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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Alignment

Alignment

My word for today is #alignment

A few years ago, I was travelling back to school in a commercial vehicle, when suddenly the driver stopped and took permission from the passengers to do what they call “wheels alignments.”

I didn’t know what that meant, because I was in high school then.

I can still recall that experience because it led to a misunderstanding between the driver and one of the passengers, which eventually turned into a minor World War III.

If you are familiar with the Nigerian garage system, you will know what I mean.

But this morning, while I was on my routine meditation, the Spirit of God took my memory back to that experience to teach me on alignment. I did a Google check to find out what wheel alignment means.

It turned out that alignment refers to an adjustment of a vehicle’s suspension. This system connects a vehicle to its wheels.

When correctly done, alignment “assures your tires meet the road at the proper angle, your wheels are pointing straight, and your tires are centred in the wheel wells. It adjusts the angles of your vehicle’s wheels to original specs for best gas mileage, proper road contact, a smooth ride, and the longest tire life.”

However, when your car or your tires are out of alignment, among other things, it causes your vehicle to pull to the left or right, or that your steering wheel is off-centre when driving straight. Speed becomes uneasy and driving tedious and unenjoyable in the process.

Just like driving a car, if you must live a happy life, enjoy it to the fullest and keep straight at your purpose, you must learn to align correctly.

Life’s alignment comes in two dimensions – alignment with the source and alignment with your passion.

Show me a man who derives 100% satisfaction from life and I will show you a man in complete alignment with God – the Source of everything you need to make the experience enjoyable. Such a man moves at the frequency of God, who knows the past, understand the presents and what the future holds.

If you find alignment with God, the next thing is to align to His purpose. In that, every part of your life, just like the four wheels of the car, will be perfectly aligned.

Then consistency will begin to pay off. After all, the new speed is consistency.

I welcome you to find alignment today – with God and with your purpose, and I promise you that your life will be nothing short of fulfilment.