The Relentless Rules of Humble Arithmetic

Posted: 2 Jan 2006


The message of this article is simple, obvious, and almost invariably ignored by the investment community: Gross return in the financial markets minus the costs of financial intermediation equals the net return actually delivered to investors. This equation helps explain the failure of the mutual fund industry to deliver to shareholders their fair share of market returns, and it explains the enormous shortfall in the assets of the private and public retirement systems relative to their pension liabilities. It is high time for investment professionals to consider not only the comparative advantage of outmanaging their peers but also the community advantage that would result from a major reduction in the costs of our investment system.

Keywords: Investment Industry, Future Directions and Sources of Change, Corporate Governance

Suggested Citation

Bogle, John C., The Relentless Rules of Humble Arithmetic. Financial Analysts Journal, Vol. 61, No. 6, pp. 22-35, November/December 2005, Available at SSRN:

John C. Bogle (Contact Author)

The Vanguard Group ( email )

100 Vanguard Blvd.
Mailstop V-22
Malvern, PA 19355
United States
610-669-6323 (Phone)


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