Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor

John C. Bogle, the author, may be retired (86 years old so well deserved) but what he created (Vanguard) has not stepped down, rather the opposite. This book's message better live on as well because it is something that needs to be repeated over and over again to avoid the trap financial institutes create for normal people (and their retirement money).

The message is this: If you want to save in the stock market (something that has historically been a good thing in the long run), then prioritize low cost because otherwise you will love 30-40% of your growth before you retire.

The background here is the active mutual funds that banks and other financial institutes create for almost everything. They more or less promise (or hint) at better show more return than other options, but as Bogle shows here, those promises are nothing but empty words. There are a few actively managed mutual funds that do really well when they are small (luck or skill - who knows) but once a fund becomes well known, well marketed and large it's practically impossible for it to grow faster than the average. Despite that, fund owners will typically charge 1.5 to 2% of your money every year.

1.5-2%, is that something to worry about? It is. Unfortunately the noise in a single year 20% or -30% that 1.5-2% can seem small, but over time this will add up to 30-40% of your money since long term growth of stocks is around 6-8%.

So what is the solution? Low cost (both visible fees and hidden transaction costs) and the only funds able to give that are pure index funds. There exist some in Sweden with 0.0 to 0.2% fee, and typically low transaction costs since they are index funds, but they are rarely marketed by the big institutions since they compete with their cash cows.

The book repeats this statement over and over again from every conceivable angle. That makes it a rather tedious book to read but it also means that it really doesn't leave much room for counter arguments. If anything I'd like some more concrete examples. Bogle avoids naming specific funds in many cases. Maybe to not market his own funds, maybe to not shame specific companies that might be just as good as others, just a bit unlucky.

Is Bogle right? Without a doubt. Is the book worth reading? Well, if you plan to put all your savings into a high cost fund that can make you rich, then yes, absolutely. Otherwise, I think there might be more readable books with the same message. Maybe.

One interesting detail with the edition I read was that it was from 1999 but updated 2009 with the hind sight of the IT bubble and the 2008 financial crash. The author is rather proud that his statements from 1999 are more or less correct (some percentages wrong every here and there but the main message was right, 1999 stocks were very expensive so nobody could reasonably expect much growth in the next decade). He didn't predict the crash but he saw that the market was overpriced so that it couldn't increase much in price for a long time. I guess we have a similar situation now, though less extreme. Whether this ends with a crash or just ultra slow growth remains to be seen.

With low growth expected, low cost becomes even more important. I hope people understand that. If not, read this book (tedious or not). show less

Sadly, I think the audiobook was abridged, but I think that this really is 'common sense.' You might not hit the moon with Bogle's advice, but I feel fairly certain that you willl get a pretty average, solid return... and have a lot less to worry about. I should probably read this in hard copy!

If there is only one book you read about mutual fund investing this is the one. Bogle pioneered the low cost, no load, mutual fund, and they are still the best investment.

uitgeleend Antoine MAhieu