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The Little Book of Common Sense Investing (2007)

by John C. Bogle

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If you're investing in the stock market, you should start with this book. Hands down. It compares the long term performance of index investing to managed or mutual fund investing. The statistics and studies are compelling. Over 20-30 years, there is no comparison to index investing. It wins 100%.

If I was building a book list as a curriculum to learn investing, this would be first on the list. It's underlying principle is all about the power of compounding. In fact, the third last page sums this principle up wonderfully. I quote, "I am 85 years old and have never earned more than $25,000 a year. I started investing in 1974 with $500 (55YO). I have only bought - never sold. I remember when things were not going well, your advice was, 'stay the course.' (Author) He enclosed a list of his investments at the start of 2004: Total value, $1,391, 407".

Based on the studies in this book, it's alarming how over 10+ years, 90-something percent of managed funds underperform the broad stock market indices; In this case, the S&P500. This occurs for a variety of reasons, too many to discuss here, but still, the stats are black and white in favour of index investing. The book's case is that passive investing beats active investing easily over 20+ years, especially when factoring in brokerage and management costs.

An interesting point also from the book is the author's principle of asset allocation. Here, he advocats an investor direct 90% of their spare income (after living expenses) to passive index funds with the remaining 5-10% used for funny-money to speculate on other direct investment. Thinking about it, he has a very valid point. If an investment technique or strategy can significantly beat the market, then a 5-10% asset allocation will quickly catch and outperform the 90% passive allocation. If it can't, then just stick with the 90% passive index investing for the long term. Simple really.
This book is bundled with studies and statistics that shouldn't be ignored. ( )
  FirstWord | Jul 28, 2017 |
April 2009 Total return = the market, "helpers" only reduce that. Pay nothing to get everything. Earnings Growth Dividends = return which is fairly consistent over time. Speculation is a measure of emotions up/down. The miracle of compounding returns is overwhelmed by the tyranny of compounding costs. Time (not timing) and low cost win (including low taxes). Don't look for the needle, Buy the haystack. ( )
  deldevries | Jan 31, 2016 |
Book is more about convincing you about long term index investing. If you are expecting information on fundamental analysis, this one is not for you! ( )
  ganesh.kudva.groups | Mar 31, 2013 |
I quite enjoyed this easy-to-listen-to book that preaches that index funds are the only ones worth buying. I suspect this will be my new go-to gift for new college grads. It suffers a bit from a mild case of the endless repetition and the self-evident style of business books everywhere (which makes me glad I didn't pick up the Big version), and it didn't explain some concepts (like loads) that I was hoping for -- but those are just minor quibbles that detract slightly from 5 star content and presentation. ( )
  pammab | Dec 7, 2011 |
This is the first book that I have read on index investing and I was a little disappointed. The author spells out his investment strategy of using index funds to cover the whole market very eloquently in the first couple of chapters. After that the little book of common sense investing does not seem so little as the later chapters drag on and just seem to constantly repeat what has already been stated.

Also it is a bit too US centric for a a potential investor from the UK. ( )
  sbarrow57 | Sep 8, 2011 |
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Amazon.com Product Description (ISBN 0470102101, Hardcover)

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), but 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 expectationsHow to overcome the powerful impact of investment costs, taxes, and inflationHow the magic of compounding returns is overwhelmed by the tyranny of compounding costsWhat expert investors and brilliant academics—from Warren Buffett and Benjamin Graham to Paul Samuelson and Burton Malkiel—have to say about index investingAnd 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 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.

(retrieved from Amazon Thu, 12 Mar 2015 18:16:36 -0400)

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 founder of The Vanguard Group recommends a simple, time-tested investment strategy that can deliver the greatest return to the greatest number of investors: indexing. Why? Investing 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 be an index, why not invest in one? And you'll be all the happier and richer for it.… (more)

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