The Little Book of Common Sense Investing, Updated and Revised: The Only Way to Guarantee Your Fair Share of Stock Market Returns

Backs up what he says
I have experience investing at the retail level and consider myself a knowledgeable but highly typical retail American investor. I started from zero and believe in personal responsibility, self reliance and I firmly believe SS is going to shift to a welfare program and because of that belief I plan on needing my own money for a retirement that is to involve anything in addition to sitting home and waiting on a government check to barely cover the groceries. I am also a victim of class warfare perpetrated through our current political class and feel a sense of urgency in protecting my future from the witless and covetous hordes at the gate. I invest what I can for my personal wealth advancement, to pay for my children’s education and for my retirement. All that I have learned comes from educating myself and through experience.In my quest for independence I have recently been working on asset allocation fine tuning but also on simplifying my investments for ease of management. This book was a home run. What John Bogle preaches (and I do mean preaches) is that owning the major markets in their entirety is a better strategy than trying to pick individual stocks and a far better strategy than allowing some ‘advisor’ to chip away at your principle via expenses. Even mutual funds can chip away principle through expenses. The simple analogy given by Bogle is “instead of looking for the needle in the haystack, buy the haystack”. He is a ‘buy and hold through low cost indexes’ disciple. That sums up the thirty thousand foot view of the book but it is worth reading so he can make his case, and make his case he does. Unless you did not know it already, John Bogle is the father of mutual funds and one of the founders of Vanguard. Yet, he even offers some fair criticisms of today’s mutual fund industry.After reading his book I applied much of what John Bogle proffers into my asset allocation strategy and have shifted nearly all of my long term investments into one low cost mutual fund company where asset class diversification is available,where expenses are low, turnover is low and I can see and manage everything from one simple dashboard. Rebalancing, adding to an allocation and the simplicity of doing so was worth the price of the book itself, especially when you see how the author details the method of collecting expenses by the financial industry.There are no populist boogie men in this book and there are no get rich quick schemes, no pretense that Bogle knows how to better time the market and no pretense that all financial planners are evil doers hell bent on destroying the little people. As for the last point, he rightfully leaves those charges to be leveled by the opportunist politicians to the low information voter.

