http://sensibleinvesting.tv -- the independent voice of passive investing A four-part series exploring the foundations of passive investing and the men who have brought it to global significance. Part one investigates one of the key fundamentals of passive investing; recognising the difference between investing and speculating, and short- and long-term strategies. Including studies of Benjamin Graham, Warren Buffett and the 'grandfather of passive investing', Vanguard founder John Bogle. With comment from Tim Hale and Jeffrey Molitor. The first person to make a clear distinction between active and passive investors was the American economist and financial analyst Benjamin Graham. Born in London in 1894, his parents moved to the States when he was a baby. He studied and taught at Columbia University and co-founded a highly successful investment company. His books have become investing classics. Graham described active investors as speculators. They need to be interested in studying companies and markets - and have the time time to do it. Ideally they'll have specialist knowledge as well. Passive investors, on the other hand, are essentially defensive, and in it for the long term. Graham recommended that passive investors have a diversified portfolio, split between shares and bonds, which they occasionally rebalance. One of Graham's students was Warren Buffett, who once described him as his "idol". LIke his mentor, Bufett is of course a speculator. But he, too, recommends passive investing for the majority of investors. "Most investors," he once said, "will find that the best way to own shares is through an index fund that charges minimal fees. Those following this path are sure to beat the net results of the great majority of investment professionals." But, without doubt, the most important figure by far in the development of passive investing is this man, John Bogle. In a thesis he wrote as a student at Princeton in 1951, Bogle highlighted the conflict between a stockbroker's loyalty to himself and his duty to his customer. Two decades later he founded a company on the Biblical principle that you cannot serve two masters. Bogle realised that most people are investors rather than speculators. By investing in low-cost index funds and settling for the average market return, they almost invariably end up better off than those who pay an active fund manager to speculate on their behalf. Indeed they have. American investors have poured nearly two and half trillion dollars into index funds, and Vanguard is now the biggest investment company in the world. A monumental achievement for the man who championed investing over speculating. For more videos like this one, visit http://sensibleinvesting.tv
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