What do you think?
Rate this book
Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor
NATIONAL BESTSELLER!
"Cogent, honest, and hard-hitting-a must read for every investor." -Warren E. Buffett
Praise for Common Sense on Mutual Funds
"Invoking both Thomas Paine and Benjamin Graham, Jack Bogle outlines a supremely logical plan not only to better investors' returns, but to improve the whole fund industry. This isn't just the best book yet by Bogle, it may well be the best book ever on mutual funds." -DON PHILLIPS, President & CEO, Morningstar, Inc.
"Buffett cannot teach you or me how to become a Warren Buffett. Bogle's reasoned precepts can enable a few million of us savers to become in twenty years the envy of our suburban neighbors-while at the same time we have slept well in these eventful times."-PAUL A. SAMUELSON, Massachusetts Institute of Technology Department of Economics
"After a lifetime of picking stocks, I have to admit that Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him. Bogle's wisdom and his commonsense way of explaining things make this book indispensable reading for anyone trying to figure out how to invest in this crazy stock market."-JAMES J. CRAMER, Money Manager and Senior Columnist for TheStreet.com
"Written in his characteristic forthright and visionary style, Bogle penetrates the myths and jargon to shed a powerful light on the central issues that confront every investor, no matter what their level of experience or sophistication." -MARTIN L. LEIBOWITZ, Vice Chairman and Chief Investment Officer, TIAA-CREF
"Jack Bogle is one of the great pioneer/visionaries of the investment business. In this book, he shares his knowledge, experience, and judgment to enable us to become better investors. The final philosophical chapters provide insights that may help some of us become better people." -BYRON R. WIEN, Chief U.S. Investment Strategist Morgan Stanley Dean Witter
"Cogent, honest, and hard-hitting-a must read for every investor." -Warren E. Buffett
Praise for Common Sense on Mutual Funds
"Invoking both Thomas Paine and Benjamin Graham, Jack Bogle outlines a supremely logical plan not only to better investors' returns, but to improve the whole fund industry. This isn't just the best book yet by Bogle, it may well be the best book ever on mutual funds." -DON PHILLIPS, President & CEO, Morningstar, Inc.
"Buffett cannot teach you or me how to become a Warren Buffett. Bogle's reasoned precepts can enable a few million of us savers to become in twenty years the envy of our suburban neighbors-while at the same time we have slept well in these eventful times."-PAUL A. SAMUELSON, Massachusetts Institute of Technology Department of Economics
"After a lifetime of picking stocks, I have to admit that Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him. Bogle's wisdom and his commonsense way of explaining things make this book indispensable reading for anyone trying to figure out how to invest in this crazy stock market."-JAMES J. CRAMER, Money Manager and Senior Columnist for TheStreet.com
"Written in his characteristic forthright and visionary style, Bogle penetrates the myths and jargon to shed a powerful light on the central issues that confront every investor, no matter what their level of experience or sophistication." -MARTIN L. LEIBOWITZ, Vice Chairman and Chief Investment Officer, TIAA-CREF
"Jack Bogle is one of the great pioneer/visionaries of the investment business. In this book, he shares his knowledge, experience, and judgment to enable us to become better investors. The final philosophical chapters provide insights that may help some of us become better people." -BYRON R. WIEN, Chief U.S. Investment Strategist Morgan Stanley Dean Witter
496 pages, Hardcover
First published January 1, 1999
626 people are currently reading
9679 people want to read
About the author
John C. Bogle
61 books595 followersJohn Clifton "Jack" Bogle (born May 8, 1929) is the founder and retired CEO of The Vanguard Group. He is known for his 1999 book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor, which became a bestseller and is considered a classic.
More on http://en.wikipedia.org/wiki/John_C._...
More on http://en.wikipedia.org/wiki/John_C._...
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 30 of 174 reviews
May 11, 2015
If you're not a super informed investor this is a really valuable book to read.
Main take aways from this book:
All market index funds (bond and stock) are an ideal place for most people to invest money because.
- Their expense ratios are low and efficient.
- They reflect the market as a whole which over time tends to out pace actively managed mutual funds.
- Actively managed mutual funds tend to have higher costs which further detracts from their effectiveness as a place to invest. Over time those costs add up (due to what you're missing with compound interest) to a significant amount of money. Also, past performance of mutual funds and fund managers is not a good way to judge the future earnings because the market is too unpredictable. Funds and managers that are hot for a few years, typically will do much worse after a few years. So when you have high funds you're essentially paying some one more money than you need to to produce a portfolio that will most likely not outpace the market. He has tons of data on this.
- A good way to balance investments is to hold your age (in percentage) in total market bond funds, the rest can be put into a total market stock index fund. The bond funds allow you to mitigate some of the risk from having all of your investments in the equities markets.
- Bogle started the Vanguard investment company in the 70s to start the first total stock index fund and create a more efficient way for a mutual fund company to operate.
- He gives some views about leadership that are good, but the main value are his ideas about the effectiveness of index funds and expense ratios.
Main take aways from this book:
All market index funds (bond and stock) are an ideal place for most people to invest money because.
- Their expense ratios are low and efficient.
- They reflect the market as a whole which over time tends to out pace actively managed mutual funds.
- Actively managed mutual funds tend to have higher costs which further detracts from their effectiveness as a place to invest. Over time those costs add up (due to what you're missing with compound interest) to a significant amount of money. Also, past performance of mutual funds and fund managers is not a good way to judge the future earnings because the market is too unpredictable. Funds and managers that are hot for a few years, typically will do much worse after a few years. So when you have high funds you're essentially paying some one more money than you need to to produce a portfolio that will most likely not outpace the market. He has tons of data on this.
- A good way to balance investments is to hold your age (in percentage) in total market bond funds, the rest can be put into a total market stock index fund. The bond funds allow you to mitigate some of the risk from having all of your investments in the equities markets.
- Bogle started the Vanguard investment company in the 70s to start the first total stock index fund and create a more efficient way for a mutual fund company to operate.
- He gives some views about leadership that are good, but the main value are his ideas about the effectiveness of index funds and expense ratios.
February 26, 2019
This is the newest edition of one of the best investing books I've read. I was curious to hear Bogle's thoughts on the recent economic situation, and his reflections on his sage advice ten years earlier. The last ten years, although totally unprecedented and unpredictable, have certainly borne him out.
This book doesn't actually talk much about the stock market or asset allocation. It talks specifically about the mutual fund industry. This book doesn't give the standard lines about beating the market and picking mutual funds. It's even unique among books about passive investing in that it doesn't talk much about asset allocation and Modern Portfolio Theory.
What it does is incessantly rip into traditional mutual funds, particularly their cost structure. The first part explains all the ways costs matter. I found my jaw dropping a few times during this part. I already agreed with him, and yet, I was astonished. I knew that costs matter, but I had no idea that they mattered to that extent. I used to believe high costs are justified in some cases, but after this book, I really understand that even small differences in cost make an enormous difference long term. Later, the book discusses how mutual funds are organized and how they subtly deceive shareholders. It seems downright fraudulent, and Bogle agrees. All along, he never fails to offer an alternative: index funds.
I was grateful that the book ended with a mini autobiography, and an explanation of how Vanguard works, which is the company he founded. This man is a crusader, a hero, practically a saint among the investing community. He had the guts to stand up against an enormous industry that was complicit in ripping off their shareholders. Bogle was a promising mutual fund executive at a very young age, and he could have increased his fortunes by several orders of magnitude. Even though he certainly did very well for himself, he was clearly more interested in sticking up for the investors than in taking their money. His company, Vanguard, is very unique. They're owned by their fund shareholders, have practically no marketing budget, operate at-cost, and will turn away money if taking it would not be in the best interests of their shareholders.
This book doesn't actually talk much about the stock market or asset allocation. It talks specifically about the mutual fund industry. This book doesn't give the standard lines about beating the market and picking mutual funds. It's even unique among books about passive investing in that it doesn't talk much about asset allocation and Modern Portfolio Theory.
