Common Sense on Mutual Funds, Updated 10th Anniversary Edition

this is *the* book to read on mutual funds. it's a hefty tome coming in at 600+ pages, but fear not. this book does not read like a dry financial report. bogle is opinionated and his writing flourishes with reminders of his personality amidst the endless but important charts and tables. to spice things up, bogle makes references to a wide variety of sources including shakespeare, thomas paine, scripture and even hegel! by the time you're done, you'll know *everything* you've ever wanted to know (and more) about the mutual fund industry, all straight from the founder of the vanguard group himself. for those afraid of the size of this book, perhaps check out bogle's "little book of common sense investing" instead and then come back to this book if you want more details. bogle's main message is that costs do matter and simplicity is the best way to avoid costs. the recommendation is to buy low cost broad-based index funds that will outperform the vast majority of actively managed mutual funds in the long run. notice by the definition of "average" that the average investor will get average market returns minus fees and taxes. notice the low cost broad-based index fund gets average market returns minus *minimized* fees and taxes. the index investor will thus outperform the average investor in actively managed mutual funds given all the extra costs associated with active management. also notice that the margin of victory from indexing will compound over the years and will lead to an even greater index fund performance in the long run. that's the gist of why indexing works. if you're not convinced, read bogle's book! even if you've already read some of the other great passive investing books espousing the virtues of indexing, you still owe it to yourself to read at least one of bogle's books. "common sense on mutual funds" is both readable as well as comprehensive, and would be a good addition to your library. burton malkiel, rick ferri, william bernstein, larry swedroe and others have all written excellent books on the subject as well, but they also hold differing opinions on the specifics, so read all of these authors! i was already convinced on indexing after first reading malkiel's book, but continued reading more on passive investing to work out all the details. these books as a whole help reinforce the main ideas while also exposing the reader to the authors' differences in perspectives, thus building confidence in the reader to think and succeed as an independent d.i.y. investor. of particular interest to me was the issue of small-cap value tilting. i was ambivalent on this practice, but bogle's book convinced me to *not* small-cap value tilt. readers who already know what small-cap value tilting is should feel free to skip to the next paragraph. now, for those unfamiliar with the terminology, stocks are divided according to size (small-cap, mid-cap, large-cap) as well as style (value, blend, growth). the size refers to the company's size as measured by its market capitalization, i.e. the number of shares multiplied by the price per share. the style is another way to partition stocks according to certain numbers such as price/book ratios and dividend yields; there's no agreed upon standard that's universally accepted for what constitutes a value/blend/growth stock. informally, you could think of value stocks as those that are not currently favored by the market for whatever reason. at the opposite extreme, growth stocks are "hot" stocks that scream potential. blend stocks are in between value and growth. given 3 sizes and 3 styles, there are thus 9 size-style combinations. according to research done by professors fama and french, small-cap value stocks significantly outperform the other 8 size-style combinations in the long run. the problem is, small-cap value stocks make up about 3% of the total stock market. small-cap value tilting means overloading on small-cap value stocks to try to capture the bonus identified in the fama/french research, but that also means underweighting 97% of the total market and potentially missing out if the other 8 size-style combinations outperform small-cap value. you see the dilemma. bogle's repeated message of simplicity, as well as his emphasis on reversion to the mean, ultimately convinced me to resist the temptation of small-cap value tilting. bogle's unwavering conviction in the simple serves as a necessary component in the chorus of voices, helping to guide your investment decisions, even on the more esoteric matters. and although the message of simplicity is easily stated, i am glad bogle wrote a comprehensive text because the details illustrating the majesty of simplicity is what finally settled the small-cap value tilting question for me. this book's huge size and scope definitely has its drawbacks, not the least of which is the sheer intimidation factor. nevertheless, i believe this book does serve a useful role in the catalog of passive investing, and bogle was the only one who could've written it.

John Bogle is my teacher.

