The Little Book Of Common Sense Investing by John C. Bogle – A Review

The Little Book Of Common Sense Investing by John C. Bogle – A Review

Compiled by Aina Joseph

Chapter one – THE PARABLE

In the first chapter of his book- The Little Book Of Common Sense Investing, John C. Bogle succinctly used a simple parable of the Gotrocks family that was originally narrated by Warren Buffet, the CEO of Berkshire Hathaway and the infamous Oracle of Omaha. Bogle, whose parable seemed convincing enough, argued that the more active is your investment, the more tax you pay, and the more your money goes out as commission to the intermediaries.

Thus, sustainable investment and a wise investor will diversify but, at the same time, keep fees low and build over the long term. Hence, the need to invest in index funds or other mutual funds because they provide a better opportunity and platform to do this successfully.

Bogle pointed out that the higher the level of an investor’s activities are, the greater the cost of financial intermediation and taxes, and ultimately this will lead to a less net return from the shareholder.

Chapter two – RATIONAL EXUBERANCE

Many investors make the mistake of holding a stock for a short time, and when the market is down, they tend to lose their money. Rather than using this route, John C. Bogle advised investors to buy and hold stocks for a long time.

Although there are ups and downs in stock investing, in the long run, the aggregate shows that you will earn more. This is what Bogle referred to as rational exuberance.

He proved that for each $1 invested in 1900, the return would be $43k over 116 years. Although no one may live up to 116 years, your next generation can, thus, long term stock investing is a way of building generational wealth.

The author also noted that stock trading involves forecasting “swing in investor’s emotions,” and to do that accurately is impossible, but predicting the long-term success of a company carries a remarkable higher odd of success. Conclusively, there are two types of investments; speculative investment or stock trading and a long-term investment like index funds.

Chapter three – CAST YOUR LOT WITH BUSINESS

Rely on Occam’s Razor to win by keeping it simple. Occam’s Razor: when there are multiple solutions to a problem, choose the simplest one. So how do you cast your lot with business? “Simply by buying a portfolio that owns the shares of every business in the United States and holding it forever,” the author suggested.

He used William of Occam’s expression of 1320 to buttress his point. “When there are multiple solutions to a problem, choose the simplest one” It is a simple concept that guarantees you win the investment game played by most other investors who – as a group- are guaranteed to lose.

To focus on the long-term investment, the best parameter to look at is the business and their number and not speculation surrounding individual stocks.   

John Bogle claimed that the S&P 500 is highly profitable. He did this by comparing the performance of the S$P 500 and the total stock market over some time. He expressed how major government parameters are utilizing an index fund to achieve a long term guaranteed profit from the investment.

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The Lessons About Values from Mr. Ibu

The Lessons About Values from Mr. Ibu

When I use to do Nigerian movies, one of my favorite actors when it comes to comedy was John naira Okafor popularly known as Mr. Ibu. In one of his movies, he found a wallet full of several hundred-dollar bills and some few a thousand-naira notes in a “danfo” bus.

On reaching home, he took the notes and pasted the dollar bills in his room as decoration. A friend who knows the value bills came visiting and asked to have the remaining bills so that he, too, can use it to decorate his room. Mr. Ibu reluctantly gave him the remaining large chunk of the notes. You can imagine what happens next.

As I was reminiscing on this story this afternoon, two things lessons became clear to me, and I will love to share it with you.

1. Ignorant of a value does not reduce the value.

Simply because Mr. Ibu doesn’t know the worth of those hundred-dollar bills does not reduce the worth of the bills.

Let’s look at the business perspective. Because some people are ignorant of the value of your product or services does not appreciate, it does not mean the value has reduced. Do not cut your value to their level of understanding rather help them to increase their understanding of your value. That’s why effective value communication is a fundamental part of your business activity.

Alternatively, you can focus on those people who understand and appreciate your value. I mean, those whose values resonate with yours. Hence the need for market segmentation. The two can even go hand-by-hand is you have enough resources to pull it.

Now from an individual perspective, of almost 8 billion people on earth, you are the only version of you. That means you have something to offer or do in a unique way that nobody else can, and that’s your value. The fact that you have not discovered it yet does not mean it’s not there. So, don’t ever think you are worthless.

2. If you don’t know your value, others who do will use you.

The world is full of several of Mr. Ibu’s friends – people who know your value and know that you don’t know your value. And instead of helping you to discover it, they will rather exploit you. It could be your friends, your employer, your clients, and even your customers

Always ask yourself, am I really been appreciated for the value I’m bringing to the table? When it comes to the exchange of values, never think the next party is doing you a ‘big favor.’ That does not mean you should be an ingrate; it does mean you should strive to know your value and what it worth.

