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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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The Little Book of Common Sense Investing summary
The Only Way to Guarantee Your Fair Share of Stock Market Returns
12 mins
Brief summary
The Little Book of Common Sense Investing by John C. Bogle is a guide to passive investing. It promotes the idea of investing in low-cost index funds to achieve long-term financial success.
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The Little Book of Common Sense Investing
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Key idea 1 of 6
Actively managed funds are expensive and consequently often underperform the market.
Have you ever invested in the stock market? If so, you might have realized that evaluating the attractiveness of a stock is tricky business.
That’s why many investors choose not to invest directly into stocks, but instead put their money in an actively managed fund. Here money is pooled from several investors and then invested into stocks by a specialized fund manager, who regularly evaluates and revises the stock portfolio according to the current situation.
Unfortunately, that kind of investment is risky.
Why?
Because the costs of investing in such a fund are very high. As an investor, you’d pay the brokerage commissions, the fund manager’s fees and so forth. All those fees add up to a hefty chunk of your expected profits.
If the funds perform extremely well, you might not mind those costs, but in the long run, actively managed funds are likely to yield you less profit than the overall stock market.
How can that be?
For one, speculating on stock prices is simply not a sustainable strategy. You might think that a fund can generate huge profits by, for example, buying stocks when they are undervalued and selling them later when they reach their true higher value, but in the long run this strategy can’t produce more earnings than what the underlying companies are earning, which is reflected in the overall development of the stock market.
Add that pitfall to the high costs of the funds, and the result is that an actively managed fund will generate significantly less profit for you than a passive, low-cost index fund that merely mimics the performance of the overall market. In fact, if you had invested $10,000 in 1980, by 2005 you would walk away with 70 percent less if you invested in an active fund rather than an index fund, due to fees alone!
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What is The Little Book of Common Sense Investing about?
The Little Book of Common Sense Investing provides a detailed overview of two different investment options: actively managed funds and index funds. These blinks explain why it's better to your money in a low-cost index fund instead of making risky, high-cost investments in wheeling-and-dealing mutual funds.
The Little Book of Common Sense Investing Review
The Little Book of Common Sense Investing (2007) by John C. Bogle provides a straightforward approach to investing in the stock market. Here's why this book is worth reading:
- With its no-nonsense advice, it guides readers towards a low-cost, long-term investment strategy that is proven to outperform most professional investors.
- Backed by extensive research and historical data, the book presents a compelling case for index fund investing as a simple, yet effective, way to build wealth over time.
- The book's common-sense approach to investing sets it apart, making it a refreshing read that is both informative and highly practical.
Best quote from The Little Book of Common Sense Investing
The expectations market is about speculation. The real market is about investing.
—John C. Bogle
Who should read The Little Book of Common Sense Investing?
- Anyone who wants to invest their money better
- Anyone who wants to learn more about how investing works
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The Little Book of Common Sense Investing FAQs
What is the main message of The Little Book of Common Sense Investing?
The main message of The Little Book of Common Sense Investing is the importance of low-cost, passive index funds for long-term investment success.
How long does it take to read The Little Book of Common Sense Investing?
The reading time for The Little Book of Common Sense Investing varies, but it typically takes a few hours. The Blinkist summary can be read in just 15 minutes.
Is The Little Book of Common Sense Investing a good book? Is it worth reading?
The Little Book of Common Sense Investing is a must-read for anyone interested in smart investment strategies. It offers practical advice and insights in a concise format.
Who is the author of The Little Book of Common Sense Investing?
The author of The Little Book of Common Sense Investing is John C. Bogle.
What to read after The Little Book of Common Sense Investing?
If you're wondering what to read next after The Little Book of Common Sense Investing, here are some recommendations we suggest:
- Get Good with Money by Tiffany Aliche
- Millennial Money by Patrick O’Shaughnessy
- The Intelligent Investor by Benjamin Graham and comments by Jason Zweig
- The Richest Man in Babylon by George S. Clason
- How to Make Money in Stocks by William J. O'Neil
- Warren Buffett's Ground Rules by Jeremy C. Miller
- The Warren Buffett Way by Robert G. Hagstrom
- Trade Like a Stock Market Wizard by Mark Minervini
- The Algebra of Wealth by Scott Galloway
- The Psychology of Money by Morgan Housel
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