Jack Bogle: Vanguard's $2.2 trillion man

December 6, 2012: 5:00 AM ET

There are many steps to managing your money wisely. A good way to start: a visit with the father of indexing, Vanguard's Jack Bogle.

By Andy Serwer, managing editor

Jack Bogle built Vanguard into a $2.2 trillion behemoth by selling low-cost mutual funds. Invite him to lunch at a fancy New York City restaurant, and he orders a hamburger.

Jack Bogle built Vanguard into a $2.2 trillion behemoth by selling low-cost mutual funds. Invite him to lunch at a fancy New York City restaurant, and he orders a hamburger.

FORTUNE -- What if your life's work could be measured by one simple number, and what if that number was 2.2 trillion? As in dollars. I walked into an upscale Midtown Manhattan restaurant looking for such a man. He was easy to spot. Not because he was oozing wealth from every pore and surrounded by an entourage -- but because he wasn't. Over there in the corner, he's the older fellow in a plain suit and a boring tie who looks a tad uncomfortable in a place that serves up Spanish Octopus a la Plancha, with sofrito, cocoa beans, marble potatoes, and serrano ham. (He would have a hamburger -- hold the pickled ramp dressing.)

John C. "Jack" Bogle, 83, didn't build Vanguard into one of the biggest companies in the world by sitting around eating fancy Spanish octopus. He's all about keeping things simple. And he's a fighter, a cantankerous iconoclast, and more than a bit of a zealot. He officially retired in '99 and hasn't been in the best of health for a while, but he still believes adamantly that conservative, low-cost index funds are the best way -- nay, the only way -- to invest. And now so, too, do millions of Vanguard customers around the world. They've invested $2.2 trillion in the house that Jack built from scratch 37 years ago.

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This is the third time I've written about Vanguard in my career at Fortune. The first was in 1991, when the company had around $80 billion under management; then again in 2001, when it had $540 billion; and now, after it has quadrupled in size over the past 11 years. (I know, I'm a year behind schedule.) In that time Vanguard has quietly become one of the greatest business success stories of our time. And over the decades I've come to realize a thing or two about the company -- namely, that it is truly unique and seemingly inexorable. Vanguard has grown in every kind of market as enlightened investors beat a path to its door.

In case you don't know, here's how Vanguard works: The company sells low-cost mutual funds (primarily index funds) and ETFs directly to investors, thereby bypassing brokers and their markups and marketing fees. The most important distinction, though, is that Vanguard is able to operate with the lowest margins in the business because, like a mutual insurance company, it is owned by its customers. (In Vanguard's case: investors in its funds.) Of course Vanguard pays its managers and executives. But instead of paying out profits to an owner or shareholders, the company's gains are instead realized by lowering costs. Got it? Meaning Bogle has built Vanguard into a global behemoth and yet not become fabulously wealthy. Which is a big reason no one else has seen fit to create another Vanguard. To do so, you'd have to be a true believer. And not many people are.

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Bogle has met me to talk about his new book, The Clash of the Cultures: Investment vs. Speculation, in which he eviscerates most investing practices and much of what happens on Wall Street. "I don't pay attention to what others say. I say what I think," he tells me, while warily eyeing my Fall Roasted Root Vegetable Salad with petite lettuce, goat cheese, duck confit, figs, apple, and carrot vinaigrette. "I don't know how to do otherwise." (I think he wants to say something about my salad, but Jack does have some limits.)

The fundamental principles that Jack has always emphasized, and still does -- getting diversified market exposure, not giving your profits away in fees -- are the building blocks of success for the average investor. There is a lot of sophisticated advice in this year's Investor's Guide. And all of it -- stock picks from elite managers, market insight from seasoned pros, tips on buying real estate in your IRA -- can help give you a boost. But that doesn't mean we should ever lose sight of the basic, commonsense approach that works for Vanguard.

As I help Jack hail a cab to take him to Penn Station (no Town Cars or limos for him) to catch his train back to Philadelphia, I realize that when you boil it down, his success is a result of the power of independent thinking. Jack has consistently gone his own way and made up his own mind. It's an important point to remember when considering how to invest. Very few of us have the same ability as Jack. We need help and advice. But you should always ask yourself, What do I really think about, say, Apple's stock (AAPL) or a particular bond fund? Does investing my money there make sense to me? You may not build quite what Jack has, but thinking a bit more like him is sure to help you succeed.

This story is from the December 24, 2012 issue of Fortune.

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