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The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns Hardcover


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Product Details

  • Hardcover: 216 pages
  • Publisher: Wiley (March 5, 2007)
  • Language: English
  • ISBN-10: 0470102101
  • ISBN-13: 978-0470102107
  • Product Dimensions: 7.3 x 5.2 x 0.9 inches
  • Shipping Weight: 9.9 ounces (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (209 customer reviews)
  • Amazon Best Sellers Rank: #1,909 in Books (See Top 100 in Books)

Editorial Reviews

Review

"excellent advice in a concise and accessible manner." (The Wall Street Journal, April 10, 2007)

"It's hard to argue with the eloquent logic of John C. Bogle's latest ode to index funds…Bogle's 'Little Book' offers much exemplary advice." (Bloomberg News, April 2007)

Among monetary gurus and wise men, John Bogle is a singular case. As the founder of the highly regarded Vanguard Group, he is revered for the company's commitment to providing value to its clients as well as profits to its investors. He even has his own group of fans, called "Bogleheads," who cling to every utterance and pronouncement from the great man.

In this latest entry in the Little Book series, Bogle's gentle prose contains idiot-proof advice for investors at all levels. He punctures the myth of the superiority of mutual funds and instead declares that by using a bit of common sense, low-cost index funds are the way to go for most modest stock investors. He's also wary of the ways of Wall Street and cautions investors to steer clear of its institutional con men and cautions against excessive fees and taxes that invariably eat up profits.
It's not very glamorous or exciting advice, but that's also his point: Slow and steady wins the race. (Miami Herald, April 9, 2007)

"genuinely provides investors with the ideal strategy for making the most of stock-market investing" (Motley Fool's UK website, March 8, 2007)

"It's an easy read that will, I suspect, quickly join Burton Malkiel's A Random Walk Down Wall Streetand Charles Ellis's Winning the Loser's Gameas one of the indexing crowd's favorite books."—Jonathan Clements (Wall Street Journal)

"It's hard to argue with the eloquent logic of John C. Bogle's latest ode to index funds." (Bloomberg Terminal, March 8, 2007).

"provides an opportunity to reflect on a remarkable career and legacy." (Financial Times, 19th March 2007)

"…it is John Bogle's hymn to index-tracking investment, and a fascinating read it is too." (Daily Telegraph, March 2007)

"Those who doubt my reasoning should read the Little Book of Common Sense Investing by John Bogle." (FT Adviser, 24th April 2007)

"…particularly interesting…goes some way towards discrediting the stockpicking virtues taught to me in my time as a financial journalist." (Fund Strategy, 7th May 2007)

"…wittily written, pocket-sized guide…If you want to learn how to avoid the unpredictabilities of the stock market and the fees of middle men, then this book is well worth a read." (Pensions Age, May 2007)

" ... For the individual investor, it presents a solid game plan for growing funds over the long haul." (Directorship, July 2007)

"... read Bogle's new Little Book of Common Sense Investingand you'll see how easy it is to beat the Alpha Hunters at their own game!" (MarketWatch, July 2007)

‘The one big thing that Bogle knows -- and explains so well in this slender volume -- is that buying and holding a broad benchmark of stocks while keeping fees to a minimum leads to higher long-term returns than constantly trading in a vain attempt to beat the market. Common sense? Yes. But radical too, as the entire investing establishment is designed to get investors to do the exact opposite.” (CNNMoney)

"Business books are often written by show-offs who want you to know all about their knowledge of the Greek tragedies and dark-coloured birds. So it was nice to get hold of the simply written Little Book of Common Sense Investing…Its author, John Bogle, in no simpleton. He built Vanguard into a huge fund manager...He is synonymous with index funds in the US. Vanguard's S&P 500 tracker is by far the world's largest mutual fund."—Stephen Cranston, Investor's Notebook (Jan 23, 2013)

From the Inside Flap

Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner's game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), and after the substantial costs of investing are deducted, it becomes a loser's game. Common sense tells us—and history confirms—that the simplest and most efficient investment strategy is to buy and hold all of the nation's publicly held businesses at very low cost. The classic index fund that owns this market portfolio is the only investment that guarantees you with your fair share of stock market returns.

To learn how to make index investing work for you, there's no better mentor than legendary mutual fund industry veteran John C. Bogle. Over the course of his long career, Bogle—founder of the Vanguard Group and creator of the world's first index mutual fund—has relied primarily on index investing to help Vanguard's clients build substantial wealth. Now, with The Little Book of Common Sense Investing, he wants to help you do the same.

Filled with in-depth insights and practical advice, The Little Book of Common Sense Investing will show you how to incorporate this proven investment strategy into your portfolio. It will also change the very way you think about investing. Successful investing is not easy—it requires discipline and patience. But it is simple, for it's all about common sense.

With The Little Book of Common Sense Investing as your guide, you'll discover how to make investing a winner's game:

  • Why business reality—dividend yields and earnings growth—is more important than market expectations
  • How to overcome the powerful impact of investment costs, taxes, and inflation
  • How the magic of compounding returns is overwhelmed by the tyranny of compounding costs
  • What expert investors and brilliant academics—from Warren Buffett and Benjamin Graham to Paul Samuelson and Burton Malkiel—have to say about index investing
  • And much more

You'll also find warnings about investment fads and fashions, including the recent stampede into exchange traded funds and the rise of indexing gimmickry. The real formula for investment success is to own the entire market, while significantly minimizing the costs of financial intermediation. That's what index investing is all about. And that's what this book is all about.