Life is a journey, and one of the exciting things about it is a fact that it is a journey of self-discovery. The more of the adventure you undertake, the more you understand what you are capable of, which sets you apart from others. How much of your value do you know?

Do you learn any lesson from Mr. Ibu’s story? Share with us.

The better and faster way to learn anything

The better and faster way to learn anything

Do you want to master the art of learning faster? Or Are you a student at any level desiring academic excellence? Then gather here; this is for you.

What can a primary school pupil teach? I think I can answer that question because I started teaching right from primary school.

I grew up in the house of teachers – my both parents are teachers. So before I began schooling, I had started going to school; and at that tender age, I can recall watching my mum teach students.

As part of the regular child’s play, I remember gathering my younger ones in a classroom setting and teaching them simple things like how to say ABC and count 123… correctly, while every other kid was busy playing with sand.

Fast forward to secondary school, my passion for teaching continued. This time, I started teaching the primary school pupils in my neighbourhood basic arithmetic and dictation.

Then I moved to a boarding school outside my hometown, where I started taking the junior students, and sometimes my classmates, tutorials as well.

I had to read to know more so that I will not be disgraced. That was how I cultivated the habit of reading outside my teachers’ lesson notebooks. It was so serious that while I was in SS1, I had already finished the syllabus and had delved into the next class’ curriculum.

Looking back at my life as a student, I learned a few things from these experiences:

1. There’s always something you can teach. In my previous post, I emphasized that knowledge is progressive, which means there’s always someone who has a lesser understanding than you do, and that’s an opportunity to teach.

We usually fall into the temptation of thinking that everybody already knows what we know. But It will surprise you to realize that there are millions of people who do not have the knowledge you have. So, there’s always something you can teach somebody.

2. The more you teach, the more you know you don’t know enough: In my adventure in teaching, I always realize later on how much more I need to know about a concept. That’s why professors seem to keep searching for more. As long as they keep teaching, they keep on bridging the gap in their knowledge. That’s because the more you teach, the less you will think you know.

3. You cannot really claim you know it until you teach it: There are things we think we know until you get the class to teach it. Then your bubble will be busted. There’s this spirit in class that opens your mind to a great depth that you cannot access while just keeping the knowledge to yourself. As you teach, the concept becomes clearer, simpler.

4. The more you teach, the more you know.
The final part of the lesson I learned is that my comprehension of a concept improves while teaching it. I really cannot explain the science behind it, even when I really wish I could. But I discovered that it is tough to forget whatever I taught somebody.

Apart from that, if you are a teacher, you wouldn’t want to mess up in the presence of the students; thus, it’s up to you to make sure that your level of knowledge is up-to-date.

If you are looking for a motivation to study more, then start teaching more. This explains why students who take tutorials always perform well, ceteris paribus.

So what should you do?
1. Never think there’s nothing you can teach.
2. Do not allow what you don’t know to prevent you from teaching what you know.
3. There’s always somebody who is dying to know what you already know, so teach it.
4. You don’t teach because you know more, but you teach to understand more.

 

The “Progressiveness” of Knowledge

The “Progressiveness” of Knowledge

In primary school, we were taught that two minus three (2-3) was equal to “cannot.” I mean, it was impossible to subtract three from two, probably because we used sticks to count and an attempt to explain it would get us more confused.

As we moved from primary to junior secondary school, we found out that the answer was minus one (-1). I could remember finding that really difficult to understand in JSS 2. However, with time, I got used to it and not only master the concept but also used it to solve some basic algebra.

In junior secondary school, we were told that the square root of negative integer was impossible. But in senior secondary school, surd was introduced. Thus one could solve problems involving negative integer until one got the lowest imperfect number. So when we solved a problem involving surds and got to the point of (-1), that was the end of the solution.

In senior secondary school’s further mathematics and early years in the university, the concept of complex number was introduced. And suddenly, the square root of -1 became possible.

Now, why all these stories? It is to demonstrate the importance of a concept – “Knowledge is progressive.”

Let’s assume Paul, Peter, and Pius are in university, secondary and primary levels of education, respectively.

It would be wrong for Paul to shut Peter up for saying that the square root of -1 is not possible. Similarly, it wouldn’t be okay for Peter to laugh at and look down on Puis for saying that it’s not possible to solve 2 minus 3 (2 -3).

They are all talking from their levels of knowledge, and three of them have to pass through all these phases.

For our brothers and sisters in “high places” of knowledge, when next you hear somebody “blowing” blunder, please remember that he or she is talking from his or her level of knowledge. Don’t be too quick to forget that you were there once upon a time. So instead of shutting him or her up or looking down on him or her, just sincerely correct or, at best, walk away in peace.

