Here Come the Bogleheads ON A SUNNY SUMMER WEEKEND, DOZENS OF STRANGERS GATHER TO HEAR JACK BOGLE PREACH VANGUARD'S INVESTING GOSPEL. DON'T THEY HAVE ANYTHING BETTER TO DO?
(MONEY Magazine) – Irma Fisher-Williams, an elegant 65-year-old from Swarthmore, Pa., is standing in front of 40 people she has never met before--and she is pouring her heart out as if she'd just been handed the microphone at a taping of the Oprah Winfrey Show. Three years ago, says Fisher-Williams, her husband of 38 years split up with her, leaving her life a financial wreck. "I was frozen and unable to move," she says. The memory catches in her throat, and she pauses to crook her index finger and dab at her eyes. "These are tears," she says nervously, and a soft, cushioning laugh rises up to her from the audience. But now, says Fisher-Williams, "I'm taking command of my own ship, thanks to your patience, intelligence and compassion. You've made a difference in my life."
Welcome to one of the most unusual investors' meetings of all time: It's a sunny Friday afternoon in June, and dozens of people have convened at the Fairfield Inn in Exton, Pa. ($69 per night, breakfast included). Half investment club, half support group, this crew has assembled here to swap life stories, rhapsodize about Vanguard mutual funds and give thanks for one another's online companionship. (For the next two days, this area will officially be an irony-free zone.) The members of the group have also come to match faces to Internet screen names like "Cyberdaisy," "Wickenden" and "Bylo Selhi." As for me, I've come to give a brief speech at their opening banquet--and to observe the unusual devotions of this investing sect. Strange as it may seem, the gathering holds lessons for every investor--even those who don't have a nickel at Vanguard.
Officially, the people here are known as Vanguard Diehards, after the forum in the "conversations" area of www.morningstar.com where they hang out online. But they also call themselves Bogleheads. One and all, they revere John Clifton (Jack) Bogle, the founder and retired chairman of the Vanguard Group. On this pilgrimage, they'll meet their hero (whom many of them call "Saint Jack") and reach out and touch their money at Vanguard's headquarters a few miles east of here.
The Diehards are led by Taylor Larimore, 77, a retired official of the Small Business Administration, and Mel Lindauer, 63, the retired head of a graphic-arts company. The idea for this meeting is theirs; in fact, it's the second annual Diehards reunion. Last year, roughly a dozen Diehards convened at Larimore's condominium in Miami to dine with Jack Bogle, who stopped by on his way home from a local investment conference. (Larimore calls his condo, with its 35th-floor panorama of Biscayne Bay, "the house that Jack built," since he couldn't have afforded it without the money he's made in Vanguard funds.)
Unlike most of the Bogleheads, Larimore and Lindauer have met in person several times, and they are fast friends. But everyone else "knows" Larimore and Lindauer too, because the two of them have posted an astonishing 11,000 messages since the Diehards forum was born in March 1998. Larimore devotes an average of six hours a day to answering queries online in the courtly, Southern-gentleman style that is his trademark. Lindauer clocks between one and five hours a day. No question is considered too stupid; Larimore and Lindauer will spend a typical day explaining how investment taxes are calculated, why index funds work, which investing books are worth reading, who should consider inflation-adjusted bonds, and how the two of them survived the market crash that struck in 1973 and 1974.
But it's not just Larimore and Lindauer who are obsessed with this stuff: "bonesly," a 38-year-old Navy computer scientist from Jamestown, R.I., named Bill Jones, has posted 1,300 times. Robert Stowe, a 52-year-old United Church of Christ minister from Montague, Mass., has made nearly 1,800 posts. No wonder the Bogleheads greet each other with squeals of recognition, kisses, protracted handshakes, huge hugs: Although these people have never met in person, they know each other well.
The Diehards--some with their spouses and even their children in tow--have ventured here from Detroit and Dallas-Fort Worth, from Cape Cod, Mass., and Carmel, Calif., from Miami and Toronto. Some have more than $1 million invested at Vanguard, others only a few thousand dollars. Some, like Irma Fisher-Williams, don't even own a computer; she logs onto the Vanguard Diehards forum through the computer at her public library.
