Reviewing Common Sense on Mutual Funds

John C. Bogle’s Common Sense on Mutual Funds, Updated 10th Anniversary Edition is one of the most influential books I have ever read. If you are at all interested in learning more about investing your money, you need to read this book.

John Bogle, the book’s primary author, is not someone followers of this website would expect me to appreciate. When I first heard about Common Sense on Mutual funds that was my expectation too. So, I didn’t read the book for over a year. What could I learn from a Wall Street magnate who founded a giant investment company? As it turns out, more than I have learned from almost any book I have ever read.

I began learning about investing seven years ago. At that time, I strongly believed (I almost always strongly believe) that investing money, the stock market, and portfolios were complicated ideas that required years of study and some degree of mastery if one is to be successful. Couple that with my dislike of Wall Street and finance, I was of the mindset that I needed lots of help in learning what I needed to learn and making my money grow. Since I also understood the need to make my money work for me, I was ripe for the pickings.

I sat across from the investment guy at my bank branch and confessed that I knew nothing. I was ready for the bank to guide me. I was willing to pay for their expertise.

The investment guy was very nice and understanding. All I had to do was agree to a fee of roughly two percent and they would be happy to help me. I could give them my money, pay a small fee, and rarely consider all I didn’t know.

Being me, I was never quite comfortable with that arrangement. I hate not knowing things I feel like I should know. I hate paying people to do something I should be able to do for myself.

Over the years, I slowly started learning. Thanks to circumstances of life, I had to largely liquidate my investment account with the bank in the fall of 2016. About a month ago, the circumstances of life smiled on me and I was once again in a position to invest. Armed with this unexpected opportunity, I was determined to do better.

I started reading every book on personal investing that had good reviews in multiple places. I began listening to podcasts on investing. I started reading the Wall Street Journal and Investors Business daily almost every day. In the middle of my binge, I was reminded of Mr. Bogle’s book. Within minutes of beginning, I knew this book was going to teach me, give me confidence, and change my life.

What shocked me about Mr. Bogle’s book was his willingness to criticize the mutual fund industry. Mr. Bogle, who has dedicated his career to investing, wrote an entire book dedicated to the idea that most investors don’t need professionally-managed portfolios and their associated fees. Mr. Bogle proved his point with lots of statistical evidence demonstrating how often simple index funds beat the so-called pros and do so at a fraction of the cost.

Convinced by Mr. Bogle’s arguments, I began looking at index funds. When I saw that I could invest in index funds for as low as 0.04 percent–I was hooked.

I spent the next several days comparing dozens of well-known index funds from several different companies. I spent hours deciding on an investment strategy (something else Mr. Bogle discusses). At the end of last week, I opened an app and began investing in index funds with no help from anyone. All I had read about investing in different stocks was suddenly meaningless. I knew that If I picked the right mix of index funds, trusted my strategy, and held on for the ride, my money would grow and I would have far fewer headaches than I would have from a life as a trader.

Today, after investing almost all of my money, I accepted a free consultancy appointment with the brokerage I’m using. I took the meeting feeling like I could confirm what I had learned. When I got up to leave, the investor said, “you have a good head for investing.”

Picking up Ufi’s harness handle, I smiled. If this guy only knew me seven years earlier.

In case you’re wondering, index funds are different from mutual funds because index funds don’t try to beat the market (something Mr. Bogle says rarely happens). Instead, index funds track the performance of a certain market or index. The Vanguard 500 Index is designed to track the performance of the S&P 500 Index.

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