The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
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 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 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.
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The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits) Reviews
All of the other books describe how to pick winning stocks, value stocks, diversification, and other "tricks" to winning in the market (and by my experiences, none of them work). Over the past year, I have read 7 of the "Little Book of common sense Investing", and this is by far, the one that makes the most sense. I agree 100% with the author's work, especially for the average 401k investor who doesn't have time to "play the market". Especially when you factor in the fees associated with buying and selling individual stocks, and using other Funds that have high management fees associated with them. This book, talks about "Index Funds" that track the broad markets like the S&P 500, and how safe and economical that strategy is in the long run.
Resummary:. So 10% return + 2% costs + 40% taxes =. Well good luck most of the exciting stock picking methods lead to bankrupcy. They still lost huge regularly (In recent years lets all remember 2000-1, 2003, 2007-8, each time we witnessed in the region of a 40% crash in the markets). This book is accessible, factually based, informative and small enough to read quickly. In recent years Wall Street has made $400 Billion per year in those costs (Thats right they won and you lost before your money even went into stocks). your first investment should be this book and then the markets. Not exciting but so well worth the money, unlike most of the garbage out there.
What makes a good investing book. In a market of hype about the "Latest" and "Greatest" stock picking method John Bogel has written a book based on common sense. Your system needs to double market returns. Sound boring. Inevitable John Bogel uses the Vanguard S&P 500 index tracker (From his own company) as an example. Assume the stock market returns 10% per year, you have 100% portfolio turnover per year, 2% costs (Very low) and 40% taxes (which is about right in GB where I live). One method that was well explained is Value Investing.
As a final endorsement of what John Bogel writes about, when companies make investments that they have to all but guarantee returns on (Pensions etc), they invest in the manner described in this book. If they fail why can you or I do better. Unfortuantely these days you are up against computers that can analyse all world wide stock markets in real time - chances are you won't win. Also indexing doesn't offer you very much excitment. (10 + 2) / 0.6 = 20%.
Hows about keeping that money and still investing and getting a fair (Average) share of returns. What should make a good investing book. Buffet, Charlie Munger, Charles Schwab, etc (Who all know more about investing than I ever will) endorse indexing. So it sometimes feels a little like a sales exercise in places. He mentions others but not very often. And I am a cynic who is always looking to disprove (Or even disapprove) of what I read.
Hows about something that can actually work. Well the best way isn't always the most exciting. Inevitably all investors in a market must on average gain returns equal to the market, less costs (Forget these at your peril). Hint: One reason Warren Buffet is able to beat the markets is he has very low portfolio turnover (Thus avoiding many taxes).
Summary (To save you time):. As for most stock picking methods please remember you are taking on the best and brightest on Wall Street and their computers. The likes of Warren E. Through humble arithmatic John Bogel convinces you of the value and sense in a low cost index tracking fund. However never so much that it detracts from the point. However I can counter that with I want to retire early, not late (And broke) in life knowing I had fun in the markets. Each chapter finishes whith people who endorse indexing.
Thats good enough for me. Well Yes, there always are. It always seems to be the promise of riches and excitement.
Lastly I haven't read all the books out there and there may well be better for me yet to discover. Please bear in mind at this point that if a stock picking method cannot be rationaly explained as to why it works the chances are its garabge. If you want to retire early and financially wealthy you'll go a long way to beat this book. There is no heavy analysis or huge amount of brain power required. Review:. So are there down sides to this book.
As far as I personally have read this book tops the list though. As a quick explanation of the aritmetic (I made these numbers up, they're not from the book, but they are mathematically accurate) and why it should convince you:. If you have a system to beat the markets you need a return of 10% or more as well. Well good luck. I'll stick to boredom and a fair return. John Bogel provides a clear and concise text on how to make a good (If unexciting) return.
They just don't advertise it, but if you want a good safe return guess what.
The effect of what you may think are slight differences in fund fees and charges from one fund to another over time are quite shocking. Basically, Mr. Bogle lays out his argument for that viewpoint in several relatively short, easy-to-understand chapters that each focus on a separate aspect as to why index funds are the vehicle of choice for the long term investor.
I can see there is a lot of wisdom for sticking with index funds for the long run. He provides the reader with supporting historical data, information about fees, income tax effects, quotes from other respected investors, etc., to build a strong case for index funds. Plain and simple. So as not to leave anyone in suspense, according to the author the "only way to guarantee your fair share of stock market returns" as it says in the title of the book is to invest in index funds that mirror the broad market, such as an S&P 500 fund.
Overall, this is a well-written, organized, intelligent book that is also thankfully concise, and I thought it was well worth reading.
Straightforward form people whom know what they are talking about. And quoting from other good references as well. An excellent book on investing.
Sure, you can beat the market sometimes, but it can't last. As a beginning investor, I found the book informative - it helps you think about stocks and the market in ways that aren't immediately obvious to the uninformed. As others have mentioned, this book could be distilled down to "The only way to succeed at long term investing is to buy low-fee mutual funds that track the whole stock market". The entire rest of the book is the justification, and it's pretty hard to argue with any of it.
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