Warren Buffett's hero, revealed


Warren Buffett has praised the life's work of Jack Bogle on several occasions recently. He's even gone so far as to call Bogle a "hero" in his recent letter to Berkshire Hathaway(NYSE: BRK-A)(NYSE: BRK-B) shareholders. So who is Jack Bogle, and why is Buffett such a big fan?

Who is Jack Bogle?

Bogle is the founder of the Vanguard Group, and his big investment innovation was creating the world's first index fund in 1975. The basic idea was that by charging lower fees than other funds and simply tracking the performance of the index, his investors would realize better returns over time.

Today, Vanguard is one of the most popular and well-respected fund companies, with a wide variety of index funds to choose from, in both mutual fund and ETF forms.

One excellent example that I've discussed before is the Vanguard S&P 500 ETF(NYSEMKT: VOO), which tracks the performance of the 500 stocks in the S&P 500 index and charges a rock-bottom 0.04% expense ratio -- 96% less than that of funds with similar holdings.

What Buffett has said about him

In his most recent letter to Berkshire's shareholders, Buffett said, "If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle."

He says that because Bogle's mission has been to get investors to embrace the idea of low-cost index-fund investing, as opposed to actively managed mutual funds or hedge funds.

"In his early years, Jack was frequently mocked by the investment-management industry," Buffett wrote. "Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me."

22 PHOTOS
What famous business leaders looked like in high school
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What famous business leaders looked like in high school
Mark Cuban

Mark Cuban may have ditched his wild 'do, but otherwise, he hasn't aged a day since he took his senior portrait in 1976!

(Classmates.com/Reuters)

Barbara Corcoran

"Shark Tank" star and real estate magnate Barbara Corcoran was a cheerleader in her heyday -- and she hasn't lost any of pep since 1969.

(Classmates.com/Getty)

Barbara Corcoran

We weren't kidding!

(Classmates.com/Getty)

Barbara Corcoran
(Classmates.com/Getty)
Warren Buffett

The business magnate was quite the dapper young man in 1947.

(Classmates.com/Getty)

Steve Wozniak

These days, the Apple co-founder opts for more casual looks than his tux in his 1968 senior portrait.

(Classmates.com/Getty)

Steve Jobs

Wozniak's business partner, Steve Jobs, rocked the man-bob in 1972.

(Classmates.com/Reuters)

Ralph Lauren

Ralph Lauren had the same penchant for plaid suits in 1957!

(Classmates.com/Reuters)

Paul Allen

Microsoft co-founder Paul Allen looked totally current with his Warby Parker-esque frames in 1969.

(Classmates.com/Getty)

Bill Gates

Plaid shirt? Check. V-neck sweater? Double-check. Bill Gates' style sure hasn't changed since the 8th grade in 1969.

(Classmates.com/AP)

Paul Allen and Bill Gates

Adorable! Allen and Gates have taken their friendship from the computer lab to the basketball court.

(Classmates.com/Getty)

Oprah Winfrey

Before Oprah was one of the biggest TV personalities and businesswomen in the world, she was voted "Most Popular" in her 1971 high school yearbook.

(Classmates.com/AP)

Oprah Winfrey

Love those peace sign earrings!

(Classmates.com/PA)

Michael Bloomberg

No doubt 1960 Debate Club helped prepare Michael Bloomberg for a future in business and politics!

(Classmates.com/AP)

Michael Bloomberg

Just take a look at those determined eyes ...

(Classmates.com/AP)

Marissa Mayer

These days, Yahoo CEO Marissa Mayer speaks sans notecards. Here she is at her 1993 homecoming dance.

(Classmates.com/Getty)

Marissa Mayer

The only thing that's changed since this 1993 debate is Mayer's hair -- the CEO went from a wavy brunette to a straight blonde bob!

(Classmates.com/Getty)

Donald Trump

Trump's soccer days are behind him -- but his competitive spirit lives on.

(Classmates.com/Reuters)

Donald Trump

He even had a bit of the same combover in 1964!

(Classmates.com/AP)

Marcus Lemonis

"The Profit" star Marcus Lemonis, chairman and CEO of Camping World and Good Sam Enterprises, rocked a 'fro in 1988.

(Classmates.com/AP)

Abi Heller

We wonder what Classmates.com and Intelius CEO Abi Heller's former schoolmates think of his biz!

(Classmates.com)

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Why is Buffett such a fan of low-cost index funds?

Since Buffett is one of the most respected stock pickers of all time, it may surprise you that he's such a big fan of index fund investing. In fact, he's even said that after he dies, he wants his wife to invest her inheritance in a low-cost S&P 500 index fund, like Vanguard's, as opposed to Berkshire Hathaway stock. And he's said that low-cost index funds are the best investment most people can make.

To be clear, Buffett is not against stock picking for people who have the time, desire, and knowledge to do it right. He is, however, against investing in high-cost funds that, overall, don't do any better than the market.

About 10 years ago, Buffett made a $500,000 bet that the Vanguard S&P 500 index fund would beat a portfolio of five hedge funds over a 10-year period. His logic is that while some funds beat the market and some underperform it, as a whole, all of the funds' underlying investments would, by definition, simply match the market's performance. So, since actively managed funds charge much higher fees than passive index funds, they're at a big disadvantage over long periods of time. You can read more about Buffett's bet and why he loves index funds, but in a nutshell, let's just say that Buffett won the wager by a wide margin.

Simply put, Buffett thinks American business will perform well over the long run, and an index fund will allow investors to take advantage of it, while keeping their profits in their own pocket and not in the pocket of some investment manager. As Buffett said, "When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsize profits, not the clients."