What it does is incessantly rip into traditional mutual funds, particularly their cost structure. The first part explains all the ways costs matter. I found my jaw dropping a few times during this part. I already agreed with him, and yet, I was astonished. I knew that costs matter, but I had no idea that they mattered to that extent. I used to believe high costs are justified in some cases, but after this book, I really understand that even small differences in cost make an enormous difference long term. Later, the book discusses how mutual funds are organized and how they subtly deceive shareholders. It seems downright fraudulent, and Bogle agrees. All along, he never fails to offer an alternative: index funds.
I was grateful that the book ended with a mini autobiography, and an explanation of how Vanguard works, which is the company he founded. This man is a crusader, a hero, practically a saint among the investing community. He had the guts to stand up against an enormous industry that was complicit in ripping off their shareholders. Bogle was a promising mutual fund executive at a very young age, and he could have increased his fortunes by several orders of magnitude. Even though he certainly did very well for himself, he was clearly more interested in sticking up for the investors than in taking their money. His company, Vanguard, is very unique. They're owned by their fund shareholders, have practically no marketing budget, operate at-cost, and will turn away money if taking it would not be in the best interests of their shareholders.
August 24, 2007
For Bogle converts, you won't find much new in this book. For everyone else, and that's most of you, you really ought to read this book.
An unflinching attack on America's financial industry, Bogle explains how the average investor is separated from their money. But rather than doom and gloom, the book offers a way out -- index funds that keep your costs reasonable and offer reasonable returns.
An unflinching attack on America's financial industry, Bogle explains how the average investor is separated from their money. But rather than doom and gloom, the book offers a way out -- index funds that keep your costs reasonable and offer reasonable returns.
February 28, 2016
I recently finished reading Common Sense on Mutual Funds - New Imperatives for the Intelligent Investor - by John C. Bogle.
Below are key excerpts from this book that I found to be insightful:
Investing is an act of faith. We entrust our capital to corporate stewards in the faith—at least with the hope—that their efforts will generate high rates of return on our investments. When we purchase corporate America's stocks and bonds, we are professing our faith that the long-term success of the U.S. economy and the nation's financial markets will continue in the future.
To state the obvious, the long-term investor who pays least has the greatest opportunity to earn most of the real return provided by the stock market.
In my view, market timing and rapid turnover—both by and for mutual fund investors—betray both a lack of understanding of the economics of investing and an infatuation with the process of investing.
My guidelines also respect what I call the four dimensions of investing: (1) return, (2) risk, (3) cost, and (4) time. When you select your portfolio's long-term allocation to stocks and bonds, you must make a decision about the real returns you can expect to earn and the risks to which your portfolio will be exposed. You must also consider the costs of investing that you will incur. Costs will tend to reduce your return and/or increase the risks you must take. Think of return, risk, and cost as the three spatial dimensions—the length, breadth, and width—of a cube. Then think of time as the temporal fourth dimension that interplays with each of the other three. For instance, if your time horizon is long, you can afford to take more risk than if your horizon is short, and vice versa.
Rule 1: Select Low-Cost Funds...Rule 2: Consider Carefully the Added Costs of Advice...Rule 3: Do Not Overrate Past Fund Performance...Rule 4: Use Past Performance to Determine Consistency and Risk...Rule 5: Beware of Stars...Rule 6: Beware of Asset Size...Rule 7: Don't Own Too Many Funds...Rule 8: Buy Your Fund Portfolio—And Hold It.
No matter what fund style you seek, you should emphasize low-cost funds and eschew high-cost funds. And, for the best bet of all, you should consider indexing in whichever style category you want to include.
There are three major reasons why large size inhibits the achievement of superior returns: the universe of stocks available for a fund's portfolio declines; transaction costs increase; and portfolio management becomes increasingly structured, group-oriented, and less reliant on savvy individuals.
Four principal problems are created by this overemphasis on marketing. First, it costs mutual fund shareholders a great deal of money— billions of dollars of extra fund expenses—which reduces the returns received by shareholders. Second, these large expenditures not only offer no countervailing benefit in terms of shareholder returns, but, to the extent they succeed in bringing additional assets into the funds, have a powerful tendency to further reduce fund returns. Third, mutual funds are too often hyped and hawked, and trusting investors may be imperiled by the risks assumed by, and deluded about the potential returns of, the funds. Lastly, and perhaps most significant of all, the distribution drive alters the relationship between investors and funds. Rather than being perceived as an owner oi the fund, the shareholder is perceived as a mere customer of the adviser.
On a closing note, on leadership:
To wrap up this litany, I put before you—both tentatively and humbly—a final attribute of leadership: courage. Sometimes, an enterprise has to dig down deep and have the courage of its convictions—to "press on," regardless of adversity or scorn. Vanguard has been a truly contrarian firm in its mutual structure, in its drive for low costs and a fair shake for investors, in its conservative investment philosophy, in market index funds, and in shunning hot products, marketing gimmicks, and the carpet-bombing approach to advertising so abundantly evident elsewhere in this industry today. Sometimes, it takes a lot of courage to stay the course when fickle taste is in the saddle, but we have stood by our conviction: In the long run, when there is a gap between perception and reality, it is only a matter of time until reality carries the day.
A recommended read in the areas of investing and leadership.
Below are key excerpts from this book that I found to be insightful:
Investing is an act of faith. We entrust our capital to corporate stewards in the faith—at least with the hope—that their efforts will generate high rates of return on our investments. When we purchase corporate America's stocks and bonds, we are professing our faith that the long-term success of the U.S. economy and the nation's financial markets will continue in the future.
To state the obvious, the long-term investor who pays least has the greatest opportunity to earn most of the real return provided by the stock market.
In my view, market timing and rapid turnover—both by and for mutual fund investors—betray both a lack of understanding of the economics of investing and an infatuation with the process of investing.
My guidelines also respect what I call the four dimensions of investing: (1) return, (2) risk, (3) cost, and (4) time. When you select your portfolio's long-term allocation to stocks and bonds, you must make a decision about the real returns you can expect to earn and the risks to which your portfolio will be exposed. You must also consider the costs of investing that you will incur. Costs will tend to reduce your return and/or increase the risks you must take. Think of return, risk, and cost as the three spatial dimensions—the length, breadth, and width—of a cube. Then think of time as the temporal fourth dimension that interplays with each of the other three. For instance, if your time horizon is long, you can afford to take more risk than if your horizon is short, and vice versa.
Rule 1: Select Low-Cost Funds...Rule 2: Consider Carefully the Added Costs of Advice...Rule 3: Do Not Overrate Past Fund Performance...Rule 4: Use Past Performance to Determine Consistency and Risk...Rule 5: Beware of Stars...Rule 6: Beware of Asset Size...Rule 7: Don't Own Too Many Funds...Rule 8: Buy Your Fund Portfolio—And Hold It.
No matter what fund style you seek, you should emphasize low-cost funds and eschew high-cost funds. And, for the best bet of all, you should consider indexing in whichever style category you want to include.
There are three major reasons why large size inhibits the achievement of superior returns: the universe of stocks available for a fund's portfolio declines; transaction costs increase; and portfolio management becomes increasingly structured, group-oriented, and less reliant on savvy individuals.
Four principal problems are created by this overemphasis on marketing. First, it costs mutual fund shareholders a great deal of money— billions of dollars of extra fund expenses—which reduces the returns received by shareholders. Second, these large expenditures not only offer no countervailing benefit in terms of shareholder returns, but, to the extent they succeed in bringing additional assets into the funds, have a powerful tendency to further reduce fund returns. Third, mutual funds are too often hyped and hawked, and trusting investors may be imperiled by the risks assumed by, and deluded about the potential returns of, the funds. Lastly, and perhaps most significant of all, the distribution drive alters the relationship between investors and funds. Rather than being perceived as an owner oi the fund, the shareholder is perceived as a mere customer of the adviser.
