Welcome to our review of The Little Book of Common Sense Investing. The Little Book of Common Sense Investing is the best book written on index fund investing. It is a must read for beginners starting on their investment journey.
About the Author John C. Bogle
The author John C. Bogle set up the first index fund in 1975. He is the founder and former Chairman of the Vanguard Group which now has $6.2 Trillion dollars under management. Bogle passed away in January 2019 and few people have had a more positive impact in helping retail investors.
Bolge has a dedicated following of investors who call themselves Bogleheads.
What is the Little Book of Common Sense Investing about?
The book explains how index funds work and why they have proved to be an good investment strategy. Index funds offer diversification, low fees and long term gains that outperform most professionals.
The book highlights why professional managers often underperform the market. It focuses on the impact of high management costs, the difficulty of market timing and poor stock selection.
‘Most investors will find the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results delivered by the great majority of investment professionals.’ – Quoting Warren Buffet
Bogle is not saying that you can’t find a good manager but rather that it is very difficult to find a good one. The fact is actively managed funds rarely beat passive index funds.
He quotes the SPIVA report from 2001-2016 which shows on average 90% of actively managed mutual funds underperformed the equivalent index fund. Click here for latest data.
What else will you learn from the Little Book of Common Sense Investing?
The Little Book of Common Sense Investing provides a valuable introduction into how investor behaviour can temporarily affect market prices in the short term but how a focus on long term investing will help you navigate such periods.
‘Accurately forecasting short term swings in investor emotions is not possible. But forecasting the long term economics of investing has carried remarkably high odd of success.’
The book contains information on bonds, asset allocation, dividends, ETFs and the miracle of compound interest.
The Little Book of Common Sense Investing Review Conclusion
Realistically nobody can predict the future. Invest in a low cost index fund instead of paying high fees to professional money managers .
‘An index driven strategy may not be the best investment strategy ever devised, then number of investment strategies that are worse is infinite.’
It is a simple long-term strategy that has proven to beat the majority of professional money managers over the years.
It is a must read for new investors and features in our 5 best investing books for beginners.
Note from Reviewer: This is one of the most important books for a new investor to read. It showed me I didn’t need to pay high fees to a professional to look after my money. With a simple Index Fund Investment strategy I could confidently invest in my future.
BTB Recommendation: – Best for beginners starting their investment journey
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