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Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor Hardcover

ISBN-13: 978-0471295433 ISBN-10: 0471295434 Edition: 1st

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Product Details

  • Hardcover: 496 pages
  • Publisher: John C. Wiley & Sons; 1st edition (March 18, 1999)
  • Language: English
  • ISBN-10: 0471295434
  • ISBN-13: 978-0471295433
  • Product Dimensions: 9.3 x 6.4 x 1.1 inches
  • Shipping Weight: 1.9 pounds
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (81 customer reviews)
  • Amazon Best Sellers Rank: #135,310 in Books (See Top 100 in Books)

Editorial Reviews Review

Invoking the words and spirit of Thomas Paine, investor-turned-historian John Bogle concedes that his ideas for revamping the mutual-fund industry are perhaps "not yet sufficiently fashionable to procure them general favor." But despite likening the "ills and injustices suffered by mutual fund investors" to those "our forebears suffered under English tyranny," Bogle--founder of the Vanguard Group--makes a strong case for index funds with this exhaustive study of investing.

He begins with primer-like essays on investment strategy, championing mutual funds for their inherent investment value, and then grinding each point home with a bevy of graphs, charts, entertaining anecdotes, and common sense. He repeatedly stresses time as a basic tenet for investing, listing these simple rules: "Time is your friend"; "Impulse is your enemy"; "Stay the course." And then he proceeds to blast fund managers, who have become marketers rather than managers.

The trade-off between the profits that accrue to fund shareholders and the profits that accrue to the fund management companies seems subject to no effective independent watchdog or balance wheel, despite the fact that the shareholders actually own the mutual funds.
It's an interesting concept: smart, reasoned investors can all but secure their financial future, but the system itself, run unchecked by fund managers, needs a major overhaul. And considering the amount of reasoned, historically based support he includes, readers will have a hard time finding fault with the sometimes controversial Bogle. Equal parts instructional and crusade, Common Sense on Mutual Funds deserves the attention it's likely to receive. Recommended. --Rob McDonald

From Publishers Weekly

Not that many years ago, an average bookstore might have had two or three books on mutual funds filed away in the business section. Today, as the number of Americans who invest in mutual funds continues to grow, such books take up several aisles in a section of their own. There are guides for data junkies and mathphobes, books that tell how to make a killing and books that tell how to avoid the coming disaster. A few classics stand above the clutter. Bogle on Mutual Funds is one of them. Now the same author has added another. While the first book aimed at educating beginners, the new one seeks to persuade experienced investors to discard received wisdom that isn't so wise after all. While no 450-page work on mutual funds with lots of charts can be considered fun summer reading, the book is always informative and the writing never worse than painless and sometimes quite lively. Bogle speaks with a rare authority. On one hand, he is the founder of Vanguard mutual funds, the second-largest mutual fund company in the world. So he knows the business from the ground up. On the other hand, Vanguard has always been famous for running the lowest-cost mutual funds, funds that eschew loads, engage in sensible strategies and return all profit to the investors. So Bogle is also a leading consumer advocate. That rare combination, mixed with years of serious research and a dash of style, makes Bogle an unparalleled guide to the world of mutual funds. Money Book Club alternate.
Copyright 1999 Reed Business Information, Inc.

More About the Author

John C. Bogle (Bryn Mawr, PA) is Founder of The Vanguard Group, Inc., and President of the Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as Chairman and Chief Executive Officer until 1996 and Senior Chairman until 2000. He had been associated with a predecessor company since 1951, immediately following his graduation from Princeton University, magna cum laude in Economics. The Vanguard Group is one of the two largest mutual fund organizations in the world. Headquartered in Malvern, Pennsylvania, Vanguard comprises more than 100 mutual funds with current assets totaling about $742 billion. Vanguard 500 Index Fund, the largest fund in the group, was founded by Mr. Bogle in 1975. In 2004, TIME magazine named Mr. Bogle as one of the world's 100 most powerful and influential people, and Institutional Investor presented him with its Lifetime Achievement Award. In 1999, FORTUNE designated him as one of the investment industry's four "Giants of the 20th Century." In the same year, he received the Woodrow Wilson Award from Princeton University for distinguished achievement in the nation's service."

