Bogle little book common sense investing

Countless millions of investors have purchased index funds because of Jack. But, simply being an indexer is insufficient. Successful investors embrace the principles undergirding the rationale for index funds and understand the pitfalls hindering the effective execution of an investment plan.

The Little Book of Common Sense Investing provides the tools required to implement a winning portfolio strategy. Read it and win! The Little Book of Common Sense Investing packs into short pages the distilled genius of the nearly seven decades hes spent revolutionizing the process for everyone, from the smallest IRA holder to the largest pension and endowment funds.

Read, enjoy, and profit. His website is www. This book focuses on explaining the value of index investing in an easy to understand way and encourages readers to focus on a long-term approach to investing. What is index investing? Index investing is when you buy and hold index funds in your investment portfolio for the long-term, while focusing on broad diversification and minimizing fees.

An index fund is a basket or portfolio that holds many stocks designed to mimic the overall performance of the stock market, sector or financial market. Index funds, called a traditional index fund TIF in the book, are a form of mutual funds that buy shares from all stocks in the stock market so that you can reap the rewards of investing. All the earnings growth generated and dividends distributed by corporations become part of your all-market portfolio.

Index funds eliminate the risks of individual stocks, market sectors and manager selection, except for stock market risk. Why are index funds a winning investment strategy? The magic of compounding investment returns adds additional value to an index investing portfolio. Over the long term, stock market investing has been a winner's game because of the growth, productivity, resourcefulness and innovation of companies and capitalism in creating wealth for business owners.

Successful investing is about minimizing the share of returns earned by companies and maximizing the share of returns delivered to the individual investor. Individual investors can do this by buying and holding a total stock market index fund, instead of individual stocks, for the long-term.

What is the most effective way to build wealth? Bogle recommends that the most effective way for individual investors to build wealth over the long-term is to: Buy and hold a total stock market index fund for the long-term Capitalize on the magic of long-term compounding of returns Avoid high cost, high turnover, opportunistic marketing costs in the financial services industry Diversify broadly in your investments Keep costs, fees and expenses low Rebalance in a disciplined fashion, typically on an annual basis Spend less and save more Avoid making assumptions about future returns on the stock market Stop trying to time the stock markets How can individual investors become successful investors?

Successful investing is about owning businesses and earning rewards through dividends and earnings growth. The higher your investment activity, the higher the financial cost and the less return individual investors receive. Investment return of stocks includes earnings growth and dividend yield. What is the difference between investment return and speculative return? Bogle argues that the stock market can be divided into two parts: Investment return of corporations, which is made up of the initial dividend yield of stocks and their earnings growth over time.

When there is below average performance on the stock market, they tend to be followed by periods of recovery. For example, the negative s were followed by the roaring s, and the dispiriting s were followed by the booming s. In the long run, stock returns depend on the reality of investment returns earned by businesses. The perception and emotional swings of investors are reflected by speculative returns and are difficult to accurately forecast in the short-term. However, you can forecast the long-term economics of investing because investment returns earnings and dividends are almost completely responsible for long-term stock market returns.

What are the two games of investing? Roger Martin, the Dean of the University of Toronto's Rotman School of Management, introduced the idea of two different games in investing: The real stock market of businesses. This is where companies compete with real money, strategy, innovation and foresight to earn real profits and pay real dividends.

This is about investing and the gradual accumulation of returns earned by companies. The expectations market of stock prices. This is when stock prices go up and down baked on the expectations of investors. Speculation creates a transitory and volatile short-term expectations based on investor emotions and perception. Bogle argues that investors should ignore the short-term expectations market and focus on the real stock market.

This will provide individual investors with a productive long-term investment return. Can individual investors win by building a simple investment portfolio? This can be achieved by holding the total stock market portfolio, which means owning all publicly traded businesses on the stock market. In , William of Occam wrote about the concept of simplicity When there are multiple solutions to a problem, choose the simplest one.

This is done by buying and holding a diversified, low-cost portfolio that tracks the stock market. It allows you to own the stock market over the long-term, as opposed to trying to beat the stock market. Indexing is the predominant cornerstone of investment strategy for corporate pension funds and as the core building block for long-term investment portfolios.

Why is cost important to investing? Costs matter a lot in investing because they decrease the value of an individual investors portfolio over the long-term. Portfolio transaction costs such as front-end sales charges, cost of the purchase and sale of portfolio securities. These are mostly hidden costs. To offset the high costs of actively managed funds, Bogle recommends focusing on low cost index funds.

Keep portfolio turnover low. Stay the course of the long-term.

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