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

Greate book on why investing should be simple and easy.
John Turner
Knowledge of how to invest and why is what will give the reader the chance to make more money in the stock market.
R. Rowlett
I very much like that Bogle includes supporting data at the end of every section.
D. Kerssen

Most Helpful Customer Reviews

152 of 154 people found the following review helpful By Vasiliy Zhulin on June 26, 2007
Format: Hardcover Verified Purchase
John Bogle created the world's first index fund in 1975. In this book, he describes why you should make index funds the core of your investment portfolio.

Bogle starts off with introducing index funds through a parable that describes how middle-man costs in finance eat away at investors' profits. He discusses why speculation doesn't work and why business reality (in his definition, divident yields plus earnings growth) is more important that market expectation (changes in P/E based on what investors are willing to pay for various equities).

Bogle spends a few chapters discussing various problems with regular actively managed mutual funds, covering issues with performance (he asserts that less than 1% of all mutual funds were able to beat the market consistently over the past half century), various costs (expense ratios, sales charges, advertising fees, turnover costs, tax implications), poor market timing, and finally the difficulty of choosing a mutual fund (he states that there's no good way to pick a fund, since we can't foretell the future, and past performance is not an indicator of what's to come). He brings the reader to the "common sense" conclusion that index funds, in their pure simplicity, are the logical choice for any investor, as they provide the diversified return of the entire market with miniscule fees and minimal effort.

The last few chapters cover bond funds, ETFs, and a few pages of investment advice - which boils down to keeping at least 50% (if not all) of your money in broad-market index funds. Interestingly, Bogle spends a chapter discussing what Benjamin Graham would have thought about index funds, citing various quotes from Graham's "The Intelligent Investor" and certain blurbs from Warren Buffet.
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151 of 157 people found the following review helpful By Michael Kavanagh on March 4, 2007
Format: Hardcover
This latest book from Vanguard founder John Bogle is a gem. For those of us who are investment junkies, his past works have been superb, but a little overwhelming for regular readers who need their guidance in smaller and more direct terms.

The Little Book of Common Sense Investing fills that void. For Bogle fans, this is a summary of what we already know and you will not find a lot that is dramatically new or different. For readers who need a stern lecture on what is right and what is wrong, this is a perfect guide.

One nice touch in this new book are a variety of quotes Bogle uses that say "If you don't believe me" or "Don't take my word for it". He quotes Warren Buffet, Benjamin Graham and other major figures that confirm the advice he gives is right.

With all the large confusing investment books on the market today, this one provides a small friendly guide that allows the reader to focus on the behaviors that lead to success in investing. This is the finest new book on investing in 2007 and a must read for all investors who need to cut through the noise to find the truth. Thank you Mr. Bogle!

Mike Kavanagh, CFP ®

Atlanta, GA
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70 of 72 people found the following review helpful By dennis wentraub on March 20, 2007
Format: Hardcover Verified Purchase
Who better to make a straightforward argument for the index mutual fund than the man who developed the first of its kind for Vanguard in 1975. The stock market offers the return of the businesses it represents to investors. These returns are not received, because rather than 'buying' the market with a fund that tracks those returns, investors are sold actively managed funds that try to outperform the market and in the end dilute those returns with crippling fees and costs from excessive trading. The argument has been made by other distinguished writers in recent years, but investors will find this industry giant's take on the matter forceful.

What's new is Bogle's sobering expectations for future market returns. Over the past century companies have produced a 4.5% dividend yield and a 5% earnings growth rate (9.5%) for investors - before actively managed fund costs have stripped away much of that wealth. Today dividend yields on equities are under 2%. Earnings growth rates in the future may or may not be lower than the historical average. What seems apparent is that investors are less willing to pay for those earnings than they have in the past - as measured by a decline in price earnings ratios. Bottom line: we may be looking at a period of market returns of just 7-8%, and after all the "intermediary" costs of the mutual fund industry, investors will see that return dramatically reduced. This is why costs matter. The index mutual fund is the least expensive way to get the market's return into your pocket. Unfortunately, many 401 (k) retirement plans do not include some of the key U.S. and international indexes recommended by Bogle.
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35 of 36 people found the following review helpful By Allan S. Roth on March 15, 2007
Format: Hardcover Verified Purchase
What's in the book is just what the title says - obvious common sense.

This book is for people that want to move up their financial goals by using techniques so simple, my son Kevin implemented them last year when he was in second grade. Don't confuse simplicity with stupidity, Bogle notes.

If these techniques are really so simple, why doesn't Wall Street "get it?' Because they are paid a small fortune not to understand it. In fact, it's critical that the grand illusion continue.

The book is a battle pitting the Wall Street machine, glitz, and emotion against only the relentless rules of simple arithmetic. Even Wall Street, however, doesn't have the might to overcome simple arithmetic. It's a bloody battle where most that try to disprove mathematics, end up being the casualties.

You may be thinking this book merely says to buy index funds or exchange traded funds. Actually, Bogle notes that many index funds and most exchange traded funds are the wrong thing for investors. Yes, Wall Street took his indexing concept and morphed it into vehicles that would make them rich, at the cost of the investor. These are known as "enhanced" or "specialized" funds that are far closer to active investing than many disciplined investment funds - like Berkshire Hathaway.

Bogle explains what investors should do to capture the returns of capitalism. You may be surprised to learn that he goes beyond saying only own the broad index funds. In fact he says individual stocks and active mutual funds are okay, under certain conditions. It's okay to have a little fun, he says.

If you are absolutely convinced that you or your advisor will beat the market, then don't read this book - it will only make you sick to your stomach with irrefutable logic. This book is only for those wanting to guarantee your fair share of stock market returns.
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