Bogle on Mutual Funds: New Perspectives for the Intelligent Investor

by John C. Bogle

John C. Bogle, founder of the Vanguard Group of  Investment Companies, has built a $100 billion  mutual fund company on principles of candor, fairness,  and low cost. The most outspoken critic of the  mutual fund industry, Bogle speaks to the serious  mutual fund investor, both novice and seasoned, in  this straightforward assessment of an industry Bogle  himself helped revolutionize. Here he offers the  essential principles of canny mutual fund  investing, as well as caveats to protect the investor.  Readers will learn how to: Ask three critical  questions before investing. Evaluate risk tolerance and  design a portfolio to meet current financial  objectives. Develop a diversified portfolio of equity  funds, bonds, and money market funds that will  weather the market's short term variations. Apply  Bogle's eight model portfolios to achieve their own  financial goals. Always find themselves in a winning  money market fund. Protect themselves from  inflation Use index funds to effectively balance  risk/return. Anyone who is serious about mutual funds can  apply the dynamic investment principles of  Bogle On Mutual Funds to establish a  winning, long-term investment portfolio.

Genres: Finance, Business, Nonfiction, Personal Finance, Money, Economics

352 pages, Paperback

First published September 1, 1993

About the author

John Clifton "Jack" Bogle (born May 8, 1929) is the founder and retired CEO of The Vanguard Group. He is known for his 1999 book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor, which became a bestseller and is considered a classic.
More on http://en.wikipedia.org/wiki/John_C._...

Reviews

[Jonathan Peto · Rating 3 out of 5]

While reading this book before lockdowns, the guy next to me at Starbucks told me not to overthink it.

I overthink things.

Though I read this thoroughly and underlined things. Though I am rereading things and using a highlighter to reevaluate and reinterpret passages, I know I do not get the big picture.

I may rate this higher as I continue to use it as a reference text while examining mutual fund data. I can imagine its content becomes clearer with more effort.

Maybe all I can do is make sure my daughter doesn’t repeat my mistakes. (My son learns everything the hard way.)

[Ralph Orr · Rating 4 out of 5]

The evangelist for indexing. One should remember, however, that had one put all their money in the Vanguard S&P 500 fund in July 1999, he or she would have lost over one percent per year annualized over the next ten years, including the reinvestment of dividends and not counting expenses and taxes. Remember, not all investment opportunities can be tracked by an appropriate index. Consider also that as soon as one reallocates (rebalances), which most financial advisors recommend to be done every year or so, then you have at that moment rejected pure passive indexing for at least semi-active management. Also, it is unfair to merely compare the average of all mutual funds with indexing, when in reality advisors do not divide their clients money among all funds equally. They tend to favor certain funds and certain fund groups. A better comparison would be an asset-waited comparison of active managed funds to indexing, and how those active managers handle downside risk compared to pure indexing. After all, it is the downside that concerns clients the most. This would indicate whether advisors add value. Hence, though Bogle's points are well taken, indexing is not the final word. A better strategy may be combining indexing, with active management, and stock and bond selection, and perhaps the prudent use of stops and other risk management strategies. In other words, hedging your bets.

[Alton Motobu · Rating 4 out of 5]

Bogle is the founder of the Vanguard family of mutual funds. This book is for those who want to invest intelligently in mutual funds in the same way that Benjamin Graham advised individual investors of stocks and bonds in THE INTELLIGENT INVESTOR. However, where Graham's book was written for finance majors, Bogle targets lay people. I could not quite make it through Graham's book with 100% comprehension, but I got through Bogle's book because it was not technical. The chapters were specific to each topic and there were easy-to-follow lists and highlighted boxes labeled "caveat emptor" with advice to "let the buyer beware." This book was published in 1994, but the information is still relevant today in 2018.

[Sarah · Rating 4 out of 5]

As a total beginner to this study, some of it was over my head, but I was able to understand more of it than I anticipated. The unfortunate thing is the age of the book, the data stops at the period ending December 31, 1992. One of the things I was able to notice is that the maximum contributions for the tax deferred accounts have significantly increased since the writing of this book, but I don't know enough to know what other information might be outdated and I can't help but wonder about comments the author would have had about the most recent decade.