On a closing note, on leadership:
To wrap up this litany, I put before you—both tentatively and humbly—a final attribute of leadership: courage. Sometimes, an enterprise has to dig down deep and have the courage of its convictions—to "press on," regardless of adversity or scorn. Vanguard has been a truly contrarian firm in its mutual structure, in its drive for low costs and a fair shake for investors, in its conservative investment philosophy, in market index funds, and in shunning hot products, marketing gimmicks, and the carpet-bombing approach to advertising so abundantly evident elsewhere in this industry today. Sometimes, it takes a lot of courage to stay the course when fickle taste is in the saddle, but we have stood by our conviction: In the long run, when there is a gap between perception and reality, it is only a matter of time until reality carries the day.
A recommended read in the areas of investing and leadership.
May 17, 2016
Easy there John Bogle, save a few pats on your back for me!
I really enjoyed this, but its not for everyone. It does have a lot of dense information proving its point. The point: Investing in low-cost all-market passively-managed index funds for the long term is what you should do.
If you need some one to prove it to you, then read this book. By about the 5th chapter Bogle will convince you of this, then he'll continue to take this fact and beat you over the head with it for the remainder of the book with tons of percentages and math and charts. It really is presented as common sense, he just gives you ALL the information you need to come to the same conclusions.
It's hard not to think that this book is just an advertising scheme for Bogle's company, Vanguard. I have a hard time thinking anyone can finish this book and not decide to put all of their investment money in Vanguard. The fact that the guy is in his 80's, retired, already rich, and really doesn't need a book to prove the fact that his fund is the best means it probably was sincerely written and the guy is just one top notch dude who really wants everyone else to get rich... and as I mention at the beginning he spends three of the last four chapters talking about just how awesome, selfless and brilliant he is. Nothing wrong with that I suppose, when its true.
They main take away? If you don't actually want to read a long fact filled book on investing, but still be a really smart investor, just call Vanguard. So really, keep reading bodice rippers and graphic novels and just move all your investments over to Vanguard.
I really enjoyed this, but its not for everyone. It does have a lot of dense information proving its point. The point: Investing in low-cost all-market passively-managed index funds for the long term is what you should do.
If you need some one to prove it to you, then read this book. By about the 5th chapter Bogle will convince you of this, then he'll continue to take this fact and beat you over the head with it for the remainder of the book with tons of percentages and math and charts. It really is presented as common sense, he just gives you ALL the information you need to come to the same conclusions.
It's hard not to think that this book is just an advertising scheme for Bogle's company, Vanguard. I have a hard time thinking anyone can finish this book and not decide to put all of their investment money in Vanguard. The fact that the guy is in his 80's, retired, already rich, and really doesn't need a book to prove the fact that his fund is the best means it probably was sincerely written and the guy is just one top notch dude who really wants everyone else to get rich... and as I mention at the beginning he spends three of the last four chapters talking about just how awesome, selfless and brilliant he is. Nothing wrong with that I suppose, when its true.
They main take away? If you don't actually want to read a long fact filled book on investing, but still be a really smart investor, just call Vanguard. So really, keep reading bodice rippers and graphic novels and just move all your investments over to Vanguard.
June 20, 2015
This is not the book to read if you're looking for a primer on investing or retirement planning that includes Bogle's philosphy. Instead, this is the book to read once you're underway and have some knowledge of what you're doing from his other more entry level books--or after you've started with the Boglehead's series.
He goes into depth in an easy to read style about the mutual fund industry and why his philosophy on investing (hold, index funds, don't time the market, passive investing, etc.) is both sound and proven given these facts.
A excellent read, probably none better, should you want more depth on the 'why' and the numbers to back it up. Just don't expect much advise or hand holding on the 'how'.
This may not need to be added as a reference book to have in your library as you navigate your own investments from time to time, but can make a good and enlightening one-time-read (if only to shore up support for Bogle's investing philosphy) borrowed from the library.
Last, the 10th Ed adds his updated reflections at the end of each section looking back 10 years from when the book first came in print.
He goes into depth in an easy to read style about the mutual fund industry and why his philosophy on investing (hold, index funds, don't time the market, passive investing, etc.) is both sound and proven given these facts.
A excellent read, probably none better, should you want more depth on the 'why' and the numbers to back it up. Just don't expect much advise or hand holding on the 'how'.
This may not need to be added as a reference book to have in your library as you navigate your own investments from time to time, but can make a good and enlightening one-time-read (if only to shore up support for Bogle's investing philosphy) borrowed from the library.
Last, the 10th Ed adds his updated reflections at the end of each section looking back 10 years from when the book first came in print.
November 19, 2013
Not a beginners guide to investing. You have to be really geeky to read cover to cover. There are other short (comparatively) books on investing that follow Bogle's investing 'theology'. A part-geek can pick and choose what to read and come out with a lot of great advice. Even if you know the basics: invest for the long haul in super low cost funds indexed to major market indexes, there are certainly some more here that is practical. I found his arguments concerning owning foreign stock interesting. A few tidbits: you can feel comfortable not owning foreign for a number of reasons including currency risk. Also he made an interesting argument that much of the business done by companies in the S&P 500 (for example) is foreign. Anyways, glad I read it, but certainly not light reading.
May 20, 2023
A little dated in some references but the basic point remains valid and relevant as ever. I've heard so many people express dissatisfaction with their 401(k). Seems like they're always losing money or the performance just isn't as good as they'd hoped. Many employee benefit plans I've seen have a wide selection of mutual funds to chose from but what people often don't realize is that the management fees can negate the purported benefits of those particular choices. Bogle recommends for the common investor a simple strategy - buy the whole market, by way of a low cost index fund that follows the S&P 500. Throw in a bond fund minority position for good measure and you're good to go, provided you hold and just let it cook.
September 7, 2016
This lengthy book was simple to understand but also profound and complex in its message. Each section focuses on a different but crucial financial obstacle in the current mutual fund industry.
It is a little difficult to go through this book due to its length, but its well worth it to read through the content. The main message shines through, costs matter, buy for the long term.
It is a little difficult to go through this book due to its length, but its well worth it to read through the content. The main message shines through, costs matter, buy for the long term.
This entire review has been hidden because of spoilers.
June 23, 2014
A very thorough blueprint for the individual investor. Bogle believes in investor discipline, long-term focus, diligent saving, and the use of passively-managed index funds. By clearly laying out the four dimensions of investing (risk, reward, time, cost), Bogle makes a strong case for avoiding high-cost, actively managed mutual funds or funds which have high turnover or high speculation. This strategy will only lose the investor money by raising costs as the actively managed fund tries (often in vain) to outperform the market. Bogle cites the research which says that actively managed funds very rarely can outpace the average (index) of the stock market due to the fees which eat into returns. As he stresses: COSTS ARE FOREVER.
Certainly not a light or easy read. Its very dense with financial lingo and visuals. I would not recommend for somebody just trying to get started with investing and who is not yet familiar with a lot of the financial terms. I found it hard to keep up with at times and expected the book to cover the basics a little better. It's also quite lengthy, especially the revised version which adds a lot of updated content to the already long original version (not necessarily a bad thing). Bogle's shorter book, The Little Book of Common Sense Investing, would be more appropriate for somebody looking for a less bulky read. I kind of wish I had chosen the shorter, more accessible version, but still eye opening nonetheless. Bogle's philosophy has created a loyal following of individual investors (and led to huge growth for Vanguard) and has helped enlighten those investors to the fact that they don't need to rely on fund managers whose interests may not align with their own.
Certainly not a light or easy read. Its very dense with financial lingo and visuals. I would not recommend for somebody just trying to get started with investing and who is not yet familiar with a lot of the financial terms. I found it hard to keep up with at times and expected the book to cover the basics a little better. It's also quite lengthy, especially the revised version which adds a lot of updated content to the already long original version (not necessarily a bad thing). Bogle's shorter book, The Little Book of Common Sense Investing, would be more appropriate for somebody looking for a less bulky read. I kind of wish I had chosen the shorter, more accessible version, but still eye opening nonetheless. Bogle's philosophy has created a loyal following of individual investors (and led to huge growth for Vanguard) and has helped enlighten those investors to the fact that they don't need to rely on fund managers whose interests may not align with their own.
