John Bogle follows his own advice, the “Bogle rule.” Background photo: iStockphoto; Bogle photo courtesy Vanguard

John C. Bogle, creator of the first index mutual fund and founder of the Vanguard Mutual Fund Group, was named in 1999 by Fortune magazine as one of its four “investment giants” of the 20th century.

His latest book, Enough, attacks what he sees as abuses in the very industry he helped pioneer. Bogle argues that the increasingly costly and complex mutual fund industry has come to reward itself more than the investors it serves.

Bogle, 80, now president of Vanguard’s Bogle Financial Markets Research Center, continues to vigorously express his views in interviews, articles and on the Bogle Blog.

In a conversation with AARP Bulletin Today, the voluble investment veteran addressed federal efforts to fix problems exposed by last year’s meltdown in the securities and real estate markets. He also offered advice—including his own “Bogle rule”—on how older people can shape their personal investment decisions, and he discussed how policymakers could make America’s fiscal future more secure.

Q. What do you think of President Obama’s proposal, now before Congress, to overhaul regulation of the financial industry and create a consumer protection agency for investors?

A. I think it’s a good plan. I think the additional authority for the Federal Reserve over giant financial institutions that don’t happen to be banks is absolutely essential. We do need a consumer protection agency.

My own view is that all money managers should be subject to a federal standard of fiduciary duty [a requirement that they act at all times for the sole benefit of investors]. Conflicts of interest are not OK, period. So this standard would mean very large changes for the mutual fund industry.

Q. What kind of change?

A. You know, the Investment Company Act of 1940, our basic governing standard for the mutual fund industry, says mutual funds should be organized, operated and managed in the interest of shareholders rather than in the interest of managers and distributors. That just isn’t happening. So we need to put some meat on the bones of the act, and I would have it apply to all money managers, whether they’re mutual funds, pension or institutional money managers, and of course, to financial advisers as well.

Q. Is there anything that individual investors can do to get managers and corporate heads to put their stockholders first instead of themselves?

A. If the boards of directors got enough letters from investors, they would wake up. Investors are already voting with their feet. They’re going to lower-cost funds. But every day that they wait costs investors money and enriches managers. The managers get paid before the investors do. The investor is at the bottom of the food chain.

Q. I think a lot of investors, particularly older investors, are a little scared to put their money back into mutual funds because of the stock market’s steep fall. Do you think they’re right to be worried?

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