Are you looking for a good book on investing? How about a book that is only a few inches wide and one inch thick (250 pages)? That’s doable, right? What if I told you it was written by one of the most experienced investment professionals in the world? What if he started a company that now has trillions of dollars under management? This man who is financially independent is willing to share his knowledge with us. All for about $15.
John C. (‘Jack’) Bogle is the author. His book is the new and updated edition of The Little Book of Common Sense Investing. He is the founder of the Vanguard Group. Have you heard of them? I bet you have. I’m not the only one recommending this book though. There is another investor who likes it. “Rather than listen to the siren songs from investment managers, investors -large and small- should instead read Jack Bogle’s ‘The Little Book of Common Sense Investing.’” – Warren Buffett
This 10th anniversary edition, published in 2017, is fully updated so even if you read the original, it is worth a fresh read.
He makes a case for how to win at investing. He demonstrates the important role of equities, transaction costs, and taxes in building financial success. He stresses the importance of dividends and how to pick stocks that will make you rich. His method is proven. Don’t let the simplicity of the index funds he created fool you. They are a very sophisticated way of earning not “average” returns, but in the top 15-20% of investor returns.
We physicians work hard for years to acquire specialized knowledge and skills that the lay-public doesn’t have. Our medical outcomes are superior because of this knowledge. What we know literally saves lives. We assume that applies to other fields too. Wouldn’t a finance-MBA hedge fund guy do better than a passive index fund? The shocking answer is no.
Passive index investing has been endorsed by the biggest names in investing. These include the fathers of value investing (Benjamin Graham & Warren Buffett), Jeremy Siegel, William Sharpe, Bill Bernstein, Charlie Munger, Michael J. Mauboussin, Jonathan Clements, Paul Samuelson, Burton G. Malkiel, Mark Hulbert, David Swensen among others. As a practicing physician do you have financial knowledge that these geniuses don’t have?
Investing in broad, low-cost index funds allows you to take advantage of what Louis D. Brandeis called, “The relentless rules of humble arithmetic.” It really is just common sense. Read Bogle’s excellent book and let him explain it to you.