Monday, July 23, 2007

Book Review: The Little Book of Common Sense Investing by John C. Bogle

As I receive a few inquiries a month on my finance blog regarding how I research companies, what books do I read, etc..I would like to introduce a new section to my finance blog, Book Reviews.

For my 1st book review, I picked up “The Little Book of Common Sense Investing” by John C. Bogle.

John C. Bogle is founder of the Vanguard Group, Inc., and President of its Bogle Financial Markets Research Center. In 1999, awarded one of the four “Investment Giants” of the twentieth century by Fortune Magazine.

“The Little Book of Common Sense Investing” provides a good introduction to basic finance principle for someone new to the financial markets or investing. The book is focused around one winning simple strategy: owning the entire stock market through a market index fund, and then do nothing. Mr Bogle uses a three-way approach to support this main strategy:
- Uses simple and logical arithmetic to illustrate the magic of compounding with a low cost structure, ideally in an index fund. Provides data that a total market index fund with a low expense ratio is superior over the long –term against mutual funds, professional money managers, exchange-traded funds, and active traders.
- Provides surveys and quotes from many of the most experienced, most successful investors in the US to agree with the successful strategy of indexing. Each chapter ends with a section called “Don’t take my word for it” Some of the investors include, but not limited to are: Warren Buffet, David Swenson, Jack Meyer, Paul Samuelson
- Provides a dataset of facts and figures around all of the costs involved when you trade often, supporting one of my favorite Warren Buffett quotes “For investors as a whole, returns decrease as motion increases.”

My biggest takeaway from this book is to truly understand the net return of all my trades against the index. Going forward, I will change my performance benchmark calculation to a net return of each trade and/or strategy against the S&P 500.

Please email me letting me know if this book review was helpful.

1 comment:


John Bogle is the Index head. The theory that you cannot beat the market over time has been thoughly disproven many times over.