[Jay French · Rating 2 out of 5]

If you've read any of Bogle's other, shorter books on mutual funds, and you have an interest in the markets and some history investing, you probably already know what this book is about. I'd say this is about the same as Bogle's other books, but more so. More pages, more details, and more, albeit similar pronouncements. Here he explains stock mutual fund investing, but also bond mutual funds and money markets. I listened to this on audio, free from the jarring charts and tables that must have filled many a page in the paper version of the book. Did I miss those reference items? Yes, the audio version was more difficult to follow without referencing those items. Keep that in mind. I suspect I'd rate this higher were those reference items been described in the audio version, and if I hadn't already read two of Bogle's other books..

[Nathan Albright · Rating 5 out of 5]

As someone who is pretty familiar with the author's books [1], this book was a pretty obvious choice to read.  As someone who enjoys Bogle's perspective, why wouldn't I want to hear what he has to say about mutual funds?  Even when he brags about his positive book reviews and even his not-so-positive book reviews, the author is endearing and surprisingly humble and deeply interested in encouraging smarter behavior among investors.  There is, as one might expect, a combination of familiar things as well as mild surprises with this book, and that is precisely the way I prefer it.  Those who appreciate Bogle's taste for literary allusions will find much to enjoy here and those who appreciate mathematical and statistical approaches to investing will find much to enjoy and appreciate here too.  Of course, not everyone is going to be happy about this book, namely those who favor a more aggressive approach to investing that benefits brokers and not investors, but for those of us who are looking to have a fair and conservative return will find a lot of wisdom here and that is something to appreciate, making it no mystery why this book is considered an investment classic.

This book of a bit more than 300 pages begins with a somewhat lengthy preface where the author shares his thoughts and reflections on the book and its continued value and where the book sits among other related books on investing.  After that the book is divided into four parts.  The first part looks at the building blocks of investing (I) with chapters on the rewards (1) and risks (2) of investing along with the principles, practicality, and performance of mutual funds (3).  After this comes some chapters on mutual fund selection (II) including how to select mutual funds of common stocks (4), bonds (5), money markets (6), and balanced investments (7), as well as where to get mutual fund information (8).  The third part of the book looks at some perspectives on three key issues (III) including index funds (9), mutual fund costs (10), and the issue of taxes (11).  The fourth and final part of the book looks at the practical application of investment principles (IV) with chapters on the allocation of assets (12), some model mutual fund portfolios (13), and a mandate for fund shareholders not to be automatic votes for fee increases (14), with a closing epilogue on some principles of wisdom.

There are a few elements to this book that help make it even better.  The author gives some very practical and very granular advice concerning the mix of stocks and bonds people should have at different areas in their investment life.  Every chapter includes a few sidebars that the author labels as caveat emptor to help the reader understand different aspects of investing that are worth paying attention to but that are not part of the main theme of the chapter.  The author includes a lot of charts and some attempts to change the way people think about risk and the connection between a given mutual fund and an index that would help an investor know certain key aspects about the funds they might invest in.  Above all, the author has some very clear goals, in that he wants investors to be more aware and more active in terms of their interaction with others while maintaining a cautious approach that understands the risks being dealt with and does not panic nor seek to greedily earn more than the market as a whole.  And these are reasonable goals told well in a way that is both informative and deeply interesting.

[1] See, for example:

https://edgeinducedcohesion.blog/2018...

https://edgeinducedcohesion.blog/2018...

https://edgeinducedcohesion.blog/2018...

[Chad · Rating 3 out of 5]

Bogle presents his case for what's wrong with the mutual fund industry (it's always trying to outperform the market, and charging shareholders high fees to do so) and how to be an intelligent investor (choose low-cost index funds). Bogle doesn't ask you to take his word for it; he provides evidence to support his claims.

Bogle talks about the "eternal triangle of investing": risk, reward, and costs. He spends many pages explaining in detail the visible and invisible costs of mutual funds.