Customer Reviews

Both books are must reads.
Troy Cook
Even if you think you understand the market to a large degree, make sure to read it too, for you will learn a thing or two.
David Keirsey
500 and Wilshire 5000 index funds will be a terrific solution.
Donald Mitchell

Most Helpful Customer Reviews

129 of 136 people found the following review helpful By Justus Pendleton on June 5, 2001
Format: Paperback
I didn't find the book nearly as repetitive as some other reviewers did. Yes, Bogle continues to point out that cost matters and that you can't predict the winners in advance. But he HAS to keep repeating his point. If he didn't, opponents of indexing would (and do) say, "But cost doesn't matter as much in emerging markets because they are less efficient." So Bogle is forced to remake his point over and over and over again to show the superiority of indexing in every asset class.
Bogle has a few hidden gems in here that I haven't come across in my other reading. For instance, he points out that owning S&P 500 companies DOES give you international exposure since almost 25% of the those companies' revenues come from outside the United States. He also makes some very good points about the effectiveness of slice-and-dice efficient frontier asset allocation methodologies and how they tend to reflect the past more than the future.
On the other hand, I feel that his dismissal of international investing shows an underlying bias that isn't well founded. He points out that the EAFE failed to perform as well at the S&P 500 over the past 10 years. Yet that is a period he admits is extraordinarily favorable to US-based large-cap firms. Later he does admit that when measured from its inception in the 1960s the EAFE has almost the same returns as the S&P 500 but then dismisses the usefulness of this. Even though it provided the same returns if it has a low correlation to the S&P 500 it can be a good component in a portfolio. It is almost like he doesn't understand the entire point of risk-adjusted returns.
Another complaint is that I don't think the book is very suitable as an introduction for novices.
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36 of 37 people found the following review helpful By Jeffery Steele on December 9, 2003
Format: Paperback
Despite the prosaic title of the book, and the conservative investment philosophy of its author, "Common Sense on Mutual Funds" has a revolutionary aim. Vanguard founder John Bogle believes the mutual fund industry must make major changes in order to faithfully serve its customers and, by explaining his investment philosophy, he shows both why radical change is necessary for the industry and helps to precipitate it by encouraging individual investors to follow his investment advice.
Bogle thinks too many mutual fund investors are being scammed by professional managers of funds who reward their companies instead of their investors' portfolios. High fees, outrageous expenses, rapid turnover, unneeded "products", marketing costs -- all are used by countless mutual fund companies to inflate their bottom lines to the detriment of their investors' needs.
Several reviewers here have noted that Bogle repeats several key points throughout the book, especially the importance of keeping costs as low as possible. This is true. But important lessons need to be stressed, especially with so much evidence that the average investor still doesn't understand them. Perhaps Bogle feels it's a lesson that can't be said enough. After all, why would you pay more for less, unless you simply don't understand what is being done to you?
This book was somewhat prescient. Published near the end of the long bull market of the 1980 and 90s, "Common Sense on Mutual Funds" called out -- in its own quiet and understated way -- for reform of the mutual fund industry before it became fashionable to do so. While Bogle's book doesn't have an angry tone, its recommendations are essentially more radical than anything now being considered by New York's attorney general in his drive to reform the industry.
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29 of 30 people found the following review helpful By Charles on June 15, 2001
Format: Paperback
Critics may say the book in only trying to sell index funds, a strong suit of Vanguard. Absolutely wrong! The book's real value is explaining how the mututal fund industry works and, hence, how to follow the money. The industry extracts about one per cent each year of your money in excess expense ratios and keeps it, not to mention the hidden costs of turnover and load. That adds up over a lot of money in a life time. Read the book. Understand asset allocation, return, risk, and cost. Then, you'll understand how the money works and how to pick a fund based on its expense ratio, load, and turnover.
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19 of 19 people found the following review helpful By Brian Considine on April 1, 2002
Format: Paperback
John Bogle, founder of the Vanguard Group which is the known for its low cost index funds as well as simply being one of the two largest mutual fund organizations, makes his simple but undeniable arguement.
1. The administrative costs of a mutual fund makes a huge impact on returns. For example, a 1% administrative fee eats away at least 10% of the fund's yearly return if it earns 10%.
2. Index funds have consistantly outperformed other managed funds.
3. Given #1, the managment fees for managed funds are a double burden because they reduce returns that are already typically below what a low cost index fund can offer.
Bogle also touches other topics on the mutual fund industry. I found that he hammered the same points home again several different ways. This made some parts of the book drag, but I suppose it is useful for those who may be skeptical about index funds to see the evidence presented in several formats. Bogle also touches upon the (mis?)-management of mutual funds. Fees have gone up despite the proven inability of funds to beat the market despite the supposed skill of their managers, funds turnover their securities rapidly leaving the unprepared owner (invester) with capital gains nightmares as well as lost returns due to trading costs.
Also interesting, Bogle reviews his life in the mutual fund industry. I feel Bogle hits us with a little too much data and not enough of the drama of the industry. For example, does Bogle's fellow fund managers believe they have the skill to beat the market or do they know they are ripping people off by creating and marketing funds with excessive fees and unproductive churning of assets?
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