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Jack Bogle: The Legend in Mutual Funds

In this interview, mutual fund legend, Jack Bogle, who started Vanguard back in the mid-1970s discusses index funds today compared with back when they first began.


Before the video, here are some definitions that will be helpful:


From Investopedia:

What is an 'Index Fund'

An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. These funds adhere to specific rules or standards (e.g. efficient tax management or reducing tracking errors) that stay in place no matter the state of the markets. 

Active management is the use of a human element, such as a single manager, co-managers or a team of managers, to actively manage a fund's portfolio. Active managers rely on analytical research, forecasts, and their own judgment and experience in making investment decisions on what securities to buy, hold and sell. The opposite of active management is passive management, better known as "indexing.”

'Exchange-Traded Fund (ETF)'

An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.


Based on these definitions and the interview below, how do you answer the following questions:

1. What has changed in financial markets since Bogle launched Vanguard in 1975?

2. Are these changes good for the American investor? Why?

3. How do the fees differ for actively managed funds compared with index funds?

4. What does Bogle mean when he says that today ETFs are passive investments held by active investors?