Quick and simple introduction to index investing
John Bogle created the world’s first index fund in 1975. In this book, he describes why you should make index funds the core of your investment portfolio.Bogle starts off with introducing index funds through a parable that describes how middle-man costs in finance eat away at investors’ profits. He discusses why speculation doesn’t work and why business reality (in his definition, divident yields plus earnings growth) is more important that market expectation (changes in P/E based on what investors are willing to pay for various equities).Bogle spends a few chapters discussing various problems with regular actively managed mutual funds, covering issues with performance (he asserts that less than 1% of all mutual funds were able to beat the market consistently over the past half century), various costs (expense ratios, sales charges, advertising fees, turnover costs, tax implications), poor market timing, and finally the difficulty of choosing a mutual fund (he states that there’s no good way to pick a fund, since we can’t foretell the future, and past performance is not an indicator of what’s to come). He brings the reader to the “common sense” conclusion that index funds, in their pure simplicity, are the logical choice for any investor, as they provide the diversified return of the entire market with miniscule fees and minimal effort.The last few chapters cover bond funds, ETFs, and a few pages of investment advice – which boils down to keeping at least 50% (if not all) of your money in broad-market index funds. Interestingly, Bogle spends a chapter discussing what Benjamin Graham would have thought about index funds, citing various quotes from Graham’s “The Intelligent Investor” and certain blurbs from Warren Buffet. He, of course, concludes that Graham would have praised index funds.So, did I like the book? Yep.. it was pretty good. Bogle writes very clearly and visibly tries to keep his discussions simple and to the point, so as to appeal to the widest possible audience. And with good reason! Bogle’s advice is very applicable to the many individual investors today – index funds are a great low-cost and low-maintenance way to get your share (or all, as Bogle suggests) of the market’s return.To convince the reader, Bogle uses many diagrams to illustrate returns of various mutual funds vs. index funds, and to compare what your original investment would look like after a certain time – based on how it was invested. I found an error in one of the diagrams – exhibit 10.1 (and the text around it) on page 108 lists the average fund advisor return as $188,500 instead of $88,500. Not a big deal, but it slightly undermines the point he’s trying to make on that page. Overall, I feel that Bogle’s diagrams illustrate some good harsh realities – he clearly illustrates how a few percentage points (i.e. the costs associated with actively managed mutual funds) can eat away enormous chunks of your money over time.To bring more authority into his argument, Bogle provides a “Don’t Take My Word for It” section at the end of each chapter, where he quotes various respected investors and professors to support the points he made in the chapter. I enjoyed this, but it’s important to be aware that some quotes can often be interpreted very differently outside a certain context.One very obvious issue with this book is that Bogle is selling his own product – Vanguard’s funds. He doesn’t try to hide this in any way. He uses Vanguard’s funds in nearly all examples, and he often hints how his “world’s first index fund” is the greatest thing since sliced bread. You can’t really blame the man – his contribution to the world of finance and investing is enormous, and he damn well should be proud of his accomplishments. So I think it’s okay to cut Bogle some slack in this area.The book is short – about 215 small-size pages. You can probably sit down and read it in a few solid hours. It also goes pretty quickly, as the material is not dense and easy to follow. However, some may argue that the book is too long for what it is trying to demonstrate. True, Bogle’s advice really can be summed in just a few pages – index funds are a great choice for the average investor. But I have to say that I enjoyed reading the examples and history that he provides.In conclusion, I recommend this book to any individual investor. While Bogle’s advice is in no way eye-opening or revolutionary (chances are, you already know that index funds are a very low-cost and low-maintenance way to diversify), it is good to remind yourself the reasons why you should stay away from most actively managed mutual funds. As Bogle describes, this is all common sense – but we’re often blinded by flashy advertisements, hot market sectors, and seemingly-reachable dollar signs. This book is a good reality check for the average individual investors.I wish I could give this book 4.5 stars – but since I can’t due to Amazon’s rating system, I feel that it is more of a 4-star book rather than a 5-star one. It has solid advice, but it should not be considered the end-all of investing, and some of the advice and quotations should be taken with a grain of salt. Overall, however, it’s a great and insightful read. I plan to buy a couple extra copies to give to my family.Pros:+ quick and easy read+ lots of examples and diagrams to demonstrate how high expense ratios and other hidden costs can devastate a portfolio’s return+ some good basic investment advice: buy and hold, avoid emotional decisions, don’t be enticed by “new hot trends” (as by the time you find out about them, prices are already inflated), diversify into the whole market, look into costs before buying, etc.+ great format – short chapters, useful data, neat quotation sections at the end of each chapterCons:- some may be turned off by Bogle’s plugs for Vanguard funds (this didn’t really bother me)- may seem lengthy to drive one main point home (but keep in mind that there are quite a few good tid-bits scattered throughout the book)- take some citations with a grain of salt

It is a great book to start Investing, using common language and not boring stuff.

Book-level: AdvancedSir John Bogle has really written a masterpiece, and rightly qualifies to be marked as a “Bible” for Investment Philosophy.Considering author was a founder of the Vanguard empire, and a pioneer of the Index Mutual Fund, most of the book is presenting supporting ideas for the same. The Stock Market is a price discovery place and if all people invest in Index Fund, then price discovery of companies out of the index will be a tough task, hence most should but not everyone should follow him. 🙂 If you are willing to ignore the Vanguard Index Mutual Fund push, as not all readers are from the USA, and learn how to choose investment vehicle then this book provides a great deal of details and guiding principles.Book answers below questions well.- Active vs Passive Investment- Why cost matters?- Why future numbers will not be as good as past?- Why choosing a recent table topper is a bad idea?- When to choose advisor? and, what to expect from one?- ETF vs Index Fund- Why Sector or Theme based Index Funds are an illusion?- What Asset Allocation should one choose? and, the magic of cost along with it.With lots of courage, and though author gave evidence to support his argument, I would like to counter the argument of Indexing is better choice in developed and emerging market. Considering I am from India, this country does have pockets of companies which are out of the index and hence Active Fund Managers are still able to deliver out performance to justify their cost. Situation is tilting towards author’s argument but there is still scope for few years, if not many, for Active Managers to deliver out performance. And I am neither a Fund Manager myself nor associated with any nor paid to write this.

Es muy bueno