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

Written by

Nicholas Alifa

July 3, 2020

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.

Join the club to Read More…

Nicholas Alifa

Nicholas Alifa

Author

Nicholas Alifa is an entrepreneur, a coach, and an Agribusiness expert. He is committed to helping individuals and businesses grow to their full potential by focusing on Faith, Finance, and Life. He has spoken on several platforms and trained thousands of people on capacity development, entrepreneurship, finance, investment, and academic excellence.
1 Comments

1 Comment

  1. Royal CBD

    Heya! I’m at work surfing around your blog from my new iphone 4!

    Just wanted to say I love reading your blog and look forward to all your posts!
    Carry on the great work!

    My web site – Royal CBD

    Reply

Submit a Comment

Your email address will not be published. Required fields are marked *

Related Articles

The emotional cost of being an entrepreneur

The emotional cost of being an entrepreneur

Hey! I know you have decided to go into entrepreneurship and make it really big, and nothing will stop you. But it will interest you to know that you need more than financial and business intelligence to succeed as an entrepreneur. You might have heard this statement...

JUST WHAT YOU NEED TO KNOW ABOUT INCOME

JUST WHAT YOU NEED TO KNOW ABOUT INCOME

What if I tell you that COVID did some good! Yes, you read that right, the Global pandemic that turned the world upside down and brought it to a standstill did not do us only wrong but some good, as well! The one good thing was to expose our weaknesses or areas of...

ENTREPRENEUR Versus HUSTLER?

ENTREPRENEUR Versus HUSTLER?

Yes, you read the title right! There's a difference between an entrepreneur and a hustler, just like a wholesaler and retailer are different people. Follow me, let me tell you a story. I was privileged to work with two bosses (at different times, though). I will tag...

8 REASONS YOU NEED TO BE ORIGINAL

8 REASONS YOU NEED TO BE ORIGINAL

A few days back, I enrolled in a writing class, and we were given a template for the introduction. Our tutor said we could use hers as a guideline, with a strong instruction not to copy the template verbatim. The assignment was to be submitted before the end of the...

THE “WITCHCRAFT” TAG

THE “WITCHCRAFT” TAG

We were told countless times not to go out and play with Anita, although they did not give us any concrete reason. So, I always disobeyed my mother's order. Anita was a lively girl who loved playing rough as I did, and we would talk for hours when we didn't feel like...

Simple hacks to a cheerful life

Simple hacks to a cheerful life

Global chaos or not, while we may exert our wishes on the world, we can’t control how the world, including other people, will treat us and only control our responses to our environment. Being upset about how things are is focusing on what’s wrong, but with a quick change in focus, you see the same situation but focus on what’s right.

Achor’s research found that every single business outcome improves when a person’s brain is “a positive.” A person is 31% more productive, 37% better at sales, and doctors are 19% faster and more accurate when their brains are positive rather than negative, neutral, or stressed. The question is, how can we be positive and stay positive?

I would be sharing a few sets of actions that rewire the brain and say, hacks to living a happy life:

How Sensitive are you?

How Sensitive are you?

Some weeks ago, I was on a 'bike' with the headlight in broad daylight ON, and the rider and I didn't know. Surprisingly, we had a lot of persons, and no one called our attention to it. We kept moving happily, not until someone eventually motioned to us that the...

When God Doesn’t Make sense

When God Doesn’t Make sense

Imagine your country is at war with an enemy, say, Nigeria with Bokoharam. Then suddenly, a self-acclaimed Prophet rises and declares that he has gotten a message from God. " Surrender to Bokoharam, or the entire country will be destroyed," Thus says the Lord. Will...

Stay Up to Date With The Latest News & Updates

Let's help you grow

Growth may not be easy sometimes but it can really be fun when you have people holding your hands through the process.

Join Our Newsletter

We pursue opportunity whenever it can be found. Be the first to know about it.

Follow Me

I will love to connect with you. Knowing you better allow me to help you grow. Let's get to know each other.