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His disciples call themselves “Bogleheads” and cling to his “Pillars of Wisdom” as though they were the Ten Commandments.  The media adore him and treat his words like gospel.  John Bogle is an icon – a God-like figure to thousands of investors.

He is also the founder of the Vanguard Group, and he launched the first index mutual fund in 1975.  Since then, he has dedicated his career to encouraging investors to “own the market” by investing in index funds.  He stresses the importance of asset allocation and low fees within a passive, buy-and-hold investment approach.  No doubt Bogle is sincere and has noble ambitions, but his unwavering faith in the markets is misplaced.

Today, he has taken up what many are calling his final crusade.  In February of last year, he appeared before a Congressional committee in Washington, D.C., to tell lawmakers about his vision for “an independent Federal Retirement Board to oversee both the employer-sponsors and the plan providers, assuring that the interests of plan participants are the first priority.”

“Our Federal Retirement Board should not only foster the use of broad-market index funds in the new defined contribution system but approve only private providers who offer their index funds at minimum costs,” he told the committee. 

Bogle wants Congress to overhaul our retirement system by “limiting investment choices” for workers’ retirement plans and providing “more understandable options.”  Under his plan, “only private providers” (such as Vanguard) would be “approved” investment vehicles.

If you’re not sure which investments are right for you, don’t worry; Bogle knows.  If he has his way, a Federal Retirement Board offering only low-cost index funds will impose strict limits your investment options.  Doesn’t Bogle realize that shareholders in his index funds saw their retirement plans decimated in 2008?  Do you really want him guiding your investment decisions?  Nothing personal, Mr. Bogle, but buy-and-hold has failed. It doesn’t work.

On June 19, 2009 IndexUniverse.com asked Bogle, “Do you believe that there are environments that are more favorable to active management than passive management and index investing?”  His response was clear.  “There is no way that active managers can possibly have an advantage no matter what the circumstances are.  It is just statistically, mathematically, tautologically impossible.”

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