The Little Book of Common Sense Investing

Here's a summary of chapter six from 50 Prosperity Classics: Attract It, Create It, Manage It, Share It (50 Classics). This chapter is written by John C. Bogle.

Key Quote

"Successful investing is all about common sense...Simple arithmetic suggests, and history confirms, that the winning strategy is to own all of the nation's publicly held businesses at very low cost. By doing so you are guaranteed to capture almost the entire return that they generated in the form of dividends and earnings growth."

Summary of the Chapter

If you invest in stocks at all, put your money in a fund that automatically owns a little bit of every company listed. Over time, it is a sure and almost worry-free way to accomplish wealth.

My Thoughts on This Subject

1. Regular readers will know that I LOVE the thoughts expressed above. ;-)

2. One of Bogle's other books, The Bogleheads' Guide to Investing, is one of the books I named the best money books of all time.

3. For those of you who don't know, he’s suggesting that stock investors invest in index funds.

4. Though it seems like indexing would doom you to "average" results at best, index funds actually beat most actively managed funds (for more details, see Investment Smackdown: Index Funds Versus Actively Managed Funds). The reason? Their costs are significantly lower and thus their net returns are higher.

5. If you want to, it's pretty easy to invest using only index funds.

6. Bogle isn't the only person who loves index funds -- many other famous and prominent investors do as well.

Comments

[thad]

I'm sure you know this, but the "Boglehead's Guide to Investing" was actually written by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf... regular posters over at www.diehards.org

Bogle does have several great books - Common Sense on Mutual Funds is great.

Thad

[FMF]

Thad --

You are correct. I should have said the Boglehead's book is about Bogle's investing philosophy.