https://www.forbes.com/global/1999/0614 ... 5484d268ff
Anyone have any other information or maybe an interview where Bogle describes this?John Bogle gave birth to the retail index fund industry by creating the Vanguard 500 Index Fund in 1975. Today this $88 billion fund’s turnover is a minuscule 6%. Its expense ratio is a rock-bottom 0.2% of assets annually.
But Bogle thinks he has a better baby, the ultimate in buy-and-hold investing. He would buy the 50 largest companies in the S&P 500 and then never buy another. If a stock were lost in a merger, Bogle would not replace it.
The Vanguard 500 Index incurs (small) transactional costs when people buy new shares or cash out. Bogle would avoid this by opening the doors only once and requiring people to take redemptions in shares in lieu of cash.
Professor Jeremy Siegel of the University of Pennsylvania’s Wharton School calculated a hypothetical return (before transaction costs) if someone had bought the 50 largest S&P 500 stocks on Dec. 31, 1950, and held on. Average annual return: 12.6%, a fraction of a point better than the entire market. He then created separate buy-and-hold portfolios for every year between 1950 to 1996. The buy-and-hold approach beat the market 75% of the time, never underperforming by more than 0.6% a year.
Bogle estimates that taxes and transaction costs skim 4.5% annually out of returns for most U.S. investors in actively managed funds, and 1.5% even for investors in an index fund. He figures his static-50 fund would cost 0.15% of assets to run. One big caution, with which Bogle agrees: All 50 top S&P 500 stocks may currently be overpriced. This matters less for long-term investors.
Seems implementable in 2022 given fractional shares and zero trading costs…
Might be a PITA to backtest with the current set of online tools.