How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever
I’ve seldom found a journalist who really understands our crazy industry and is willing to write about it with integrity and depth. Virtually every article or book on investing for mainstream consumption is sensationalist and Wall Street-centric. They appeal to lazy minds more comfortable being part of a large like-minded herd.
Misery loves company? Nah, most are not miserable (until stock prices collapse). They’re just happy to be led along by those they perceive as experts doing what everyone else seems to be doing. More like blissfully ignorant. Lots of that going around lately.
So it was refreshing to discover Robin Wigglesworth’s new book Trillions. Wigglesworth is the global finance correspondent for the Financial Times, and Trillions offers a very valuable—I’d say critical— update on the history of indexing and asset class investing (the “turbocharged” variation of indexing we offer at Equius).
I am always more impressed when very prominent Wall Street-connected practitioners like Charley Ellis (How to Win the Loser’s Game) or Peter Bernstein (Capital Ideas: The Improbable Origins of Modern Wall Street) break from the herd and tell the truth about investing in the capital markets. This is a level of integrity and courage that is in very short supply in our industry.
It’s even more impressive to me when a non-industry intellectual like Bill Bernstein (no relation to Peter, and a practicing neurologist) takes the time to study, understand, adopt, and then write so eloquently about the foundational principles of an asset class approach (The Intelligent Asset Allocator and other great books).
I believe Trillions is a must-read for anyone contemplating taking a “passive” approach to their long-term investing. Unlike Bill Bernstein’s book and others of the kind, it doesn’t get into the sometimes mind-numbing details of an asset class strategy. Like Peter Bernstein’s Capital Ideas, Wigglesworth’s book concentrates on the history and the evolution of modern investing and the people involved in its ascendency.
This perspective is the critical first step that lends credibility and motivation to learning and understanding the details of a successful asset class strategy. Investors who skip this step risk falling off the wagon and becoming, once again, victims of speculation and short-term thinking. In the absence of an honest intellectual foundation—built on evidence and history—any investment strategy is just one of thousands propped up by the flimsy, rotting supports of short-term returns.
The courage of a small set of industry mavericks and the theories of exceptional academics over 30 years ago spawned a new breed of successful practitioners who risked their financial capital and reputations to bring the truth to millions of investors around the globe. These are the heroes of Wigglesworth’s book, and he writes about them in a very personal and engaging way.
At the top of the pyramid stands several brilliant entrepreneurs such as Rex Sinquefield, David Booth, and John “Mac” McQuown at Dimensional and Jack Bogle at Vanguard.
But the real heroes of the story are people like Dan Wheeler and his team of regional directors who convinced Dimensional to move beyond the large institutional business and offer the benefits of asset class investing to a far wider group of investors— those most often exploited by the old-school types.
They succeeded in helping these folks (well beyond Dimensional’s expectations, by the way) by working through independent, fiduciary advisors like Equius Partners. We broke from the herd early on, followed all the evidence, and have never compromised our principles along the way.
Maybe those of us on the front lines will be the subject of a book someday. Robin?
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