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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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Top Customer Reviews
This book is like a cover version of Malkiel’s classic, coming in with a shorter page count and being less of a sales document – though where the recent “Random Walk” made me curious about Wealthfront and reading this made me go to the Vanguard website, I still am paying more in fees than I should to the company-administered 403(b) even in their so-called Index Fund. This is a pretty well-written book, but it does have a bit of an odd structure, with short chapters closed by asides referencing the current point made with an outside source instead of integrating it in the main chapter. Overall, though, it is a strong case for indexing your funds and taking advantage of the work the active traders do. When you are buying the market, you are giving up the chance of some great stock or sector that goes parabolic, but it also prevents you from thinking you are clever and taking a short position in that same sector just before it goes parabolic. Buy and hold and buy again seems to be the best way to ensure that the money you do invest will be there when you need it at the end of your life. I’m not trying to get rich by any means, but I’m also not looking to degrade the quality of my life at the end.
If you are familiar with my investing philosophies you already know that I am a big fan of Index Funds. This book illustrates even more reasons to avoid financial advisors and, definitely, actively managed mutual funds. The costs associated with using these mediums of investing is way too high and has very little to zero benefit.
The reason someone would sign up to pay more money for an actively managed mutual fund is the promise of higher returns. But this is an empty promise for 90% of mutual funds. The majority of actively managed mutual funds cannot perform better than the market average in the long-term. However, if, hypothetically, you did choose a mutual fund that outperforms the market average, the most you will beat the market by is about 1.5% (and that is the high). But since you chose a mutual fund you will have higher expense fees by about 1.3%... so you'll think that you still made a good decision because you made .2% more than the market average. This is also FALSE. Your mutual fund also comes with transaction costs that are about .7% higher than a index fund and tax inefficiencies that equate to about 1% higher. So the mutual fund that you chose, that had only a 10% chance of being higher an index fund, gave you 1.5% less on your money than an index fund would have given you.
To put it in even simpler terms... If you invested $10,000 and let it accrue interest for 20 years and you managed to pick that diamond-in-the-rough mutual fund with higher returns, you would still only make $44,087. Opposed to an index fund during the same amount of time that would grow to $58,137... That amounts to a disadvantage of $14,050. That difference could be a down-payment on a house!
Bogle is big on using simple arithmetic to determine what investment is best. As you can see from the numbers, it doesn't take a rocket scientist to analyze the numbers. And if you prefer to let a computer run the numbers go here [...]
One thing I hadn't thought of before reading this book relates to tax inefficiencies. When you have an actively managed fund, you'll have an "expert" that thinks that they can outperform the market. So that person buys and sells when they think the time is right, but it's your money they are using the whole time. That means that if they do get you the market average at the end of the year, you'll be charged for the gains you received every time they sold. And if there is anything I disdain, it's TAXES. You've been happy all year long because you think you did well with your investments and you may have even sent your Money Manager a Christmas card and then you ring in the new year with a 1099B... more gains to pay taxes on!
If you are serious about investing in Index Funds go to Vanguard and use this diversification:
35% VTSMX- This is a domestic stock fund
35% VGTSX- This is a international stock fund
30% VBMFX- This is a bond fund
It's a rocky climate right now for investing and I am not positive what is going to happen. I have my predictions (I lean toward more international index investing than I normally would right now), but for the time being I would like people to be able to make good decision when comparing actively managed mutual funds and index funds. If you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it.