized their current investment strategy wasn't working. Many Diehards became do-it-yourselfers after bad experiences with brokers. Clemens dumped his broker after realizing that "I'm taking all the risk and he's taking all the money," he said.

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