Common Sense on Mutual Funds by John C. Bogle

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This was an informative, interesting and ultimately extremely valuable book for anyone interested in building wealth for retirement thru a 401k, IRA or by investing in mutual funds. Written by the founder of Vanguard, it has completely changed the way I will approach investing for the next 30 years and has really opened my eyes about some of the downfalls of individual investing. 
“Cogent, honest, and hard-hitting-a must-read for every investor.” -Warren E. Buffett
Praise for Common Sense on Mutual Funds
“Invoking both Thomas Paine and Benjamin Graham, Jack Bogle outlines a supremely logical plan not only to better investors’ returns but to improve the whole fund industry. This isn’t just the best book yet by Bogle, it may well be the best book ever on mutual funds.” -DON PHILLIPS, President & CEO, Morningstar, Inc.
“Buffett cannot teach you or me how to become a Warren Buffett. Bogle’s reasoned precepts can enable a few million of us savers to become in twenty years the envy of our suburban neighbors-while at the same time we have slept well in these eventful times.”-PAUL A. SAMUELSON, Massachusetts Institute of Technology Department of Economics
“After a lifetime of picking stocks, I have to admit that Bogle’s arguments in favor of the index fund have me thinking of joining him rather than trying to beat him. Bogle’s wisdom and his commonsense way of explaining things make this book indispensable reading for anyone trying to figure out how to invest in this crazy stock market.”-JAMES J. CRAMER, Money Manager and Senior Columnist for TheStreet.com

Let’s see some view of the readers of this Book:

“If you’re not a super informed investor this is a really valuable book to read.

Main take aways from this book:

All market index funds (bond and stock) are an ideal place for most people to invest money because.

– Their expense ratios are low and efficient.

– They reflect the market as a whole which over time tends to out pace actively managed mutual funds.

– Actively managed mutual funds tend to have higher costs which further detracts from their effectiveness as a place to invest. Over time those costs add up (due to what you’re missing with compound interest) to a significant amount of money. Also, past performance of mutual funds and fund managers is not a good way to judge the future earnings because the market is too unpredictable. Funds and managers that are hot for a few years, typically will do much worse after a few years. So when you have high funds you’re essentially paying some one more money than you need to to produce a portfolio that will most likely not outpace the market. He has tons of data on this.

– A good way to balance investments is to hold your age (in percentage) in total market bond funds, the rest can be put into a total market stock index fund. The bond funds allow you to mitigate some of the risk from having all of your investments in the equities markets.

– Bogle started the Vanguard investment company in the 70s to start the first total stock index fund and create a more efficient way for a mutual fund company to operate.

– He gives some views about leadership that are good, but the main value are his ideas about the effectiveness of index funds and expense ratios.”

Another Person said:

This is the newest edition of one of the best investing books I’ve read. I was curious to hear Bogle’s thoughts on the recent economic situation, and his reflections on his sage advice ten years earlier. The last ten years, although totally unprecedented and unpredictable, have certainly borne him out.

This book doesn’t actually talk much about the stock market or asset allocation. It talks specifically about the mutual fund industry. This book doesn’t give the standard lines about beating the market and picking mutual funds. It’s even unique among books about passive investing in that it doesn’t talk much about asset allocation and Modern Portfolio Theory.

What it does is incessantly rip into traditional mutual funds, particularly their cost structure. The first part explains all the ways costs matter. I found my jaw dropping a few times during this part. I already agreed with him, and yet, I was astonished. I knew that costs matter, but I had no idea that they mattered to that extent. I used to believe high costs are justified in some cases, but after this book, I really understand that even small differences in cost make an enormous difference long term. Later, the book discusses how mutual funds are organized and how they subtly deceive shareholders. It seems downright fraudulent, and Bogle agrees. All along, he never fails to offer an alternative: index funds.

I was grateful that the book ended with a mini autobiography, and an explanation of how Vanguard works, which is the company he founded. This man is a crusader, a hero, practically a saint among the investing community. He had the guts to stand up against an enormous industry that was complicit in ripping off their shareholders. Bogle was a promising mutual fund executive at a very young age, and he could have increased his fortunes by several orders of magnitude. Even though he certainly did very well for himself, he was clearly more interested in sticking up for the investors than in taking their money. His company, Vanguard, is very unique. They’re owned by their fund shareholders, have practically no marketing budget, operate at-cost, and will turn away money if taking it would not be in the best interests of their shareholders.

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