March 21, 2018
“Common Sense on Mutual Funds” by John Bogle is a substantial book. It is quite long. Reading the newest version, the 10th anniversary edition, adds plentiful commentary, making this even longer. Bogle likes to offer as complete an argument as he can for low cost index funds, and I personally found it quite a bit beyond what I was expecting. I enjoyed the voice of the author. He presented his information in a casual manner, although with quite a bit of repetition. Perhaps it wasn’t exactly repetition, perhaps it was describing nuances to his arguments. This was for completeness, but hurt readability. And with this 10th anniversary edition, the author decided that every few pages (or minutes on the audiobook), he would break in with an update. These were often interesting, with Bogle saying how correct he was, or in some instances how wrong he was in his predictions of where the mutual fund industry would be. I listened to this on audio, and the problem with these update sections was that they were introduced by the narrator saying something like “Ten year update,” but there was no indication when the update was over and you were back listening to the original book. This would have been a good place to have a second narrator to help the listener understand. If you are a well-informed investor, you probably know a lot of the “rules” of efficient investing, like purchasing low cost mutual funds, and investing in index funds instead of actively managed funds. This book really provides the detailed background on how those rules came about, and not much more. Overall this is a good review of the economics and the business of mutual funds, and it provides the backgrounds into efficient stock and bond investing. It provides a lot of information, in some ways overwhelming.
March 27, 2009
This was an informative, interesting and ultimately extremely valuable book for anyone interested in building wealth for retirement thru a 401k, IRA or by investing in mutual funds. Written by the founder of Vanguard, it has completely changed the way I will approach investing for the next 30 years and has really opened my eyes about some of the downfalls of individual investing. I highly recommend this book to anyone beginning to think about investing. Here is a quick summary: Invest only in index funds - the empirical evidence is almost unanimous that they out-perform other mutual funds over the long run, even before accounting for all the fees that eat up a significant portion of your return (fees that are much lower on index funds). After reading this book, the choice becomes a no-brainer for anyone with a investment time-line of over 15-20 years.
August 13, 2007
John Bogle repeats in this book what he has been preaching for decades, so if you're not new to his work, there's going to be a lot of repeat information for you. Still, it's all great information--he defends index investing because of its low cost, low taxes, and thus long-term superiority over actively managed mutual funds. Finally, he finishes with a critique of the modern mutual fund industry, and demonstrates how all companies except one are designed to make a profit, thereby putting the interests of the fund investors after the interests of the company investors. Only Vanguard puts its fund investors first.
June 7, 2013
This book is a classic for a reason. Bogle, one of the greatest financial figures of the 20th century, gives his recommendations for investing (he recommends Index Funds, like so many other people, while he was the one to introduce them to the general investing public back in 1975).
April 12, 2023
John Bogle is the founder of Vanguard and the guy who made index fund investing available to the common person.
Here he goes in depth on why broad-based funds are the best for the majority of people.
Here he goes in depth on why broad-based funds are the best for the majority of people.
December 8, 2014
good book on the basics of Mutual funds. Really enjoyed reading it.
November 11, 2020
This books is one of the best insight into mf investing
June 8, 2017
This book was much longer, denser, and far more data-heavy than Bogle's "Little Book of Common Sense Investing." I would recommend that book over this one for the average investor just for that season. That said, Bogle's writing is at it's best when the mountains of data gives way to simple, timeless, powerful principles that must be understood, remembered, and applied in order to have success in your investments.
Here is a summary of my key takeaways from the book:
Investing is an act of faith, a willingness to postpone present consumption and save for the future. Investing is an act of faith in the U.S. Economy and the nation's financial markets.
As long-term investors we cannot afford to let the apocalyptic possibilities frighten us away from the markets. Without risk there is no return.
To consistently and reliably succeed as an investor, you must be a long-term investor.
From 1802 to 1997 stocks grew at a after-inflation rate of 7 percent annually. Bonds 3.5% over the same period. This despite all the market turmoil and bear markets and wars during that period. This does not factor in taxes.
The longer the time horizon, the less variability in average annual returns.
A sensible balance of stocks and bonds that are held in your portfolio through the market's inevitable seasons of growth and decline will position you well both to accumulate proft and withstand adversity. For a retirement plan, Bogle recommends an asset allocation between 70/30 to 90/10 stocks/bonds during your accumulation phase (15-40 years to retirement) depending on your appetite for returns and ability to stomach risk. As your time horizon shortens ( like 1-15 years to retirement) he recommends gradually decreasing the percentage of stocks, perhaps to as low as 35/65 stocks/bonds, again depending on your capital needs and ability to stomach risk.
Market returns - cost of investing (expense ratio, fees, trading costs, taxes, inflation) = investor return.
The long-term investor who pays the least has the greatest opportunity to earn most of the real return provided by the stock market.
1. All investors own the entire stock market. All investors (passive and active), holding all stocks at all times, must match the gross return of the market.
2. The management fees and transaction costs incurred by active investors in the aggregate are substantially higher than those earned by passive investors.
3. Therefore, because active and passive investments together must, by definition, earn equal gross returns, passive investors must earn higher net return than active investors.
Simple Principles for Investing Success:
You must invest
Time is your friend
Impulse is your enemy
Keep your expenses under control
Keep it simple
Stay the course
A portfolio properly balanced between stocks and bonds optimizes risk and return for the investor.
The four elements of determining your asset allocation are:
1. Return
2. Risk
3. Cost (the lower the better)
4. Time (the longer the better)
The long-term investor cannot afford not to take the risk of investing in the stock market.
Choose a balance of stocks and bonds according to your investment objectives, your time horizon, your level of comfort with risk, and your financial resources. The greater the allocation of stocks, the greater the average long-term returns (and short-term volatility).
Asset allocation and the cost of the funds you invest in are by the far the two decisions that will have the greatest impact on your returns.
Investing in high cost funds can wreck the benefits of your asset allocation.
Having lower costs both reduces risk and increases returns on your investment. Cost is the most important important determinant of portfolio performance.
Eight Rules for Building Your Portfolio
1-- select low cost funds "the first thing to look at [when evaluating a fund] is expense ratio"
2-- consider carefully the added costs of advice
3-- do not overrate past fund performance
4-- Use past performance to determine consistency and risk
5-- beware of "star" fund managers
6-- beware of asset size -- some funds get too big, and when they get too big there is a negative impact on return. This is kind of complicated but doesn't matter if you are investing in a broad-based market index fund.
7-- don't own too many funds. After owning 4-5 Funds your diversification benefit doesn't appreciably increase much more.
8-- buy your fund portfolio and hold it. "Buy right and hold tight". If you are doing it right your investments will be boring.
Bogle suggests that international stocks should be no more than 20% of your portfolio and portfolios could easily do well without them. He seems to favor and trust the U.S. market more than the potential risk/reward/diversification offered by investing in the international market. He argues that you get sufficient international exposure to get the diversification benefits of foreign markets from large-cap American companies in the S&P 500 that operate in many countries.
The returns you get on international stocks are affected by currency markets. A strong dollar means lower returns from international stocks, a weaker dollar means greater returns from international stocks.
Bogle is wary of the risks of value/growth or large cap/small cap tilting in your portfolio. He argues strongly for reversion to the mean over time. He argues that investors can't accurately guess which tilt might have an advantage over the next twenty-five years. He advocates buying the total stock market index fund because then you can't be guessing wrong and consequently run the risk of underperform the market by a substantial margin.