19 PHOTOS
Warren Buffett through the years
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Warren Buffett through the years
Investor Warren Buffett answers reporters' questions during a press conference to announce that Walt Disney will buy Capital Cities/ABC July 31.
Billionaire investor Warren Buffett of Omaha makes a rare public appearance during an autograph session outside Borsheim's Jewelry Store in Omaha, May 4. Buffett was signing autographs for shareholders in his company, Berkshire Hathaway, which is having its annual meeting May 5.
Billionaire businessman Warren Buffett sits with his wife Susan (R) and daughter Susie, prior to the annual Berkshire Hathaway shareholders meeting in Omaha, May 5. This marks a rare public appearance for the reclusive Buffett.
Arnold Schwarzenegger, Republican candidate for governor of California in the October 7, 2003 recall election listens as world famous investor, Warren Buffett (L), one of his financial advisors, speaks to reporters after a meeting of Schwarzenegger's Economic Recovery Council in Los Angeles August 20, 2003. REUTERS/Fred Prouser FSP
Billionaire financier Warren Buffett looks on after a meeting with U.S. Senator Arlen Specter (R-PA) and chairman of the Senate Judiciary Committee, at the Hart Senate Office Building on Capitol Hill in Washington June 29, 2005. Specter is the co-author of a bill seeking to create a $140 billion asbestos compensation fund. REUTERS/Shaun Heasley SH/TC
Billionaire Warren Buffett arrives at the Sun Valley Resort in Sun Valley, Idaho July 10, 2007. The world's biggest media chiefs gather this week at the 25th annual Allen & Co. conference at the resort starting today. REUTERS/Rick Wilking (UNITED STATES)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at a Senate Finance Committee hearing about "Federal Estate Tax: Uncertainty in Planning Under the Current Law" on Capitol Hill in Washington, November 14, 2007. Billionaire Buffett warned of widening U.S. income disparity and endorsed the estate tax as a check on wealth accumulation, while two senior lawmakers said they want the tax repealed. REUTERS/Jason Reed (UNITED STATES)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett greets shareholders during the Berkshire Hathaway Annual Shareholders meeting in Omaha, Nebraska May 3, 2008. REUTERS/Carlos Barria (UNITED STATES)
Billionaire investor Warren Buffett laughs as he appears with Microsoft Corporation founder Bill Gates for a town hall style meeting with business students broadcast by financial television network CNBC at Columbia University in New York, November 12, 2009. REUTERS/Mike Segar (UNITED STATES BUSINESS)
Berkshire Hathaway Chairman Warren Buffett kisses his ukulele at the Berkshire Hathaway annual meeting in Omaha May 1, 2010. Buffett played "I've Been Working on the Railroad." REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS TRANSPORT)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett (L) and Microsoft founder Bill Gates gesture at the national launch ceremony for the BYD M6 vehicle in Beijing September 29, 2010. Chinese battery and car maker BYD, backed by Buffett, launched its first premium multi-purpose vehicle (MPV) in Beijing on Wednesday to tap rising demand in the world's biggest auto market. REUTERS/Jason Lee (CHINA - Tags: TRANSPORT BUSINESS)
Billionaire Warren Buffett, wearing a traditional tikka or a red mark on the forehead, speaks during a news conference in Bangalore March 22, 2011. Buffett on Tuesday said he is looking to invest in large countries like India, China and Brazil, but added that restrictions on foreign ownership in India's insurance industry could be a deterrent. Buffett also said and the U.S. economy was improving and that the devastating earthquake in Japan would not hurt global growth. REUTERS/Stringer (INDIA - Tags: BUSINESS)
Berkshire Hathaway Chairman Warren Buffett tours the floor of the New York Stock Exchange September 30, 2011. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS)
Berkshire Hathaway chairman Warren Buffett holds his hand over his heart during the singing of the national anthem, at the start of a 5km race sponsored by Brooks Sports Inc., a Berkshire-owned company, in Omaha May 5, 2013, a day after the company's annual meeting. Buffett at the meeting on May 4, 2013 gave the most extensive comments to date about the future of Berkshire Hathaway Inc after he is gone, saying he still expects the conglomerate to be a partner of choice for distressed companies. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS SPORT ATHLETICS)
Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York October 22, 2013. REUTERS/Carlo Allegri (UNITED STATES - Tags: BUSINESS)
Roberta Buffett Elliott sits with her brother Warren Buffett as they attend an announcement ceremony at Northwestern University in Evanston, Illinois, January 28, 2015. The sister of financial investor Warren Buffett has given Northwestern University more than $100 million to create the Roberta Buffett Institute for Global Studies, the largest single gift in the school's 164-year history, the university said on Wednesday. REUTERS/Jim Young (UNITED STATES - Tags: BUSINESS EDUCATION SOCIETY)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at the Fortune's Most Powerful Women's Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque/File Photo
Warren Buffett, chairman and CEO of Berkshire Hathaway, smiles before speaking with Bill Gates (not pictured), at Columbia University in New York, U.S., January 27, 2017. REUTERS/Shannon Stapleton
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The Foolish bottom line

To be fair, in addition to Bogle, one could also say that Buffett's father or his mentor, Benjamin Graham, were also Buffett's heroes.

However, the point is that Buffett has always been concerned with everyday investors who are being taken advantage of. In fact, that's why he finally decided to create Berkshire's Class B stock -- to prevent asset managers from buying A shares and selling fractions of them at big markups.

And as far as Buffett is concerned, nobody has done more for the average American investor than Jack Bogle.

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Matthew Frankel owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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