- Audible Audio Edition
- Listening Length: 5 hours and 7 minutes
- Program Type: Audiobook
- Version: Unabridged
- Publisher: Macmillan Audio
- Audible.com Release Date: February 20, 2007
- Whispersync for Voice: Ready
- Language: English
- ASIN: B000NJXF6E
- Amazon Best Sellers Rank:
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The Little Book of Common Sense Investing Audible Audiobook – Unabridged
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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.