Having a long time horizon:
1-- greatly increases potential returns
2-- dramatically moderates risk
3-- compounds the losses incurred by high costs
4-- compounds the gains achieved through low costs
The structure of Vanguard: the mutual fund shareholders owning the mutual funds owning the management is different than the traditional mutual fund company in which the shareholders of an outside management company own the management company which controls the mutual fund which is owned by the mutual fund's shareholders. This makes Vanguard unique in its predominant focus on the interests of its mutual fund investors rather than having a focus on the interests of the shareholders of the management company that controls the mutual funds of other non-Vanguard mutual fund companies. This is a big deal. No fund can serve two masters. Under the traditional structure management companies prioritize increasing the assets under their control and the money earned through fees over increasing investor returns.
Index funds make less money for management companies and more money for investors.
Over all this book was pretty good. I enjoyed the section about leadership at the end. I got bogged down in the middle with all of the data. The key takeaways are rock solid and helpful though. I really think Bogle is right on the money.
The overall takeaway can be summed up like this:
By far the best path for a normal retirement investor is to buy and hold a portfolio of broad-based market index funds with as low of cost as possible over as long of time as possible. You should have an asset allocation (stocks/bond ratio) that is appropriate for your financial goals, time horizon, need for accumulation, stomach for risk, etc and as you get closer to the distribution phase you should gradually shift a higher percentage of your portfolio from equities (stocks) to fixed income securities (bonds). Contribute as much as you can to the investment. Don't try to performance chase, time the market, or react to market noise. Don't try to beat the market. Buy the market.
Its advice I intend to follow.
Here is a summary of my key takeaways from the book:
Investing is an act of faith, a willingness to postpone present consumption and save for the future. Investing is an act of faith in the U.S. Economy and the nation's financial markets.
As long-term investors we cannot afford to let the apocalyptic possibilities frighten us away from the markets. Without risk there is no return.
To consistently and reliably succeed as an investor, you must be a long-term investor.
From 1802 to 1997 stocks grew at a after-inflation rate of 7 percent annually. Bonds 3.5% over the same period. This despite all the market turmoil and bear markets and wars during that period. This does not factor in taxes.
The longer the time horizon, the less variability in average annual returns.
A sensible balance of stocks and bonds that are held in your portfolio through the market's inevitable seasons of growth and decline will position you well both to accumulate proft and withstand adversity. For a retirement plan, Bogle recommends an asset allocation between 70/30 to 90/10 stocks/bonds during your accumulation phase (15-40 years to retirement) depending on your appetite for returns and ability to stomach risk. As your time horizon shortens ( like 1-15 years to retirement) he recommends gradually decreasing the percentage of stocks, perhaps to as low as 35/65 stocks/bonds, again depending on your capital needs and ability to stomach risk.
Market returns - cost of investing (expense ratio, fees, trading costs, taxes, inflation) = investor return.
The long-term investor who pays the least has the greatest opportunity to earn most of the real return provided by the stock market.
1. All investors own the entire stock market. All investors (passive and active), holding all stocks at all times, must match the gross return of the market.
2. The management fees and transaction costs incurred by active investors in the aggregate are substantially higher than those earned by passive investors.
3. Therefore, because active and passive investments together must, by definition, earn equal gross returns, passive investors must earn higher net return than active investors.
Simple Principles for Investing Success:
You must invest
Time is your friend
Impulse is your enemy
Keep your expenses under control
Keep it simple
Stay the course
A portfolio properly balanced between stocks and bonds optimizes risk and return for the investor.
The four elements of determining your asset allocation are:
1. Return
2. Risk
3. Cost (the lower the better)
4. Time (the longer the better)
The long-term investor cannot afford not to take the risk of investing in the stock market.
Choose a balance of stocks and bonds according to your investment objectives, your time horizon, your level of comfort with risk, and your financial resources. The greater the allocation of stocks, the greater the average long-term returns (and short-term volatility).
Asset allocation and the cost of the funds you invest in are by the far the two decisions that will have the greatest impact on your returns.
Investing in high cost funds can wreck the benefits of your asset allocation.
Having lower costs both reduces risk and increases returns on your investment. Cost is the most important important determinant of portfolio performance.
Eight Rules for Building Your Portfolio
1-- select low cost funds "the first thing to look at [when evaluating a fund] is expense ratio"
2-- consider carefully the added costs of advice
3-- do not overrate past fund performance
4-- Use past performance to determine consistency and risk
5-- beware of "star" fund managers
6-- beware of asset size -- some funds get too big, and when they get too big there is a negative impact on return. This is kind of complicated but doesn't matter if you are investing in a broad-based market index fund.
7-- don't own too many funds. After owning 4-5 Funds your diversification benefit doesn't appreciably increase much more.
8-- buy your fund portfolio and hold it. "Buy right and hold tight". If you are doing it right your investments will be boring.
Bogle suggests that international stocks should be no more than 20% of your portfolio and portfolios could easily do well without them. He seems to favor and trust the U.S. market more than the potential risk/reward/diversification offered by investing in the international market. He argues that you get sufficient international exposure to get the diversification benefits of foreign markets from large-cap American companies in the S&P 500 that operate in many countries.
The returns you get on international stocks are affected by currency markets. A strong dollar means lower returns from international stocks, a weaker dollar means greater returns from international stocks.
Bogle is wary of the risks of value/growth or large cap/small cap tilting in your portfolio. He argues strongly for reversion to the mean over time. He argues that investors can't accurately guess which tilt might have an advantage over the next twenty-five years. He advocates buying the total stock market index fund because then you can't be guessing wrong and consequently run the risk of underperform the market by a substantial margin.
Having a long time horizon:
1-- greatly increases potential returns
2-- dramatically moderates risk
3-- compounds the losses incurred by high costs
4-- compounds the gains achieved through low costs
The structure of Vanguard: the mutual fund shareholders owning the mutual funds owning the management is different than the traditional mutual fund company in which the shareholders of an outside management company own the management company which controls the mutual fund which is owned by the mutual fund's shareholders. This makes Vanguard unique in its predominant focus on the interests of its mutual fund investors rather than having a focus on the interests of the shareholders of the management company that controls the mutual funds of other non-Vanguard mutual fund companies. This is a big deal. No fund can serve two masters. Under the traditional structure management companies prioritize increasing the assets under their control and the money earned through fees over increasing investor returns.
Index funds make less money for management companies and more money for investors.
Over all this book was pretty good. I enjoyed the section about leadership at the end. I got bogged down in the middle with all of the data. The key takeaways are rock solid and helpful though. I really think Bogle is right on the money.
The overall takeaway can be summed up like this:
By far the best path for a normal retirement investor is to buy and hold a portfolio of broad-based market index funds with as low of cost as possible over as long of time as possible. You should have an asset allocation (stocks/bond ratio) that is appropriate for your financial goals, time horizon, need for accumulation, stomach for risk, etc and as you get closer to the distribution phase you should gradually shift a higher percentage of your portfolio from equities (stocks) to fixed income securities (bonds). Contribute as much as you can to the investment. Don't try to performance chase, time the market, or react to market noise. Don't try to beat the market. Buy the market.
Its advice I intend to follow.
February 20, 2021
The book has some valuable ideas and the author seems genuinely interested in the welfare of mutual fund shareholders, but the writing style really let me down. This is one of the dryest books that I have ever read. A lot of metaphors are used where they don't fit, where they seem unnecessary, and where they appear stretched.
It didn't help that the book uses a lot of jargon. The author assumes that the reader is familiar with the concepts and definitions (which I am not). For example, some of the causal relationships have been assumed to be obvious. It wasn't obvious to me and I had to guess why A follows B. This made the book extremely hard to read. On the other hand, if I knew all the causal relationships in the book, then would I even need to read the book? To be fair, the author has explained some of these causal relationships and concepts in later chapters, but that comes after they have already been used. A re-organization would have made the book much, much better. Maybe it's the editor's fault.
All that cribbing about the writing style aside, the book indeed seems useful for investing in mutual funds (is it outdated since the last edition was 12 years ago?). I learned a lot. I just wish that the journey had been less bumpy. 2 Stars.
