Subscribe in a readerJohn Bogle’s Little Book of Common Sense InvestingPosted by ahc99 on September 3rd, 2008
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Book by John Bogle
One of the most thought-provoking books I have read regarding investing in the stock market has been The Little Book of Common Sense Investing. Truthfully, I have read quite a few investing books, from the Intelligent Investor to Take on the Street but none of them has hit me quite as hard as this book.
Just a little bit of overview, this book was written by John Bogle, the founder and retired CEO of The Vanguard Group. He founded Vanguard in 1974 and through his stewardship, the company has now grown to become the second largest mutual fund company in the world. Before reading this book I really didn’t know anything about him, just picked up the book because it had a catchy title. But after reading it, it has completely changed the way I view investing. I used to invest in only stocks and varied between investing in stable Fortune 100 companies all the way to small penny stocks that nobody has ever heard of. But no matter what, my timing was off and I ended up losing a few thousand (not much I know but still it hurt as a college student). After reading this book I realized that the path I was taking in investing was not only wrong but completely stressing me out. I recall getting up 6 AM in the morning to see how the stock market was doing and stressing out whenever the market fell or rose (it was definitely a rough 6 hours every day during the summer). In this book John Bogle goes through his own investment strategy. The best thing I like about his strategy is that you don’t need to stress out. Basically you just buy it, hold it, and let the market work it’s magic while making you money. Bogle’s eight basic rules for investors are:
- Select low-cost funds
- Consider carefully the added costs of advice
- Do not overrate past fund performance
- Use past performance to determine consistency and risk
- Beware of stars (as in, star mutual fund managers)
- Beware of asset size
- Don’t own too many funds
- Buy your fund portfolio - and hold it
Bogle’s main philosophy throughout the book is 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.” And the best way to do this is to buy the “classic index fund” which owns the market portfolio and hence is the only investment that guarantees a fair share of stock market returns. Some other important topics that he covers is how the compounding returns are overwhelmed by the compounding costs of investment costs, taxes, and inflation. And the only way to minimize those costs are through index investing, which is what the Vanguard Group philosophy is based on. I can’t recommend this book highly enough and I hope more people get a change to read it and also get into stress-free investing.