The Little Book of Common Sense Investing – John C. Bogle

Bogle, the founder and former CEO of The Vanguard Group, gives his advice on maximizing your return on investments. Points taken away from the book:

 

1. If you’re going to invest, invest for the long run, not short term. Don’t let emotions get in the way of your decision to trade.The message is clear: in the long run, stock returns depend almost entirely on the reality of the investment returns earned by our corporations. The perception of investors, reflected by the speculative returns, counts for little. It is economics that controls long-term equity returns; emotions, so dominant in the short-term, dissolve.

 

2. Statistically, roughly 4% of investors are able to beat the market. Instead of trying to beat the market, just own the whole thing and go with the flow. Our common sense tells us the obvious; while owning the stock market over the long term is a winner’s game, beating the market is a loser’s game.

 

3. Basic principle of a penny saved is a penny earned. Don’t waste money on funds that charge excessive fees. Look into what your MER (expense ratio) is try to find an index fund similar to it that charges less. “Fund returns are devastated by costs, taxes, and inflation.

 

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4. “Don’t look for the needle in the haystack. Just buy the haystack! The haystack, of course, is the entire stock market portfolio, readily available through a low-cost index fund.

 

5. Save your money and don’t buy funds managed by someone else as you’re essentially paying for nothing. Managers of fixed income funds almost inevitably deliver a gross return that parallels the baseline constituted by the interest rate environment. Yes, a few managers might do better – even do better for a long time – by being extra smart, or extra lucky, or by taking extra risk. Yet even the best bond and money market managers can add only a few fractions of one percent per year to your long-term returns, albeit only by risking a comparable shortfall.


By Ryan Lee

 

My Rating:
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1 Comment

  1. […] low cost index funds; even investing guru Warren Buffett has stated the same thing. In the book The Little Book of Common Sense Investing by founder of American investment management company Vanguard, John Bogle, it states the same […]

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