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

The Little Book of Common Sense Investing PDF

Click here to Download The Little Book of Common Sense Investing PDF Book by John C Bogle having PDF Size 2 MB and No of Pages 305.

A wealthy family named the Gotrocks, grown over the generations to include thousands of brothers, sisters, aunts, uncles, and cousins, owned 100 percent of every stock in the United States. Each year, they reaped the rewards of investing: all of the earnings growth that those thousands of corporations generated and all of the dividends that they distributed.

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

Name of Book The Little Book of Common Sense Investing
Author John C. Bogle
PDF Size 2 MB
No of Pages 305
Language English
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About Book – The Little Book of Common Sense Investing PDF Book Download by John C. Bogle

Each family member grew wealthier at the same pace, and all was harmonious. Their investment compounded over the decades, creating enormous wealth. The Gotrocks family was playing a winner’s game. But after a while, a few fast-talking Helpers arrive on the scene, and they persuade some”smart” Gotrocks cousins that they can earn a larger share than their relatives. These Helpers convince the cousins to sell their shares in some of the companies to other family members, and to buy shares of other companies from them in return.

The Helpers handle the transactions and, as brokers, they receive commissions for their services. The ownership is thus rearranged among the family members. To their surprise, however, the family wealth begins to grow at a slower pace. Why? Because some of the investment return is now consumed by the Helpers, and the family’s share of the generous pie that U.S. industry bakes each year-all of those dividends paid, all those earnings reinvested in the businesses 100 percent at the outset, starts to decline, simply because some of the return is now consumed by the Helpers.

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To make matters worse, in addition to the taxes the family has always paid on their dividends, some of the members are now also paying capital gains taxes. Their stock-swapping back and forth generates capital gains taxes, further diminishing the family’s total wealth. The Little Book of Common Sense Investing PDF Book Download The smart cousins quickly realize that their plan has actually diminished the rate of growth in the family’s wealth.

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They recognize that their foray into stock picking has been a failure, and conclude that they need professional assistance, the better to pick the right stocks for themselves. So they hire stock-picking experts-more Helpers!-to gain an advantage. These money managers charge fees for their services. So when the family appraises its wealth a year later, it finds that its share of the pie has diminished even further.

To make matters still worse, the new managers feel compelled to earn their keep by trading the family’s stocks at feverish levels of activity, not only increasing the brokerage commissions paid to the first set of Helpers, but running up the tax bill as well. The Little Book of Common Sense Investing PDF Book Download Now the family’s earlier 100 percent share of the dividends and earnings pie is further diminished.

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HOW DO YOU CAST your lot with business? Simply by buying a portfolio that owns shares of every business in the United States and then holding it forever. This sim ple concept guarantees you will win the investment game played by most other investors who-as a group-are guaranteed to lose.

Please don’t equate simplicity with stupidity. Way back in 1320, William of Occam nicely expressed the virtue of simplicity, essentially setting forth this precept: When there are multiple solutions to a problem, choose the simplest one. The Little Book of Common Sense Investing PDF Book And so Occam’s razor came to represent a major principle of scientific inquiry. By far the simplest way to own all of U.S. businesses is to hold the total stock market portfolio or its equivalent.

You can safely assume that it was not the best per formers that have gone to their well-earned demise. It was the laggards that disappeared. Sometimes their managers moved on. (The average tenure of active equity fund portfolio managers is just under nine years.) Sometimes giant financial conglomerates acquired their management companies, and the new owners decided to “clean up the product line.”

These conglomerates, truth be told, are in business primarily to earn a return on their capital as owners of the fund’s management company, not on your capital as a fund owner. The Little Book of Common Sense Investing PDF Book Often investors fled funds with lagging performance, the funds’ assets shrank, and they became a drag on their managers’ profits. There are many reasons that funds disappear, few of them good for investors.

But even funds with solid long-term records go out of business. Often, their management companies are acquired by marketing companies whose ambitious executives conclude that, however good the funds’ early records, they are not exciting enough to draw huge amounts of capital from new estors. The funds have simply out lived their usefulness. In other cases, experiencing a few years of faltering performance does the job.

In this chapter, I’ll attempt to answer the question about the value of investment consultants. The Little Book of Common Sense Investing PDF You’ll note that I’m skeptical of the ability of advisers as a group to help you select equity funds that can produce superior returns for your portfolio. (Some do. Most do not.)

Professional investment advisers are best at providing other valuable services, including asset allocation guidance, information on tax considerations, and advice on how much to save while you work and how much to spend when you retire. Further, most advisers are always there to consult with you about the financial markets.

Advisers can encourage you to prepare for the future. The Little Book of Common Sense Investing PDF They can help you deal with many extra-investment decisions that have investment implications (for example, when you want to build a fund for your children’s college education or need to raise cash for the purchase of a home). Experienced advisers can help you avoid the potholes along the investment highway.

Put more grossly, they can help you to avoid making such dumb mistakes as chasing past performance, or trying to time the market, or ignoring fund costs. At their best, these important ser vices can enhance the implementation of your investment program and improve your returns. A large majority of investors rely on brokers or advisers for help in penetrating the dense fog of complexity that, for better or worse, permeates our financial system.

If the generally accepted estimate that some 70 percent of the 55 million American families who invest in mutual funds do so through intermediaries is correct, then about 15 million families choose the “do-it-yourself” road. The remaining 40 million families rely on professional helpers for investment decision making. (That’s essentially the unsuccessful strategy described in my opening parable about the Gotrocks family’s Helpers.)

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