TRANSCRIPT

Rebecca Katz: Well, we actually got quite a number of questions about whether the popularity of index funds—you know, they’re pretty ubiquitous at this point—actually might be problematic or whether index funds work in this more volatile market environment. So how would you respond to that?

Jack Bogle: Well, indexing, take the market environment, the easy one first, indexing works in all environments. You just have to understand one simple thing. All of us investors own all the stocks in the stock market. And so those that are indexed own them in their proper proportion. The market value capitalization weight of things like Google and Alphabet, as it’s now called, are the largest. And everybody owns two-thirds of that. Everybody but the indexers roughly. And the index owns one-third. So it’s volatile for us the index fund; it’s volatile for the investors. They’re all one because investors own the market and they can either do it the intelligent way on an index fund that holds it or trade with one another. And one trader trades with another trader. It must be obvious there can be no value added there, just who owns the stock. Ah, but there is something nice going on here for Wall Street—the man in the middle, the broker in the casino, the guy with the rake—whoosh—takes his share out. So the other investors, the nonindex investors are playing a loser’s game. And people have figured that out. And I get letters pretty close to every day, Rebecca, saying, “I wish I’d read your first book earlier.” That’s now 20 years old. Twenty-five years old, I guess almost. And, “I wish I’d listened to your ideas earlier” or “I did and I’m now retired.”

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