Synopses & Reviews
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.
John C. Bogle’ s The Little Book of Index Investing is a power-packed explanation of why outperforming the market is an investor illusion. Instead, the man who has been called "the conscience of the investment industry" recommends a simple, time-tested investment strategy— indexing— that can deliver the greatest return to the greatest number of investors. Why? Beating the market is a zero sum game where transaction costs, taxes, poor investment diversification, and poor market-timing (an affliction for most investors) hurts your portfolio more than it helps. Indexing eliminates that hurt. Bottom-line, if you can’ t beat an index, why not invest in one. And you’ ll be all the happier and richer for it.The man who has been called "the conscience of the investment industry" recommends a simple, time-tested investment strategy for outperforming the market--indexing--that can deliver the greatest return to the greatest number of investors.
Praise for The Little Book of Common Sense Investing
"A low-cost index fund is the most sensible equity investment for the greatmajority of investors. My mentor, Ben Graham, took this position manyyears ago, and everything I have seen since convinces me of its truth.In this book, Jack Bogle tells you why."
—Warren E. Buffett, Chairman, Berkshire Hathaway Inc.
"John Bogle is living a useful life, and this book is a useful contribution to hisfellow citizens. It is dangerous for investors to believe a lot of nonsense,and the nonsense destroyers are particularly helpful when, like Bogle,they never tire in their animosity toward folly."
—Charles T. Munger, Vice Chairman, Berkshire Hathaway Inc.
"Whether you know it or not, Wall Street wants to steal your future.If you want to stop them, drop everything, read this marvelous little book,and take it to heart; your children, and their children's children, will thank you."
—William Bernstein, investment adviser and author, The Four Pillars of Investing
About the Author
JOHN C. BOGLE is founder of the Vanguard Group, Inc., and President of its 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. In 1999, Fortune magazine named Mr. Bogle as one of the four "Investment Giants" of the twentieth century; in 2004, Time named him one of the world's 100 most powerful and influential people, and Institutional Investor presented him with its Lifetime Achievement Award.
Table of Contents
Chapter One: A Parable.
Chapter Two: Rational Exuberance.
Chapter Three: Cast Your Lot with Business.
Chapter Four: How Most Investors Turn a Winner’s Game into a Loser's Game.
Chapter Five: The Grand Illusion.
Chapter Six: Taxes Are Costs, Too.
Chapter Seven: When the Good Times No Longer Roll.
Chapter Eight: Selecting Long-Term Winners.
Chapter Nine: Yesterday’s Winners, Tomorrow’s Losers.
Chapter Ten: Seeking Advice to Select Funds?
Chapter Eleven: Focus on the Lowest-Cost Funds.
Chapter Twelve: Profit from the Majesty of Simplicity.
Chapter Thirteen: Bond Funds and Money Market Funds.
Chapter Fourteen: Index Funds That Promise to Beat the Market.
Chapter Fifteen: The Exchange Traded Fund.
Chapter Sixteen: What Would Benjamin Graham Have Thought about Indexing?
Chapter Seventeen: "The Relentless Rules of Humble Arithmetic."
Chapter Eighteen: What Should I Do Now?