OPINION:
Is ESG investing going to be a problem for retirement plans (“The Green New Deal trojan horse: How ESG investing harms average Americans,” Web, Feb. 27)? Probably, if you get sucked into it.
Vanguard got out of the scam, and here’s why. The late John Bogle founded Vanguard in 1976. He realized that the little investor was being taken to the cleaners by the mutual fund industry and he wanted to rectify the situation, then capitalize on it to become one of the world’s biggest asset managers. He made two fundamental changes to the mutual fund company. Vanguard’s ownership structure is “mutual,” just like Mutual of Omaha. The fund shareholders own the management company, which is Vanguard. This is not the case in the rest of the industry (e.g., Blackrock). Second, Vanguard’s primary product was going to be the index fund, specifically the Index 500. The whole concept of Vanguard was known as “Bogle’s folly,” yet over the next 40 years, that folly ate the rest of the industry.
The idea that the Index 500 should be a superior investment is little understood by most of the population, but the origin is well founded in financial economics. Many economists and John Bogle realized that on average all actively managed funds (think ESGs) will have a return below that of the market (Index 500 passively managed) by the amount of their fees. In Bogle’s time those fees could be 2% or even 3%. For 1% of the population this ought to be self evident. Everyone else can have at the ESG scam.
The basic elements of virology — in fact, biology in general — were dismissed over the past three years. Look at the result. Do you want your retirement savings to end up the same way? Being sick and poor in your old age will be the result.
SAMUEL BURKEEN
Reston, Virginia