And yet, all the Bogleheads are united by their beliefs. To them, the first commandment of investing is to buy a handful of low-cost mutual funds and hold them for decades. Most prefer index funds, the cheapskate portfolios that hold every stock in a market average at an annual cost of as little as 0.12% (or less than a tenth the cost of the typical fund). The Diehards openly admit that they have no idea which stocks, or which fund managers, will beat the market--and they couldn't care less. They don't day-trade stocks or chase hot funds. And their online chatter reflects this no-frills investing approach: calm, patient and simple.
"THIS IS HOME"
The peculiarity of their gathering--can't these people just get a life already?--isn't lost on the Diehards. "It was very hard to explain to people where I was going," says Ann Brennan, a 58-year-old widow from Southbury, Conn. "I told my kids, 'I'm going off to spend the weekend with 50 people I don't know, and I met them on the Internet.'" The Diehards laugh in unison, relieved that someone else had faced the same raised eyebrows. Later, when I ask what their friends and family think of them, most Diehards just say, "They think I'm nuts."
In a society that devotes summer weekends to beach trips, gardening and softball, what inspires dozens of people to travel thousands of miles to spend the weekend talking about mutual funds? It's simple: Being an individual investor is, by definition, a lonely job. Most of the people who say they can help you either want to pick your pocket or don't know what they're talking about. And mutual fund companies have done next to nothing to create an emotional bond among their investors. Of the nearly 700 fund "families" in the U.S., fewer than two dozen can even be bothered to hold annual meetings where shareholders get to mingle with fund managers. What kind of family never holds a reunion?
The Vanguard Diehards forum, on the other hand, has created a brotherhood of individual investors with shared beliefs. Introducing themselves to the group, the Diehards speak of their bond in almost spiritual terms. Says Gail Cox, a flight attendant for American Airlines: "You opened my eyes." Claudia Reeder, a former French professor and Wall Street executive, declares, "This is home." Kathleen Ryan, 43, is a dental hygienist from Carmel, Calif. She says that one of her father's last wishes, as he lay dying of pancreatic cancer, was for her to learn more about investing so he could have peace of mind about her future. "I made it my mission," she says tremulously, "and you've all showed me that you can do it yourself."
One after another, the Diehards thank the group for making them feel less alone and less vulnerable. Michael LeBoeuf, 59, a retired management professor from Paradise Valley, Ariz., cracks up the crowd when he reminisces about his investments from the late 1980s, before he discovered Vanguard: "I helped put two children through Harvard--my broker's children!"
The chatter on most investing websites often gets nasty. Janus Junction, an online forum devoted to the once-hot fund firm, recently turned so combative that Morningstar threatened to shut the site down for what it called a "cooling off period." By contrast, even the most boisterous Bogleheads seem tame. The wildest is Tim Dempsey, 50, who used to run a steel-pipe supplier in upstate New York. He is famous within the group for his eccentric online rants, which poke fun at investors in actively managed "mutt funds." He signs off with such wildly warped Homeric epithets as "Dimmy the bald bibulous hirsute Happpy Camper." (One of his online messages concludes, "I donated my brain to science, and science said, 'No thanks!'") In person, however, Dempsey turns out to be sober, shy and polite, with a full head of hair and an M.B.A. Dempsey tells the group, "I have the joy of meeting you all in person," then sits down again.
Last year, a tragedy drew the Diehards even closer together. That September, an investor named Paul Scott posted a message on another Morningstar forum saying that he had just been diagnosed with colon and lymphatic cancer and had only a 50% chance of surviving for a year. He asked for help in setting up a financial plan for his wife and their two young children.
Over the next few days, dozens of posts poured in from the Diehards, offering detailed advice on everything from asset allocation and Social Security benefits to 401(k) rollovers and probate. They also offered prayers and tips on coping with bed sores. A month later, Paul Scott died. But, his brother reported online, "He used many of the ideas given to him here for setting up a financial plan for his family."
"It was a defining moment for me," says Ann Brennan, who has posted on the site since 1998. "It just boggled my mind, how so many people could be so kind to a complete stranger. That's the main reason I had no hesitation about spending the weekend with these people."
"CALL ME JACK"
The Diehards revere Jack Bogle for his quarter-century-long crusade against bloated fund costs--and because, in an act of spectacular altruism, he conceived Vanguard in 1974 as a kind of investment commune. The firm is owned not by a group of private shareholders who seek to maximize their own profits but by its fund investors themselves, who earn higher returns as Vanguard drives its costs lower. The Bogleheads understand this windfall supremely well.