This is a very, very detailed book. It is like the reference Encyclopedia of Mutual Funds. The 600+ pages cover everything from basic definitions to strategies for investment to include several levels of the economics and math that go with it. On of my favorite things about this booko is that Bogle does not pull any punches. This is not a get rich quick view of funds. It is a treatise and a lifetime of experience condensed down into a readable book. While you can read the book cover to cover, I recommend using it as a reference where you read the book in the sections as you need them.

The financial industry has promoted the idea that if you want to have a secure retirement, you should seek their expertise and have them manage the complex world of money for you. I beg to differ. I like to share something simple that has worked for me all these years. I want my financial strategy to provide me four things. 1. Set it and forget it 2. tax advantage 3. hedge against inflation 4. cashflow. Here is what I suggest if you want to accomplish all of these four things. Establish a Roth IRA from Vanguard Group and buy the ETF VOO. Fund it monthly automatically or manually. Fund it to the maximum allowed each year for every year you are working. This can also be where you put your 12 months emergency fund if you need to withdraw for emergencies, because there is no penalty when you withdraw up to your contributions. Next, establish a brokerage account, and fund it monthly, yearly, as long as you are working. You can set it up where each month the brokerage account pulls some funding amount from your checking/savings account to buy ETF from your brokerage. This account is taxable. You can simple buy VOO, and do a buy and hold strategy and reinvest the dividends. Next, buy single family rental property or multi-family apartments. This type of investment allows you to take advantage of the tax laws in real estate investments and is also a hedge against inflation. The depreciation that you take on hides the amount of income that you generate from such properties, thereby, you not having to pay any taxes on the profits. To free yourself from any work in real estate, hire a property manager for the single family rental. To free yourself from any work in multi-family apartments, invest as a passive investor where you only provide the funding for the investment and don't have to do all the work in operations and management of the asset. You get monthly financial reports and each quarter period you get a dividend sent to your bank account. Next thing is optional or you do it because you love it. Have some other source of income if you want to work or earn from wages. Whether it be from a regular W2 job, or from other types of employment: entrepreneur, independent contractor, YouTuber, or the gig economy. By having a strategy that provides all four legs of a table, you have set up an excellent foundation that frees you up to pursue your life's fulfilling activities, you don't have to work for your money if you don't want to. Let your investments grow it for you. People say that investing is complex and confusing and that you need to hire a financial advisor to help you on investing your money for a comfortable retirement. After reading this book, I found that much of what you hear from the financial industry is wrong and is designed to confuse the retail investor. The truth of the matter is that investing your money is not complex and that you do not need a financial advisor. If you listen and follow the advice from much of the professional investor class about where you should put your money, you would be making them rich at your expense. John Bogle exposes the smokescreen behind the financial industry's practices claiming to manage your money all the while they make big bucks from skimming from your assets that you hand over to them to collect. Bogle provides his investment theories and the evidence to back them up. It is what most others in the industry has long kept silent and a secret. The truth to investing is that it is not a secret anymore. The shell game has been exposed. With the secret out in the sunshine, it is no better time to do it yourself, it is not complex, and don't listen to the advise of professional portfolio managers who are out to take your money while pretending to have your back. The professionals make money off your back, and you can do better without them. Go with Bogle's folly, read the book, and follow the wisdom in it, and you will do better than 96% of all funds managed by the portfolio managers.