It didn't help that the book uses a lot of jargon. The author assumes that the reader is familiar with the concepts and definitions (which I am not). For example, some of the causal relationships have been assumed to be obvious. It wasn't obvious to me and I had to guess why A follows B. This made the book extremely hard to read. On the other hand, if I knew all the causal relationships in the book, then would I even need to read the book? To be fair, the author has explained some of these causal relationships and concepts in later chapters, but that comes after they have already been used. A re-organization would have made the book much, much better. Maybe it's the editor's fault.
All that cribbing about the writing style aside, the book indeed seems useful for investing in mutual funds (is it outdated since the last edition was 12 years ago?). I learned a lot. I just wish that the journey had been less bumpy. 2 Stars.
March 3, 2023
I've been meaning to read this book for a long time and I finally did it. Jack Bogle is an idealist whose idea benefits the many people who partake in Vanguard's offerings. He lays out his theories regarding investing and mutual funds and supports them with evidence ad nauseam. I was going to give this book just three stars because I found the various chapters so redundant - he really proves the same few points with a litany of examples and methods. But the last 75 pages or so brought my star rating to four - in those pages he talks about his life and Vanguard, which was quite fun for me.
For those who want to skip the 500-odd pages, Bogle's approach to investing boils down to this: choose low cost, diverse mutual funds (better yet choose index funds) at an asset allocation that fits your investing goals and timeline, then stay the course (invest for the long term without giving in to temptation of selling or switching investments). He underscores the importance of cost, proves the insane performance of mutual funds that track an index (index funds), and gives useful information on asset allocation.
For those who want to skip the 500-odd pages, Bogle's approach to investing boils down to this: choose low cost, diverse mutual funds (better yet choose index funds) at an asset allocation that fits your investing goals and timeline, then stay the course (invest for the long term without giving in to temptation of selling or switching investments). He underscores the importance of cost, proves the insane performance of mutual funds that track an index (index funds), and gives useful information on asset allocation.
January 14, 2025
Another title for this book could be: 101 ways low cost index funds are a sound investment choice for 99% of people.
Overall very solid read. Very dense. The first half is enough to get the point across, but the later half - especially the chapters on taxes and international investing - are helpful. I will likely reference these and other chapters often as I come to certain inflection points in my investment journey.
Overall very solid read. Very dense. The first half is enough to get the point across, but the later half - especially the chapters on taxes and international investing - are helpful. I will likely reference these and other chapters often as I come to certain inflection points in my investment journey.
November 23, 2020
Cost matters. That simple concept sums up the stock market indexing revolution started by Bogle and the Vanguard funds. Keeping costs low, index investors are able to capture more of the available market returns, compounded over time to build wealth. Low cost, low effort, high rewards.
December 30, 2023
One of the best books I've ever read. The first 3rd of the book gives you the main info you'd need to follow Mr Bogle's style of investing, and the remainder presents case after case (with tons of data and charts, not just anecdotes) of why low cost index funds are the way to invest.
Read
April 3, 2025Investing can often seem complex and overwhelming, but in reality, the most effective strategies are built on simplicity, patience, and discipline. Many investors fall into the trap of chasing high returns, trusting expensive fund managers, or reacting to short-term market trends, yet these approaches rarely lead to long-term success. The financial industry, originally designed to serve investors, has evolved into a system that often prioritizes profits over the interests of the people it claims to help. High fees, aggressive marketing, and unnecessary complexity make it difficult for everyday investors to achieve optimal returns. However, the key to building wealth lies in keeping costs low, maintaining a long-term perspective, and resisting the urge to constantly adjust one’s portfolio.
The investment world is filled with distractions that encourage frequent trading, market timing, and an obsession with past performance. Many people believe they can outguess the market by buying and selling at the right moments, but historical data shows that this strategy is rarely successful. Those who attempt to time the market often end up selling during downturns and missing the subsequent recovery. Instead of focusing on predicting market movements, investors should concentrate on maintaining a balanced and diversified portfolio that aligns with their financial goals, risk tolerance, and time horizon. A simple way to determine asset allocation is to match the percentage of bonds in a portfolio to one’s age, gradually shifting toward a more stable mix as retirement approaches.
Complex investment strategies and actively managed funds often promise superior performance, but the reality is that most fail to outperform the broader market in the long run. Fund managers may claim to have unique insights and expertise, but their frequent trading results in excessive costs that diminish returns. Studies have shown that the majority of actively managed funds underperform index funds, especially after accounting for fees and taxes. Fund companies often highlight funds with impressive past performance, but this is not a reliable indicator of future success. Many top-performing funds eventually revert to average or below-average returns, and a significant portion of mutual funds disappear over time due to poor performance. Additionally, funds that engage in frequent trading accumulate high transaction costs, which further erode investor gains.
The mutual fund industry has gradually shifted its focus from serving investors to maximizing its own profits. Many fund companies prioritize asset gathering over sound investment management, leading to excessive trading and marketing practices that do little to benefit investors. Advertising plays a significant role in encouraging investors to chase past performance, switch funds frequently, and adopt speculative behaviors that ultimately reduce long-term returns. High turnover rates within funds generate hidden costs that investors may not immediately notice, yet these expenses can significantly impact overall performance. Even bond funds, which are often seen as a safer option, come with risks, particularly those that chase higher yields by including lower-quality securities.
Diversification is often promoted as an essential investment principle, but it is important to understand the nuances of international investing. Many investors assume that holding foreign funds is necessary for diversification, yet global markets have become increasingly correlated. Large domestic companies often provide sufficient international exposure, eliminating the need to invest in high-cost international funds that come with currency risks and geopolitical uncertainties. Instead of overcomplicating an investment portfolio, the best approach is to stick with low-cost index funds and high-quality bonds that provide reliable long-term returns.
Long-term investment performance follows predictable patterns when guided by the right principles. Investors often believe that success comes from selecting the right stocks or funds, but in reality, market returns tend to average out over time. Funds that perform exceptionally well in the short term usually struggle to maintain their advantage, while high-flying stocks often experience declines. Instead of focusing on relative performance comparisons, investors should prioritize absolute returns and the consistency of their wealth growth. Many large funds suffer from diminishing returns as they grow too big to maneuver efficiently. Increased trading activity and market impact make it difficult for these funds to sustain their initial success, demonstrating that bigger is not always better.
Taxes are another crucial but often overlooked factor in investment performance. High-turnover funds generate significant tax liabilities, which further reduce investor returns. A large portion of an investor’s potential gains can be lost to taxes if they do not use tax-efficient strategies. Index funds, which typically have lower turnover rates, offer significant tax advantages over actively managed funds. By choosing tax-efficient investments and utilizing tax-advantaged accounts, investors can retain a greater portion of their returns. Compounding is one of the most powerful forces in investing, and minimizing taxes allows compounding to work more effectively over time.
Many investors assume that mutual funds exist to serve their shareholders, but in reality, the industry has evolved into a profit-driven enterprise that prioritizes its own interests. Originally, mutual funds were built on the principles of trust, expertise, and long-term discipline. However, asset gathering has become the dominant focus, leading to excessive trading, increased fees, and marketing tactics that encourage harmful investment behaviors. The rise of financial technology has further contributed to short-term trading and speculation, making it easier for investors to react impulsively to market fluctuations. More information is available than ever before, but this abundance of data often leads to poor decision-making rather than informed investing.
The governance structure of mutual fund companies also presents challenges for investors. Unlike corporate boards, which are accountable to shareholders, mutual fund boards often lack true independence. Many fund directors approve excessive fees and underperforming fund managers without adequately protecting investors’ interests. Some directors even receive compensation levels that rival those of executives at major corporations, raising concerns about conflicts of interest. One of the main structural issues in the mutual fund industry is the separation between fund investors and fund management companies. Investors own shares in mutual funds, but they do not control the companies that manage those funds, allowing fund managers to prioritize their own profits over investor returns.