Bogle's advice about asset allocation and selecting funds is more conservative than most investors prefer, but it's hard to argue with the stats that show that the returns of index funds beat actively managed funds in the long term.

I really liked Bogle's The Little Book of Common Sense Investing, which provides good advice for the beginning investor. This book, however, is more like the textbook for an advanced mutual fund investing course; packed with charts, statistics, mathematical explanations, and financial theory. You should only read it if you're already comfortable with stocks, bonds, money markets, and mutual funds.

This book is now 7 years old, so the historical data seems a little stale, but the concepts remain generally true. I concentrated on the stock sections of the book, and skimmed through the bond and money market sections, because stocks are what I'm focused on at this point in my life.

Notes

Growth and value funds perform equally in the long term.
Small caps outperform large caps in the long term, but there have been periods of many years where large outperforms small.

The total returns of the different equity fund types (income, value, growth, small cap, aggressive growth) are comparable over time. However, the percentage of total returns that result from dividend income are very different. Income and value attribute much more of their return to dividend income than the other types. Young people can focus on growth and small caps.

The returns of international funds are no better or worse than US funds.
Because of currency risk and sovereign risk, hold no more than 20% of assets in international funds.
No fund can consistently sustain exceptionally high returns; it will inevitably suffer a regression to the mean.
Avoid top and bottom performing funds.
The Morningstar star ratings are based on past performance, and are not predictive of future value. However, the other info Morningstar provides makes it the best source for fund info.

The Wilshire 5000 is more representative of the total US stock market than the S&P 500, which is heavily weighted toward large caps and represents about 70% of the total US stock market. Both indexes perform similarly in the long term.

Subsets of the market may outperform the total for certain periods, but not in the long run.
Transaction costs are about 0.6% per transaction (sale or purchase). So, to calculate the drag of turnover, multiply 1.2 by the turnover percentage.
Never buy into a fund just before it distributes capital gains.
Buy low-turnover; it means lower transaction costs and probably lower capital gains.
The percentage of your assets to allocate to bonds should be about equal to your age, with a max variance of 15%.
Rebalance periodically to maintain your stock/bond ratio.

[Jeff · Rating 5 out of 5]

In this book Mr. Bogle goes into great detail explaining mutual funds (including money market funds, bond funds, equity funds, etc). This is where to start if you do not know how to invest your money in the stock market.

The book also discusses all of the major considerations that need to be taken into account when investing in the stock market.

Even though it is well known that Mr. Bogle is an advocate of index funds, he does not dictate one investing strategy. He is not (as I thought before reading) a totally "passive investor." He provides a lot of information on different strategies and advises investors to be "active" and thinks it reasonable for investors to"take interim risks in the search for higher long-term rates of return."

Don't shy away from this book because it was written in 1993. AT least 80 or 90% is still relevant today. It's also easy to read (but not dumbed-down). The book provides even more to chew on for anyone who enjoys numbers and statistics.

Highly recommend. I consider this book to be up there with others such as 'The Richest Man in Babylon' and 'The Millionaire Next Door.'

[Liz · Rating 5 out of 5]

Asskicking. Provides context and sanity to the Morningstar ratings. Another book to build the average person's investing confidence.

Very helpful when you have to pick a decent fund for your 401K/retirement or need to make more than your bank's crappy savings account interest rate....and you have no idea where to start. Straight and to the point.

[danthexcman11 · Rating 5 out of 5]

Best book on mutual funds I've read!

Highly recommend this book to anyone wanting to learn more about investing in mutual funds for long term investments. Has great chapters on the effects of costs, taxes impacts on your returns that other financial and investment books have avoided.

[Bennjamin · Rating 3 out of 5]

This was not my favorite of John Bogle’s books. Originally published I believe in 1993 or 1994, it’s pretty out dated in many respects. However, with that being said I did find some diamonds in the rough that are worth noting and sharing for the investor of the 21st century.

