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If you heard about investing (usually a sign we're in a bubble or getting there) and you're thinking of start investing you should start with this book.
It makes a really compelling argument for investing using an index fund and saving time and energy for other things you may enjoy more than researching companies, etc.
Over the long terms: - Costs compound badly - Active investors on average fail to produce good results because of the costs of trading and CGT (Capital Gain Taxes) expenses - By buying an index you reduce the emotional stress and you'd be less likely of panic or get greedy
For some reason I still think the book is missing something in terms of preparing the reader for the frequent and normal up and down of the markets.
I heard of this book on an Investopedia articled titled "The 9 Best Books for Young Investors in 2021" that says: "If there’s only one book young investors need to learn about the stock market, retirement investing strategies, and real estate investment opportunities, we recommend “The Little Book of Common Sense Investing” by John C. Bogle." Intrigued, I was expecting some sort of a guide on the stock market: some sort of "for Dummies" book but better.
Instead, what I found was a finance-themed self-help book which, like all self-help books, stretches a single simple concept for 200+ pages. Here's the gist of the book: invest in index funds, don't waste your time and money by investing in single stocks or mutual funds. That's it, I saved you 10 quids. The book introduces this concept in the first 10 pages and proceeds to bludgeon you on the head with it for the remaining 190 pages. All the while relentlessly pouring unfunny jokes, quotes from Warren Buffet (if I wanted to hear from him I would've gone to the source thanks), and the author's unbearable self-aggrandizing as a "pioneer" of index funds. That's right, the author has a vested interest in index funds since he created Vanguard, one of the most famous index funds.
Basically with this book you're buying an ad.
If there's an upside from this situation is that from now on I won't every buy a stock market book again: I will just borrow ebooks from the library and read them on my non-Amazon ereader.
I wish I had come across this book in 1996, when I first started investing in funds. At the time, I was living in the US, where most pensions are defined contribution and require you to take charge of where your contributions are invested. Over the years, I have made the following errors: (1) investing in individual companies; (2) investing in "fads" (specifically, tech funds in 2000!); (3) not learning enough about bonds; (4) having a portfolio that was unbalanced in terms of equities and bonds, geographic regions, and sectors; and (5) not paying attention to fund costs.
Over the years, I have learned these lessons slowly but surely (and sometimes painfully!) I can honestly say that if I'd had this book back in 1996, I wouldn't have made nearly as many mistakes.
In the 1970s, John Bogle was the visionary that understood that the best strategy for almost every investor who is in it for the long haul is to invest broadly in index (tracker) funds with low charges. That's it! Sounds simple, and if you don't want to spend 14 quid on the book, just do this. But in comparison to the long-term costs of investing, 14 quid is nothing, and the book will help you understand WHY this is such a good long-term strategy. Using numerous data-based examples, Bogle illustrates why this works, and the pitfalls of not following it. All the data show that "expert" stock-pickers do no better than chance, compared to index funds, and because of factors such as reversion to the mean, and of course higher costs, they do worse.
I read this book in just 2 days. Besides maybe Dave Ramsay's book "Financial Peace", it is by far the easiest book on investment that I have ever read. Considering the move within the UK towards defined-contribution occupational pension schemes, it should be required reading.
Well, every now and then you choose a real gem of a read that changes your entire perspective on a subject you are pursuing. Having read many investment books over the years, this little book blew me away. Honest, concise, informative and a spring board to further study if you wish (Bogle’s “Common Sense On Mutual Funds” is incredible, but if you don’t desire to read 600pages, this little book gives you the outline and understanding to make more informed choices), this book has greatly enhanced my understanding on stock/ bond investing. Literally as if a veil that had clouded my vision was gradually removed with each page absorbed. Recommended.
Excellent. Cuts out all of the usual jargon & waffle of this type of book, and highlights all of the deceits ( many self inflicted ) of the investment world of the small investor. As somebody once said, “You can’t beat the markets”, but this book tells you how to at least get your fair share, whilst avoiding self delusion and wasted effort. All you need to construct your own balanced investment portfolio. I only wish I had found it lots of years ago.
I read a famous quote from Albert Einstein, which spurred me to action: “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”. Obviously, I want to be the one who earns it! However, getting concrete information had been tricky.
As a student (and soon graduate), my investment journey is in its early days. It's an overwhelming topic, yet I want to avoid costly mistakes.
Having read this book I have a sense of clarity, I know what strategy to follow, the justifications for this, and the pitfalls many investors made. Bogle proposes an investment approach that is incredibly simple, yet proves that this approach will guarantee you your share of the market's returns.
Bogle demonstrates it's futile (and dangerous) to attempt to get more than your fair share of the market, and in seeking to do so, you will almost certainly end up with less. Rather than trying to buy the needle in the haystack, you should instead buy the entire haystack.
At the end, Bogle explains how you should build your portfolio, what it should contain, and how you should alter it as you reach your goal (eg: buying a house, retiring). These chapters tie everything you have read together in an elegant and practical way.
My response to main reviewer critiques...
1. This is an "advert" for Vanguard: Bogle advocates for using index trackers with the lowest fees, Vanguard is one option, but there are many companies offering similar funds with competitive fees. Yes, Bogle created the first index fund, but that does not invalidate any of his justifications.
2. The information is limited or repetitive: I think the level of detail was good. The book makes a suggestion, then justifies why this is a good idea. It tackles many preconceptions or fallacies an investor might make and justifies why low-cost index trackers are a wiser choice.
The book is succinct, I read it in three evenings. It avoids rambling or information overload. If I wanted to know about every aspect of investing, I'm sure there are several 700-page textbooks that could achieve this - frankly, the simple, universal, and effective techniques described here are more compelling!