Common Sense on Mutual Funds, Updated 10th Anniversary Edition

by John C. Bogle

If individual stocks derive their values from the businesses that issue them, then the broad stock market obviously represents not a mere collection of paper stock certificates but the tangible and intangible net assets of American business in the aggregate. Before taking costs into account, investors will inevitably earn long-term returns that approximate the earnings and dividends produced by corporate America. Rapid turnover can ultimately produce no value for investors as a group, for it does nothing to increase the level of corporate earnings and dividends. Nor can market timing have any effect on the intrinsic value of corporate America. The ideal for the long-term investor remains a sensible balance of stocks and bonds held through the market’s seasons of growth and decline.

Markets depend on earnings and dividends of company. Frequent turnovers will not help.