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The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns Hardcover – March 5, 2007
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"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.
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I found a lot to like about the The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle. Mr. Bogle was the founder of The Vanguard Group and is famous for creating the world’s first index mutual fund in 1975, the Vanguard 500 Index Fund.
The logic of his index fund was to invest in a large number of stocks, all the stocks comprising the S&P 500, to make money from the combination of their growth and dividends. This is a departure from the more common view of investing in undervalued stocks to make money from an increase in their stock value.
Bogle makes a convincing argument that the best way to get the value from the stock market is to invest in all the stocks by buying mutual funds based on indexes of the market that invest in all the stocks.
The author points out that the real net income from stock investments is the investments’ gain minus the cost of the investments. The costs are relatively easy to determine in the case of retail brokers charging for a stock trade when buying or selling stocks. However, the costs are much more complicated for mutual funds because, in addition to the cost of the trade, in many cases there is an annual incentive sales fee for the broker for up to five years (up to 1.5% a year according to the author). I had no idea that there were hidden sales fees in addition to the purchase fee charged by the brokers. In addition to annual fees, most mutual funds typically have additional management fees of 2 to 3%. In comparison, index funds have low management fees (often .4% or lower) with no hidden sales fees.
What is more disturbing is that 99% of mutual funds significantly underperform the S&P 500 index. When the excessive costs combined with the underperformance of mutual funds are compared to S&P index funds, the long term income differences are shocking. The net return after taxes of $10,000 invested in an indexed fund from 1980 to 2005 would have been $76,200 versus $16,700 for other mutual funds (for those mutual funds that survived). This represents 456% more net income to the investor with far less risk.
If you are one of the 85% of investors who let their broker "manage" their assets, Bogle’s book may keep you awake at night. To sleep better, I switched to low cost, low risk index funds.
The author’s perspective is unique since he invented the very first indexed funds. It is a little like reading Thomas Edison's thoughts about the light bulb. Bogle knows the issues and history of investing in indexes versus other types of mutual funds.
This "common sense investing" book was easy to read and easy to understand. I highly recommend it to anyone wanting their investments to produce more income with less risk. Five Stars and hats off to the founder of index investing.
One caveat: Mr. Bogle didn't seem to have a good grasp on the true function of Social Security, and how to maximize its value while integrating it with a good, long-term retirement income and investing strategy. For a better understanding of this,I would suggest another read on that important subject, such as "GET WHAT'S YOURS" by Laurence J Kotlikoff.