Friday evening, over seafood Newburg and scalloped potatoes at the aptly named Lion's Share restaurant, I talk with a father and son both named Clarence Stone. Clarence Sr., 64, is a retired biology teacher and public school administrator in Detroit; Clarence Jr., 38, is an attorney for the Michigan state housing authority. "Unlike the other fund guys, Mr. Bogle didn't try to take it all for himself," says Clarence Sr., "and that just makes you want to stand up and shout." Adds Clarence Jr.: "Vanguard still follows the principles set by Mr. Bogle--or else they're the best actors in the world and they're in the wrong profession."
Ken Myers, a 61-year-old optometrist from Grand Rapids, Mich., who is dining with them, agrees: "Mr. Bogle has driven the money changers from the temple."
Saturday morning, the Diehards pile into their Buicks and Oldsmobiles and Toyotas--SUVs and luxury imports are scarce among these understated people--and drive over to the Vanguard office campus, where Bogle will meet them and give a private tour of Vanguard's offices. Larimore and Lindauer have alerted the group that Bogle has requested that they call him "Jack," not "Mr. Bogle." But many of the Diehards just can't bring themselves to do it; they hold the Vanguard founder in such awe that when he shakes their hands, they call him "Mr. Bogle" or "Sir." But Bogle disarms them: Since he logs on to their forum several times a week, he remembers many of their screen names. "Bonesly! I know you!" he exclaims. "Bylo Selhi!" He gives a hug to Kathleen Ryan, the dental hygienist from California; he recognizes her name from the emotional letters of thanks she has sent him over the past two years.
Bogle walks the Diehards through Vanguard's headquarters building, showing them the board room and his cluttered office--where, as dozens of Diehard camera flashes go off, he demonstrates that he still knows how to use a slide rule. Then they step outside, and Bogle poses for photos with the group next to the bronze statue of himself that stands between the headquarters building and the corporate cafeteria.
Once in the cafeteria (or galley, in Vanguard's nautical lingo), Bogle formally addresses his fans. This event, he declares, may turn out to be a landmark in mutual fund history. Bogle explains: "You are demonstrating the power of the World Wide Web to help people band together and make something happen, and the crying need for something more: to be recognized, to be treated as real-life, honest-to-God, down-to-earth human beings with your own hopes and fears."
Bogle fields a variety of investing questions from the group. Then Bob Stowe, the minister from Massachusetts, steps up and presents Bogle with a British regimental brass bugle from World War II. "The bugle," says the inscription, "symbolizes your clarion call to build an industry that protects and serves the average investor." It's signed, "Your Bogleheads, June 9, 2001."
Finally the Diehards adjourn for a picnic at a nearby farm owned by the Kirtland family. Dave Kirtland was an avid Diehard who volunteered the property last December as the site for the retreat. In March, he died of a heart attack, but the Kirtland family insisted on hosting the event anyway, recognizing how important the Bogleheads had been to Dave.
Breaking away from the barbecued chicken, sandwiches and cole slaw, the Diehards line up and Bogle autographs their copies of the three books he has written. Later that afternoon, he and his wife, Eve, say good-bye and walk to their car. It's not lost on the Diehards that Bogle wraps the remnants of his sandwich in plastic and carries it away to snack on later. "Waste not, want not," they whisper to one another. They also note that Bogle drives a sensible Volvo station wagon. (Should I tell them that Vanguard provides Bogle with a chauffeured Lexus LS400 when he travels on business?)
SEEK, AND YE SHALL FIND
As the event winds down, the mood is almost ecstatic. The picnic tent empties out, and the Diehards begin saying good-bye with another round of hugs. Like the worshippers at a revival meeting, the Diehards are leaving with renewed faith in their beliefs. As Bogle tells me later, "By God, in this country a helluva lot of people are searching for something to believe in."
And the Diehards have found something: Reinforced by one another, they're more determined than ever to avoid the sins that most investors commit. Not a single hot stock tip, get-rich-quick scheme or newfangled way to beat the market has been mentioned all weekend; no one here asks what the market did on Friday or tries to predict what it will do next week or next year. By singing in harmony from the same page of the same investing hymnal, the Diehards can drown out that market noise.
As I head home, one image hangs in my memory. On Friday afternoon, when the group first gathers outside the hotel, a Boglehead wants to capture a group photo. "Cheese," she calls out from behind her lens, but not everyone smiles. "The market was down today!" she chirps, and grins spread across a few more faces. "The market was down today, and we don't care!" she yells, and now all the Diehards are smiling. Finally the mood is just right. She snaps her picture.