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Jun 14, 2020

The Little Book of Common Sense Investing by John C. Bogle


 

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The Author says that, the simplest and most efficient investment strategy is to buy and hold all of the nation’s publicly held businesses, which is index fund at very low cost." Bogle maintains that the "classic index fund" that owns this market portfolio is the only investment that guarantees a fair share of stock market returns.


The book elaborates on the same practice of index investing that Bogle built the Vanguard Group around to turn a profit for clients.

Now, the index funds make up for $1 trillion in funds invested. All investment experts like Warren Buffett and William Sharpe recommend these funds. They say these are perfect for an individual investor. In this book The Little Book of Common Sense Investing, Bogle discusses what index funds do. He also explains why they’re so reliable. So, if you’re an investor, reading this book is a must. 


Author:
John C. Bogle (born 8 May 1926), who founded the Vanguard Group of Investment Companies in 1974 and built it into a giant mutual fund company, with $4.9 trillion in assets under management today, died on 16th Jan 2019.

John C. Bogle is the author of this book The Little Book of Common Sense Investing. He’s also the CEO and former chairman of Vanguard Mutual Fund Group. Vanguard is the world’s most prominent complete no-load mutual fund firm. In 1976, Bogle launched the 1st index fund of the world for ordinary people and built his empire based on his core principles of investing.


   The book explains the following concepts: 

  •  What is an Index Fund? 
  •  Why this Funds is Trustworthy? 
  •  Who should invest in Index Funds? 
  •  What are the returns on this fund compared to other funds and Individual Stocks?         
  • The way emotions, short- run mindset and admin fee impact your investment?
  • Why you must avoided fund traded on the Exchange? 
The author says that many investors don’t have any professional knowledge or training.
Consequently, they don’t check a company’s worth, and it’s stock’s value. Nor can these investors forecast a firm’s share value in the future. Thus, he advises investors to be conservative in their choices. He recommends putting money in a diverse portfolio. And the stocks in such portfolio must be held on to in the long run.
The ideal way to broadly invest is by buying an index fund. This covers the whole market. Your plan must be to buy the entire market. And then, hold on to it for the long-term. This investment principle is a sure win. In contrast, speculative investments will lose over the same time-frame.





Index Fund:

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index

An index mutual fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These funds follow their benchmark index regardless of the state of the markets. 

Index funds are generally considered ideal core portfolio holdings for retirement accounts, such as individual retirement accounts. Legendary investor Warren Buffett has recommended index funds as a haven for savings for the later years of life. Rather than picking out individual stocks for investment, he has said, it makes more sense for the average investor to buy all of the S&Ps 500 Index companies at low cost an index fund offers.
An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.

Index funds have lower expenses and fees than actively managed funds.
Index funds follow a passive investment strategy. Index funds seek to match the risk and return of the market, on the theory that in the long-term, the market will outperform any single investment.

The core idea behind index funds is straightforward. Index funds have the highest number of diversified shares. These funds denote a portfolio holding a range of stocks which comprise an index. When the businesses in the index pay dividends, their firms’ value grows. And, so do their share prices. Overall, such growth increases the total value of an index. Hence, as all the businesses in a specific index grow, investors holding those funds prosper too.

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