There is, however, an alternative to this profit-driven model. Vanguard, the investment firm founded on principles of mutual ownership, operates in a way that aligns its interests with those of its investors. By eliminating external profit motives and focusing solely on reducing costs, Vanguard has been able to deliver consistently better outcomes for its shareholders. The firm’s decision to eliminate broker commissions in the 1970s was initially seen as radical, yet it ultimately allowed for lower expenses and higher investor returns.
Beyond financial strategies, investing is also about principles and integrity. Many financial institutions prioritize growth and market share over investor success, but the best firms recognize that their primary duty is to serve the people who entrust them with their money. Companies that focus on transparency, fair treatment, and cost reduction create the best investment opportunities for their clients. Leadership plays a crucial role in maintaining these values, as strong leaders prioritize long-term stability over short-term gains. The best investment firms avoid excessive executive perks, misleading marketing, and hidden fees, instead choosing to operate with integrity and accountability.
A well-run investment firm values both its investors and employees, creating a culture that supports long-term success. Companies that treat their investors as partners rather than revenue sources are more likely to maintain a focus on wealth creation. Firms that emphasize fair treatment, reasonable fees, and a commitment to investor success ultimately provide the best options for those looking to grow their money responsibly.
Ultimately, successful investing does not require complexity or constant action. The most effective strategies are based on common sense—keeping costs low, investing in a diversified portfolio, and allowing time to work its magic. Market trends, flashy funds, and frequent trades are distractions that often do more harm than good. Investors who remain patient, minimize expenses, and focus on long-term goals are the ones who achieve the greatest success. By following these simple yet powerful principles, anyone can build a strong financial future with confidence and clarity.
The investment world is filled with distractions that encourage frequent trading, market timing, and an obsession with past performance. Many people believe they can outguess the market by buying and selling at the right moments, but historical data shows that this strategy is rarely successful. Those who attempt to time the market often end up selling during downturns and missing the subsequent recovery. Instead of focusing on predicting market movements, investors should concentrate on maintaining a balanced and diversified portfolio that aligns with their financial goals, risk tolerance, and time horizon. A simple way to determine asset allocation is to match the percentage of bonds in a portfolio to one’s age, gradually shifting toward a more stable mix as retirement approaches.
Complex investment strategies and actively managed funds often promise superior performance, but the reality is that most fail to outperform the broader market in the long run. Fund managers may claim to have unique insights and expertise, but their frequent trading results in excessive costs that diminish returns. Studies have shown that the majority of actively managed funds underperform index funds, especially after accounting for fees and taxes. Fund companies often highlight funds with impressive past performance, but this is not a reliable indicator of future success. Many top-performing funds eventually revert to average or below-average returns, and a significant portion of mutual funds disappear over time due to poor performance. Additionally, funds that engage in frequent trading accumulate high transaction costs, which further erode investor gains.
The mutual fund industry has gradually shifted its focus from serving investors to maximizing its own profits. Many fund companies prioritize asset gathering over sound investment management, leading to excessive trading and marketing practices that do little to benefit investors. Advertising plays a significant role in encouraging investors to chase past performance, switch funds frequently, and adopt speculative behaviors that ultimately reduce long-term returns. High turnover rates within funds generate hidden costs that investors may not immediately notice, yet these expenses can significantly impact overall performance. Even bond funds, which are often seen as a safer option, come with risks, particularly those that chase higher yields by including lower-quality securities.
Diversification is often promoted as an essential investment principle, but it is important to understand the nuances of international investing. Many investors assume that holding foreign funds is necessary for diversification, yet global markets have become increasingly correlated. Large domestic companies often provide sufficient international exposure, eliminating the need to invest in high-cost international funds that come with currency risks and geopolitical uncertainties. Instead of overcomplicating an investment portfolio, the best approach is to stick with low-cost index funds and high-quality bonds that provide reliable long-term returns.
Long-term investment performance follows predictable patterns when guided by the right principles. Investors often believe that success comes from selecting the right stocks or funds, but in reality, market returns tend to average out over time. Funds that perform exceptionally well in the short term usually struggle to maintain their advantage, while high-flying stocks often experience declines. Instead of focusing on relative performance comparisons, investors should prioritize absolute returns and the consistency of their wealth growth. Many large funds suffer from diminishing returns as they grow too big to maneuver efficiently. Increased trading activity and market impact make it difficult for these funds to sustain their initial success, demonstrating that bigger is not always better.
Taxes are another crucial but often overlooked factor in investment performance. High-turnover funds generate significant tax liabilities, which further reduce investor returns. A large portion of an investor’s potential gains can be lost to taxes if they do not use tax-efficient strategies. Index funds, which typically have lower turnover rates, offer significant tax advantages over actively managed funds. By choosing tax-efficient investments and utilizing tax-advantaged accounts, investors can retain a greater portion of their returns. Compounding is one of the most powerful forces in investing, and minimizing taxes allows compounding to work more effectively over time.
Many investors assume that mutual funds exist to serve their shareholders, but in reality, the industry has evolved into a profit-driven enterprise that prioritizes its own interests. Originally, mutual funds were built on the principles of trust, expertise, and long-term discipline. However, asset gathering has become the dominant focus, leading to excessive trading, increased fees, and marketing tactics that encourage harmful investment behaviors. The rise of financial technology has further contributed to short-term trading and speculation, making it easier for investors to react impulsively to market fluctuations. More information is available than ever before, but this abundance of data often leads to poor decision-making rather than informed investing.
The governance structure of mutual fund companies also presents challenges for investors. Unlike corporate boards, which are accountable to shareholders, mutual fund boards often lack true independence. Many fund directors approve excessive fees and underperforming fund managers without adequately protecting investors’ interests. Some directors even receive compensation levels that rival those of executives at major corporations, raising concerns about conflicts of interest. One of the main structural issues in the mutual fund industry is the separation between fund investors and fund management companies. Investors own shares in mutual funds, but they do not control the companies that manage those funds, allowing fund managers to prioritize their own profits over investor returns.
There is, however, an alternative to this profit-driven model. Vanguard, the investment firm founded on principles of mutual ownership, operates in a way that aligns its interests with those of its investors. By eliminating external profit motives and focusing solely on reducing costs, Vanguard has been able to deliver consistently better outcomes for its shareholders. The firm’s decision to eliminate broker commissions in the 1970s was initially seen as radical, yet it ultimately allowed for lower expenses and higher investor returns.
Beyond financial strategies, investing is also about principles and integrity. Many financial institutions prioritize growth and market share over investor success, but the best firms recognize that their primary duty is to serve the people who entrust them with their money. Companies that focus on transparency, fair treatment, and cost reduction create the best investment opportunities for their clients. Leadership plays a crucial role in maintaining these values, as strong leaders prioritize long-term stability over short-term gains. The best investment firms avoid excessive executive perks, misleading marketing, and hidden fees, instead choosing to operate with integrity and accountability.
A well-run investment firm values both its investors and employees, creating a culture that supports long-term success. Companies that treat their investors as partners rather than revenue sources are more likely to maintain a focus on wealth creation. Firms that emphasize fair treatment, reasonable fees, and a commitment to investor success ultimately provide the best options for those looking to grow their money responsibly.
Ultimately, successful investing does not require complexity or constant action. The most effective strategies are based on common sense—keeping costs low, investing in a diversified portfolio, and allowing time to work its magic. Market trends, flashy funds, and frequent trades are distractions that often do more harm than good. Investors who remain patient, minimize expenses, and focus on long-term goals are the ones who achieve the greatest success. By following these simple yet powerful principles, anyone can build a strong financial future with confidence and clarity.
August 11, 2015
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 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).
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 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).
Read
February 12, 2016recommended by WSB 11-19-2014, p B9, best books for investors.
Common Sense on Mutual Funds. Fully updated 10th Anniversary Edition. By John C. Bogle. Hoboken, New Jersey: John Wiley & Sons, 2010.