A common problem that all of us have is that we believe ourselves to be able to produce superior results in virtually any area we try -- acting on that belief can cost you a fortune if it affects how you invest over your lifetime. By definition, half will be average or less, and half average or higher in most areas of human endeavor. When it comes to investing, however, the odds are not that good. If you choose the wrong asset class, you can make great choices and greatly lag the pack. If you choose the wrong way to invest with the right asset class, you can still do poorly. Mr. Bogle's book explains in remarkable detail (with lots of graphs and numbers to make the point) that almost everyone will lag the market averages for stocks over any multiple year period of time due to the effects of trading stocks, taxes, costs for money management, marketing expenses, and size of portfolio. Rather than despair, he points out that we can view this as an outstanding opportunity. We can simply buy indexed mutual funds (such as the ones that Vanguard, his firm, offers) and outperform 98-99 percent of everyone who invests for the long haul. Unlike other books where the author touts an activity that benefits him economically, Mr. Bogle's arguement is right. For anyone with less investment skill than Warren Buffett, S&P 500 and Wilshire 5000 index funds will be a terrific solution. New investors may find this book to have more information than they need or can easily absorb. People who think they know all the answers will find a lot of new material to cogitate about, usefully. Anyone who owns mutual funds is making a mistake if they do not read this book. Anytime you start to invest on the assumption that you can beat the market easily, PLEASE QUICKLY READ OR REREAD THIS BOOK. THEN LIE DOWN UNTIL THE FEELING GOES AWAY! He is also remarkably candid that future returns from indexing may be modest (even though you will continue to beat almost everyone else). My own reaction is that the market is really too high now to start index investing, but new cash should certainly go into index mutual funds whenever we get a decent correction down to or much closer to the more typical 14 times p/e that stocks usually sell for. Mr. Bogle also explores that point in excellent detail. A wonderful book by someone who is really looking out for the investors' best interests!

John Bogle revolutionized the investment industry which was overcharging its customers, investors, and hiding the truth for personal gain. He published his first book in1976, created the Vanguard company, and immediately becoming a pariah on Wall Street. Vanguard has the lowest costs of any investment company. The book is a consolidation of all of his concepts available in the latest edition of his bigger book. If you want to know a little about investing, this is a great first book. If you have some money, as little as $1000, invest it according to what you read in this book. There is a lot to know.

Before digging into the book itself, it is important to recognize the work of John C. Bogle in the financial services industry. As briefly highlighted in the book, Bogle started the Vanguard investment fund to test a thesis put out by a prominent researcher on the merits of "indexing". He created the fund on the idea that investors shouldn't have to pay exorbitant management fees or transaction fees when putting their money away in a fund. The work he has done cannot be matched, and the 500+ pages of this book prove it page after page. That said, I cannot give this book a 5 star rating because in my eyes, it spends far too long discussing a far too simple premise. The premise is straightforward and can be gleamed from the first few pages of reading. "On average, investors would be better off to invest in an large cap index fund like the S&P 500 for the long term than any other investment strategy". If you are convinced of this line of reasoning already, this book may not be worth reading cover to cover. Bogle does state near the beginning of the book, "My goal has been to make each chapter a freestanding and indepedent essay on a particular issue". In my opinion, this book is an essential "manual" for personal investment strategy, but does not suffice for a casual weekend read. The text ruminates on the topic of mutual funds to the point where the read feels like the logical arguments are going in circles. Bogle does argue his points well though and backs them up with large amounts of historical data while also injecting his personal wisdom every so often (the true gem of the book). As a millenial who has taken the personal computer revolution for granted, it is tough to appreciate the weight of this book. U.S. mutual funds now hold over $2.5 T of U.S. equity securities compared to the $40 B in 1982, and even more startling, the concept of "indexing" is actually a novel idea still. It was hard for me to grasp the innovation of indexing because I have always found it to be an obvious idea. We have fast computers and lots of stock data, so why not index? Although my demographic (23 years of age) was probably a primary target of this text, I feel that it did not accomplish the task of compelling my thinking enough to read it straight through. Definitely worth a purchase, but I plan to peruse the chapters in random order as I need them rather than sit down and read the book cover to cover.

The best book on investing by the little guy's friend - John Bogle. You can make a sound financial plan using this book and some common sense investing. John is the best at breaking down the mutual fund industry and telling you how they load up funds with commissions and make you pay those ridiculous high fees in a low profile hard to spot way. He makes it easy for you to spot the charges in their language of 12b-1 and advertising fees. If you are using a broker - you owe it to yourself to read this book and study the facts on broker kickbacks, sales trips, and how the industry really works at your expense. You will be shocked at their hiding of fees and charges. John smokes them out and teaches you how to spot them deep in the wall of paper work.