And for us at the lower cadre, let’s not shut up because of those ahead of us or allow them to shut us up. We should also not forget to be humble to learn and grow to the next level of knowledge.

The largest room in the world of knowledge is the room for improvement. Those who think they know something do not yet know as they ought to know. 1 Corinthians 8:2

My Career – How do I Know God is Involved?

My Career – How do I Know God is Involved?

Have you ever been to a construction site? I mean, where they are building an edifice or a big auditorium.

Now, create a mental image on such a place and think of the happenings around there. I am sure you will discover that there are all sorts of engineers with different specialities, not to mention various skilled and unskilled labourers.

You will also notice that they all work on different parts and aspect of the project.  But towards a common goal, which is to achieve the original plan in the blueprint.

Think of the earth as the construction site. You are one of the workers, and God is the architect and owner of the building. God is up to something; he is building a kingdom on earth. He has a master plan, and he has recruited you to be part of the construction process. This will lead us to the first truth:

your career is part of God’s big plan – emphasis on GOD.

Yes, your career is not about you; it is about the master plan. It is more significant than you, which is why you can’t just do whatever you like. You must play according to the rule and build according to definite instructions. This very first reason underscores the importance of divine direction.

The people working on this site (in our analogy above) were paid to do what the owner wants. If at any point, they decide to build something different, and the owner finds out; he will stop sponsoring the project. That is the second truth we want to derive.

God will not sponsor a project he did not initiate. Do you want to have God as your possession? Be part of his project.

If your responsibility in the master plan is to build the kingdom from the classroom and you end up in the bank, you are on your own. I am not trying to scare you, instead to make you see the importance of divine direction in career.

Many people think career is not spiritual; thus, they can decide to do anything they want with it. Well, you can indeed do whatever you wish to, but in the end, it will amount to nothing as far as heaven is concerned. You may be successful in the eyes of men, but in God’s eyes, you are entirely out of the master’s plan.

Your self-will and dedication can yield results. Moses struck the rod instead of talking to it, and it yet yielded result. He was successful in bringing out water as far as the people were concerned, but with God, he failed.

Yes, the flesh can yield result, but the result kills. Thus, the achievement is not the yardstick for measuring whether you are in the right career path as far as divine direction is concerned.

How Do I know God is Involved?

I love the definition of a career on the University of Dubuque’s website – “Career can be defined as the total of decisions that direct your educational, social, economic, political and spiritual endeavours and reflect your unique personality, characteristics and basic life values”.

First, career is a decision. It is bigger than the job, and it is more than the course of study at the university. Unfortunately, most young people are just interested in getting a job and not in building a career. If you are a career-minded person, they are some jobs opportunity you will not bother applying. Even when you find yourself there, you will see it as just a means to an end.

If you are looking for a formula for divine direction, you will be disappointed. It doesn’t exist anywhere. But one thing is consistent among people that have received divine guidance for a career – they are people who love God enough to please him and trust him enough do his will.

Loving God

So the question is, do you genuinely love him? Do you desire to please him more than anything? The problem sometimes is not that we don’t love God, but we love other things more than God. It could be our ego, reputation, money etc. When it comes to picking between doing God’s will and these things, we would instead go for them and ask God for forgiveness later. It is difficult for a man with such a mindset to receive divine direction for a career.

Trusting God

The second part is trust. A man can Love God and ready to do whatever God tells him, but doesn’t trust him enough to pull him through. Such a man will always try to help God. He erroneously believes that heaven helps those who help themselves.

Seeking God’s face becomes an alternative. If it doesn’t work, he goes back to God, but if it works, then God is involved.

A man, who must receive divine direction for career, must be ready to LOVE him unconditionally and TRUST him with all he’s got. The love prepares your heart to receive divine instructions, and the trust gives you the stamina to obey the instruction to the later.

Avoid the extremes

I’ve once met a young man, who finished NYSC for almost two years, and I asked what he was doing, He said he is waiting on the Lord. Like Really? Are you doing nothing for nearly two years in the name of waiting on the Lord? I asked.

Please don’t get inflicted with the ‘waiting-on-God-Syndrome’.

Don’t get me wrong, there’s nothing wrong with waiting on God. However, that does not mean you should do nothing; waiting on God is not passive. Read through your scriptures, the people used by God were not idle. People like Moses, Elisha, Matthew, James, Gideon etc. They were doing something, and God visited them on their duty post.

If it comes to your heart, and your motives are right, go ahead and pray about it. If God did not say otherwise, then do it. It can only be possible for those who genuinely love him and are ready to do his will.