This is a updated version. It has the updates in the form of comments in a box near the text. I'm up to p. 45. A fairly easy read so far.
p. 200 - still fairly easy to read - but I'm having to skip some of the math. Bogle is the founder of Vanguard and creator of the index fund. He is plugging index funds.
p. 300. A chapter on bonds. Lots of math, most of which I skipped. A chapter on international funds. He's somewhat opposed, but if you want to do it, do an international index fund. Discussing the search for a superior fund. Acres of Diamonds speech - story about a man who searched the world over for a diamond mine, died, then his successor discovered the diamond mine on the man's own property. Moral: look at your own property first before chasing over the whole world to find wealth.
After having finished the whole book, I came to the conclusion that most of it is over my head. There are a lot of charts and math, which I just skimmed over. However, the last part of the book does contain a couple of interesting chapters. He provides some autobiographical information about his early career, how he studied at Princeton, was hired at Wellington and went on to found Vanguard. At the time of the writing of the 10th anniversary edition he had undergone a heart transplant and had turned over management of Vanguard to other people, continuing to work there in a smaller capacity. He also explains his philosophy of leadership. This is the last section of the book, entitled "On Spirit", with the Chapter 20, On Entrepreneurship, Chapter 21, On Leadership, Chapter 22, on Human Beings.
I think that I would say I didn't really learned all that much from the book. The main thing is the author originated the idea of the index fund and believes that is what people should invest in. Perhaps the book was intended for people more knowledgeable about stocks than I. However I would be willing to recommend the last three chapters of the book, as interesting biographical material, and expressing a general philosophy that doesn't require a deep knowledge of stocks or math skills. I was a little disappointed because I thought it was recommended as helping me learn about the stock market and I don't think it did.
Common Sense on Mutual Funds. Fully updated 10th Anniversary Edition. By John C. Bogle. Hoboken, New Jersey: John Wiley & Sons, 2010.
This is a updated version. It has the updates in the form of comments in a box near the text. I'm up to p. 45. A fairly easy read so far.
p. 200 - still fairly easy to read - but I'm having to skip some of the math. Bogle is the founder of Vanguard and creator of the index fund. He is plugging index funds.
p. 300. A chapter on bonds. Lots of math, most of which I skipped. A chapter on international funds. He's somewhat opposed, but if you want to do it, do an international index fund. Discussing the search for a superior fund. Acres of Diamonds speech - story about a man who searched the world over for a diamond mine, died, then his successor discovered the diamond mine on the man's own property. Moral: look at your own property first before chasing over the whole world to find wealth.
After having finished the whole book, I came to the conclusion that most of it is over my head. There are a lot of charts and math, which I just skimmed over. However, the last part of the book does contain a couple of interesting chapters. He provides some autobiographical information about his early career, how he studied at Princeton, was hired at Wellington and went on to found Vanguard. At the time of the writing of the 10th anniversary edition he had undergone a heart transplant and had turned over management of Vanguard to other people, continuing to work there in a smaller capacity. He also explains his philosophy of leadership. This is the last section of the book, entitled "On Spirit", with the Chapter 20, On Entrepreneurship, Chapter 21, On Leadership, Chapter 22, on Human Beings.
I think that I would say I didn't really learned all that much from the book. The main thing is the author originated the idea of the index fund and believes that is what people should invest in. Perhaps the book was intended for people more knowledgeable about stocks than I. However I would be willing to recommend the last three chapters of the book, as interesting biographical material, and expressing a general philosophy that doesn't require a deep knowledge of stocks or math skills. I was a little disappointed because I thought it was recommended as helping me learn about the stock market and I don't think it did.
August 25, 2015
An updated edition of a 1999 classic, this book dates from 2010 and includes many notes and sidebars that update the original information. It feels relevant and pertinent.
It feels a bit long-winded to me, but it seems like a good reference book if you want to know how mutual funds work on a deep level. John C. Bogle is the founder of Vanguard and knows his industry inside and out.
Premise: A low cost, broadly diversified portfolio continues to be the best way to build wealth at the lowest cost and risk. It will always outperform the more expensive and complex actively managed mutual funds.
The book has 2,410 reviews on Goodreads! Wow. (Other financial books I've looked at have 3 or 4.)
Conclusions, conveniently labeled at the back of the book: If your financial future depends on your investments, be conservative. Steer a careful course in a balanced investment program. Seek the lowest costs. Rely on highly diversified bond and stock index funds. Demand tax efficiency. Trade infrequently. Be skeptical that past returns will repeat. Keep a long-term perspective. Stay the course.
It feels a bit long-winded to me, but it seems like a good reference book if you want to know how mutual funds work on a deep level. John C. Bogle is the founder of Vanguard and knows his industry inside and out.
Premise: A low cost, broadly diversified portfolio continues to be the best way to build wealth at the lowest cost and risk. It will always outperform the more expensive and complex actively managed mutual funds.
The book has 2,410 reviews on Goodreads! Wow. (Other financial books I've looked at have 3 or 4.)
Conclusions, conveniently labeled at the back of the book: If your financial future depends on your investments, be conservative. Steer a careful course in a balanced investment program. Seek the lowest costs. Rely on highly diversified bond and stock index funds. Demand tax efficiency. Trade infrequently. Be skeptical that past returns will repeat. Keep a long-term perspective. Stay the course.
August 22, 2014
John C. Bogle's proof case for the Vanguard style of mutual fund management. The book is well written and manages to stay interesting despite the fact that Bogle belabors the point, hammering home the core principles from every conceivable angle. Why an individual would choose another style of fund after reading this is beyond me.
I read the tenth anniversary edition, which is updated with commentary and additional analysis. That feature kept my interest due to the fact that we can see his principles put into practice through the market disaster of 2007-09. Bogle is good at admitting where he was wrong (rarely) and affirming where he was right. I find it interesting that he made some projections on market patterns which turned out to be wrong. One of the things he repeats in the text is you can't base future predictions on past performance.
Well worth the time to read, whether planning for the long term future, or a looming retirement.
I read the tenth anniversary edition, which is updated with commentary and additional analysis. That feature kept my interest due to the fact that we can see his principles put into practice through the market disaster of 2007-09. Bogle is good at admitting where he was wrong (rarely) and affirming where he was right. I find it interesting that he made some projections on market patterns which turned out to be wrong. One of the things he repeats in the text is you can't base future predictions on past performance.
Well worth the time to read, whether planning for the long term future, or a looming retirement.
February 28, 2016
John Bogle explains, in detail, the benefit of ensuring that your portfolio is made up of low cost and low turnover investments. He compares the returns of actively managed funds with the returns of index funds and shows the long-term impact. It is striking how a tiny difference of .3% in expenses can dramatically alter that funds available when you go to retire.
He explains the mutual fund industry and how most funds are built solely for profits and not to enhance long term shareholders value. He also explains the foundations of which he built Vanguad and why more funds should be built with the sole purpose of truly building value for shareholders and not trying to push a product to collect fees.
The nice thing about the updated 10th anniversary edition is that it depicts these scenarios over a long period of time clearly showing that these are investment principles built to last.
He explains the mutual fund industry and how most funds are built solely for profits and not to enhance long term shareholders value. He also explains the foundations of which he built Vanguad and why more funds should be built with the sole purpose of truly building value for shareholders and not trying to push a product to collect fees.
The nice thing about the updated 10th anniversary edition is that it depicts these scenarios over a long period of time clearly showing that these are investment principles built to last.
October 30, 2014
John C. Bogle is an investing saint or an investing pariah according to who you ask. He was the founder of the Vanguard Group, the home of the first low cost index mutual fund. His advice for most investors, expounded here, is to invest in stock indices through low cost index funds. He explains his stance clearly in this book: it is the cost of advice and administration that consumes much of a managed mutual fund's return and that research effort doesn't exist in index funds. His target audience is the consumer, not the professional money manager who is more likely to belittle the Bogle approach than embrace it.
Clear ideas clearly presented. If this book seems too much to you, try The New Coffeehouse Investor. Same concept distilled to its essence.
Clear ideas clearly presented. If this book seems too much to you, try The New Coffeehouse Investor. Same concept distilled to its essence.
Displaying 1 - 30 of 174 reviews