On the Passing of Jonathan Clements

I suspect that all who read these notes have been approached at some time or other – and likely multiple times – by persons or organizations wishing to serve as their financial advisors.  I have invariably responded to these inquires over the years with the reply, “I already have the two best financial advisors one could ask for – John Bogle and Warren Buffett.”

We’ll get to how Mr. Buffett figures into our personal financial equation at the end of this note; the late Mr. Bogle, less well known to the American public, founded Vanguard, was perhaps the first advocate of index investing and certainly the most influential:  the premise that if one believed that American Business, taken as a whole, would succeed over the long run, the results of low-cost index funds that tracked the financial markets’ performance would over time exceed the performance of virtually all managers of actively traded mutual funds and financial advisors.  (Vanguard’s S&P 500 Index Fund remains the organization’s flagship fund.) 

Messrs. Bogle and Buffett weren’t our original financial advisors.  Around 1990, feeling out of our depth and aware that we needed to begin investing, we employed a financial advisor recommended to us by friends.  However, by 1995, I had decided that although our advisor certainly wished us to prosper, he was necessarily seeking to serve two masters – his financial services organization [which offered actively-managed mutual funds with front-end loads (sales charges)] and us.  [Many of us will recall the Lord’s observation that no one can serve two masters (Matt 6:24), although He was admittedly speaking in a somewhat different context. 😉]  I decided to take the time to learn the barebones of the investment field so I could better assess our advisor’s performance.  Once I started concentrating on it, the overwhelmingly most practical and understandable advice I received in those formative years was provided by Wall Street Journal Personal Finance Columnist Jonathan Clements.  For years I kept a notebook filled with Mr. Clements’ late 1990s “Getting Going” columns.  It was through his reporting that I became acquainted with the efforts and theories of Mr. Bogle.  In pieces that ran during the years I was most actively developing my investment notions, Mr. Clements cited statistics demonstrating that Mr. Bogle’s theories were correct:  (1) active fund managers’ and active individual investors’ costs were consistently significantly higher than index funds while at the same time they consistently trailed the index funds’ performance; and (2) that if one was willing to devote the effort, one could effectively “do it yourself” through a big fund house like Vanguard (Vanguard was not the only option), which provided excellent service, indexing acumen, and a wide variety of no-load, low-operating cost index funds.  Mr. Clements also noted data that refuted active fund managers’ claim that their efforts better mitigated losses in “down markets” than index funds.  He preached (this, again, was the 1990s) that medical statistics were beginning to indicate that one should plan on living longer than retirement analysts were then projecting and that one should spend, if not sparingly, at least not profligately – and invest the savings.

I was hooked.  Here was a simple approach, apparently statistically sound, that an untutored guy like me could use to seek financial security over the long run while keeping his costs down:  embracing the notion that one would never “win big” in the market by picking an individual stock like Amazon but, if one believed in the long term success of American Business, facilitate reasonable financial growth while hopefully limiting the chances of “losing big” by spreading one’s risk over hundreds or thousands of stocks.  It is an approach that we have generally maintained over the last three decades – through the “Dot.Com Bust,” the Great Recession, and the brief but precipitous COVID crash — while in the initial years gently weaning ourselves from our advisor and the actively-managed funds in which we had been invested.

Sadly, Mr. Clements himself didn’t get the long life he advised his readers to plan for.  He died of cancer on September 21^st at the age of 62.  (When reading his columns, I intuitively sensed he was a young man, but didn’t realize that he was then in his early 30s, a full decade younger than we were.)  Because of the impact he had on our financial life, I felt a true pang at his passing, and consider it appropriate to mark it in these pages. 

So where does Mr. Buffett come in?  He was a close friend of Mr. Bogle’s and is, of course, the world’s most accomplished and acclaimed investor – whom I am sure Mr. Bogle would have acknowledged was the exception to Mr. Bogle’s rule.  (If there was an unstated core to Messrs. Bogle’s and Clements’ advice, it was:  “There is only one Warren Buffett, and you ain’t him.”)  Even so, in his 2014 letter to his Berkshire Hathaway shareholders, Mr. Buffett, given his record and renown, provided perhaps the best endorsement for the approach espoused by Messrs. Bogle and Clements, I suspect then sending shockwaves through the financial advising community:

“If wise, [most investors] will conclude that they do not know enough about specific businesses to predict their future earning power.  I have good news for these non-professionals.  … [Their] goal … should not be to pick winners – neither [the individual investor] nor his helpers can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well.  A low-cost S&P 500 index fund will achieve this goal. …  [B]oth individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. … So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.  My money, I should add, is where my mouth is:  What I advise here is essentially identical to certain instructions I’ve laid out in my will. … My advice to the trustee could not be more simple:  Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.  (I suggest Vanguard’s.)  I believe that the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”

Many of those who follow these pages are either in or close to retirement, and their investment approaches are probably already pretty well cast.  However, for those at the beginning or middle of their careers, I recommend buying one of Mr. Clements’ books and absorbing his insights.  (Since I read Mr. Clements “real time,” I never bought any of his books; in a recent quick internet search, I did note one title, The Best of Jonathan Clements, that I might first consider if intending to buy one of his volumes.)  Even if one is more comfortable maintaining a relationship with a financial advisor, Mr. Clements’ notions might offer you another perspective that will better enable you to assess your financial advisor’s approach and performance.

In reflecting on Mr. Clements’ passing, I have come to realize that my laconic response to financial advisors’ inquiries over the years has been grossly derelict.  When I am next approached by a financial organization or advisor seeking to provide me with investment advice (“when,” not “if,” I am approached – such organizations and advisors are ubiquitous), I will and forever after amend my response to indicate that I already have the best advisors that anyone could ask for:  John Bogle, Warren Buffett … and Jonathan Clements.