John C. Bogle is one of the most respected leaders in the mutual fund industry and is Chairman of the Vanguard Group of Investment Companies, the second largest mutual fund family in the world. Bogle was the driving force in the creation of the world's first index mutual fund for individual investors in 1976. Bogle notes. "Vanguard is the sole apostle of indexing" among all mutual fund companies. Approximately $85 billion is indexed by Vanguard for individual and institutional investors.

Bogle explains why indexing is such a logically compelling method of investing. "In the world of investing, there are very, very few sure things. But the closest thing to a sure thing is that the Wilshire 5000 index will outperform actively-managed funds by 1.5 to 2 percentage points a year over a sustained period. The logic behind this startling fact is as follows. All mutual fund managers together provide average investment performance (those who do well are offset by those who do not do so well). But in fact, investing in an index fund that matches the average market return can be your best chance of getting an above average return compared to other non-indexing investors.

"There are three reasons for this: superior diversification, lower annual operating expenses and lower taxes. That's why indexers recognize that the advantages of indexing lie, not in impressive short 'sprints' of strong investment performance such as in 1995, 1996 and 1997, but with the steady, cumulative power of broad diversification and lower expenses and taxes."
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