Learning path
Common-sense investing: the case for index funds
John Bogle's argument for owning the whole market at low cost, taught chapter by chapter from The Little Book of Common Sense Investing, with the arithmetic worked out and his 2007 figures clearly dated. Education only: no fund recommendations.
13 lessons, about 61 minutes in all. Take them in order.
- The Gotrocks family 4 min
Bogle's parable of a family that owned every company, until the Helpers arrived.
- Where stock returns come from 5 min
Dividends, earnings growth, and the swing in what investors will pay: Bogle's way of splitting the market's return.
- Owning the whole market 4 min
Index funds, the S&P 500 and total-market indexes, and why a market-value-weighted index looks after itself.
- Costs and the market return 3 min
Why investors as a group must earn the market return minus their costs.
- Fund returns versus investor returns 6 min
Why the return a fund reports is not the return its investors actually get, and how timing opens the gap.
- Taxes are costs too 5 min
How trading inside a fund creates tax bills, and why Bogle counts taxes alongside fees.
- When future returns are lower 5 min
Bogle's 2007 forecast, built from dividends, growth and the P/E ratio, and what actually happened next.
- Why past winners rarely repeat 5 min
Survivorship, reversion to the mean, and star ratings: why picking yesterday's best fund is harder than it looks.
- Paying for advice 5 min
What a financial adviser can and can't do for you, how advisers are paid, and what an advice fee costs over time.
- Costs go on forever 5 min
Expense ratios, sales charges and trading costs, and why low cost is the most reliable guide Bogle found.
- Bonds and money-market funds 4 min
When returns come almost entirely from interest, costs take an even bigger bite.
- New indexes and ETFs 5 min
"Smart" indexes that promise to beat the market, and exchange-traded funds: Bogle's doubts, and the case for them.
- Graham, the arithmetic, and a plan 5 min
Benjamin Graham's defensive investor, Bogle's "relentless rules of humble arithmetic", and the plan he suggests: one investor's reasoned view.