Warren Buffett and Charlie Munger have made a lot of money for themselves and fellow shareholders of Berkshire Hathaway with their market-beating stock picking.
Yet as John C. Bogle’s “The Little Book of Common Sense Investing” shows, both Berkshire billionaires urge the majority of investors not to try to beat the market.
“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees,” Buffett is quoted as saying on the front cover of Bogle’s book.
Buffett and Munger’s long career is proof, at least to most people, that it’s possible to beat the market if you have the correct temperament and the willingness to read constantly and carefully consider risk management.
Yet most people aren’t equipped with the emotional temperament, time or talent to consistently beat the market--which is pretty efficient though not completely so. That’s why both Buffett and Munger have consistently urged most investors to buy low-cost, tax-efficient index funds that mirror the entire stock market. As Buffett says, that’s a way for the “dumb” money to get smart by not paying “helpers” in the financial industry high fees for market-losing and tax-inefficient results.
Bogle has made his career on the back of index investing. He founded The Vanguard Group Inc. in 1974 and was its long-time CEO. He’s credited with forming the world’s first index fund--based on the Standard & Poor’s 500--at Vanguard.
Bogle lists the many advantages of index investing in “Little Book.” Investors can buy them without paying a sales commission. They have low annual expenses and are tax efficient. They’re simple and keep investors from chasing recent performance. And because costs are so low, they beat the vast majority of actively managed mutual funds over time.
Though Bogle recommends putting the vast majority of one’s portfolio into stock and bond index funds and holding on forever, he does support investors having a small “funny money” account where they can try to pick individual stocks or carefully chosen actively managed funds.
As Bogle puts it: “Life is short. If you want to enjoy the fun, enjoy! But not with one penny more than 5 percent of your investment assets.”
“Little Book” isn’t Bogle’s only foray into the literary world. He’s also authored “Common Sense on Mutual Funds,” “Enough” and “The Battle for the Soul of Capitalism,” among others.
Bogle’s “Little Book” is one of many in a series by publisher John Wiley & Sons Inc. All of the ones I’ve read have been informative and can be digested in a day. The ones I can personally vouch for are:
“The Little Book That Beats the Market” by Joel Greenblatt
“The Little Book of Big Dividends: A Safe Formula for Guaranteed Returns” by Charles B. Carlson
“The Little Book of Value Investing” by Christopher H. Browne
“The Little Book of Safe Money: How to Conquer Killer Markets, Con Artists, and Yourself” by Jason Zweig
Yet as John C. Bogle’s “The Little Book of Common Sense Investing” shows, both Berkshire billionaires urge the majority of investors not to try to beat the market.
“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees,” Buffett is quoted as saying on the front cover of Bogle’s book.
Buffett and Munger’s long career is proof, at least to most people, that it’s possible to beat the market if you have the correct temperament and the willingness to read constantly and carefully consider risk management.
Yet most people aren’t equipped with the emotional temperament, time or talent to consistently beat the market--which is pretty efficient though not completely so. That’s why both Buffett and Munger have consistently urged most investors to buy low-cost, tax-efficient index funds that mirror the entire stock market. As Buffett says, that’s a way for the “dumb” money to get smart by not paying “helpers” in the financial industry high fees for market-losing and tax-inefficient results.
Bogle has made his career on the back of index investing. He founded The Vanguard Group Inc. in 1974 and was its long-time CEO. He’s credited with forming the world’s first index fund--based on the Standard & Poor’s 500--at Vanguard.
Bogle lists the many advantages of index investing in “Little Book.” Investors can buy them without paying a sales commission. They have low annual expenses and are tax efficient. They’re simple and keep investors from chasing recent performance. And because costs are so low, they beat the vast majority of actively managed mutual funds over time.
Though Bogle recommends putting the vast majority of one’s portfolio into stock and bond index funds and holding on forever, he does support investors having a small “funny money” account where they can try to pick individual stocks or carefully chosen actively managed funds.
As Bogle puts it: “Life is short. If you want to enjoy the fun, enjoy! But not with one penny more than 5 percent of your investment assets.”
“Little Book” isn’t Bogle’s only foray into the literary world. He’s also authored “Common Sense on Mutual Funds,” “Enough” and “The Battle for the Soul of Capitalism,” among others.
Bogle’s “Little Book” is one of many in a series by publisher John Wiley & Sons Inc. All of the ones I’ve read have been informative and can be digested in a day. The ones I can personally vouch for are:
“The Little Book That Beats the Market” by Joel Greenblatt
“The Little Book of Big Dividends: A Safe Formula for Guaranteed Returns” by Charles B. Carlson
“The Little Book of Value Investing” by Christopher H. Browne
“The Little Book of Safe Money: How to Conquer Killer Markets, Con Artists, and Yourself” by Jason Zweig
