CHICAGO (CNN/Money) – After WorldCom announced the biggest case of crooked accounting in history, the markets trembled and President Bush vowed heads would roll. Some money managers predicted investor confidence would take years to recover.
But at the Morningstar investing conference in Chicago this week, at least one group of people ignored the news: the "Bogleheads," a loose-knit organization of investors who follow the teachings of fund industry legend John Bogle.
Bogle, 72, the founder of Vanguard Group who has championed indexing and long-term investing for decades, was the last keynote speaker Wednesday. It was perhaps a fitting end to a conference filled with anxiety. Bogle's message was simple, but soothing: The market will come back eventually, so be patient and focus on asset allocation.
The Bogleheads ate it up.
"We couldn't care less about WorldCom," said one member, Mel Lindauer, a retired businessman from Pennsylvania. "It's just noise to us."
The Diehards meet their master
Who are the Bogleheads? As the story goes, they are a group of investors who in the mid-1990s liked to post their views about the market on various Internet message boards. Rather than touting hot stock picks, the group tended toward preaching the virtues of passive, long-term investing. In 1997, Morningstar gave the group a chat room of its own, called Vanguard Diehards.
Eventually, Bogle noticed. He met with them for the first time at a Miami investing conference in 2000 where he was keynote speaker. (They called the meeting Diehard I). The following year, he gave them a personal tour at Vanguard's headquarters in Valley Forge, Pa. (Diehard II).
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This week, though not officially on the agenda, there was Diehard III. And Bogle, a silver-haired Princeton man with a folksy, courtly style, gave them all the time they wanted.
"Jack is very special to us," Lindauer said, as some in his group snapped pictures of Bogle and asked for his autograph. "He even dedicated one of his books to us."
What about WorldCom?
Still, some people might have a hard time imagining how the Bogle camp could feel so smug Wednesday, as the rest of Wall Street seemed to be falling apart. The Diehards, as they also call themselves, are sleeping just fine in an era of regular stock blowups.
They stick to low-cost index funds to get broad exposure to the market. Others in the group are "slice-and-dicers" who invest in equal parts of large- and small-caps on both the growth and value sides. The theory is based on the idea that small caps and value stocks outperform the rest of the market over long periods, so you "slice and dice" out some other parts.
By focusing on asset allocation and a diversified portfolio, a WorldCom or an Enron has negligible effect years down the road, they say.
"What long-term investing is all about is that you don't worry about the day-to-day," Lindauer said. "What really matters is the day you buy and the day you sell. You either believe in the market or you don't."