With the markets dropping almost 40% in a matter of just about two weeks, many people got cold feet and liquidated their stock holdings, opting to go into cash holdings. Bogle seemingly predicted this way back 30 years ago. “Realize that there is no avoiding risk of one kind or another. Holding cash - or hiding it in the proverbial mattress - at best assures no earnings on your capital and at worst exposes it to erosion by inflation.” With inflation averaging around 2.3%, that means each dollar you hold in savings with nominal interest is eroding at that same 2.3% per year. With average inflation, money sitting there falls to 73% of original value in 10 years, and $.39 to the dollar within 30 years!

However, one way to combat inflation is by holding a mixed allocation of stocks and bonds. Bonds generally offer lower returns, but are predictable. Equities are more volatile, but with the S & P tracking about 9.5% average return since the Great Depression, the longer you hold it the more likely that you will not just break even, but be able to turn a profit. Aside from owning real estate, this is one way to help save for the long term.

One thing that Bogle argued in the 20th and 21st centuries is that as the world becomes more globalized, all economies are interconnected. Most large US companies hold substantial foreign interests, so your blue chip sector stocks are already diversified in this regard. Bogle, unlike several other economists argued that there was no reason to own more than 10% in international funds. As he said, “Nobody knows nothing… invest in what you know.”

One really interesting thing was taking 100 coin flips and comparing to 100 random mutual funds’ rate returns. Doing that found literally the average to be 5/5 head/tail ratio and 15-16% return (for decade ending in 1992) - which was the exact average of the S & P. In Bogle’s argument, you can’t beat the average market and most that try to, fail. Instead, he argues to lower costs for owning and buying/selling equities to as low as possible. By lowering costs of ownership and automatically investing dividends, you can actually come close to mimicking the market. And when you’re talking about fighting for .1 or .2% extra return, the risk of failing and underperforming the market is too great. Stay the course.

The end of Bogle’s book focuses on 12 pieces of wisdom.

Investing is not nearly as difficult as it looks.
When all else fails, fall back on simplicity.
Time marches on. Give yourself the benefit of all the time you can afford.
Nothing ventured, nothing gained. You must take some risk to have some gains.
Diversify, diversify, diversify.
The eternal triangle - Risk, Cost, Return
The powerful magnetism of “average”.
Do not overestimate your ability to pick superior equity mutual funds.
You can only have stable value or stable income. You cannot have both.
Don’t pick stocks that “survived the last war”. It is no predictor of future returns.
You rarely if ever know something that the market does not.
Think long term. Think long term. Think long term. This crisis of the day/week/month/year DOES NOT MATTER.

I enjoyed this book, though it was fairly outdated, and the info about bonds and bond rates of the 80s is not really relevant given current rates. However, as I have shared, there were some gems to save and take with you.

[Achint Kumar · Rating 5 out of 5]

An excellent book for mutual fund investor.I didn't go through one chapter on tax ,which was irrelevant for India.Although principle given in the book is true for every part of world with few exception and example,data is taken from USA.Each chapter deal with separate topic within the mutual fund.In book analysis was excellent and easy to understand.

[Andy · Rating 2 out of 5]

In the epilogue to this 30 y/o book, Bogle offers 12 Pillars of Wisdom as "lamps to guide you" and "shed light on mutual fund issues previously shrouded in darkness". Reading this book today felt like viewing these lamps in a well-lit museum.
5-star: respect for enlightening millions of ordinary investors
1-star: what am I going to do with this old lamp

[Julio Cesar Nino · Rating 5 out of 5]

Be Glad

I'm glad I read this book, it gave me a more reasonable picture about not only the reports that I need to be comparing between portfolios but also how to think simple before investing.

[Dale Callahan · Rating 4 out of 5]

Similar to other investment books - but what I was looking for at the moment.

[Jordan · Rating 3 out of 5]

This book needs an update. Since 1992, a lot has happened in the investment world. His facts are still true and accurate; but this book seriously needs an update. RIP John.

[Sonja · Rating 5 out of 5]

I wished I could give it 6 stars.

[Samuel · Rating 3 out of 5]

Me gustó mucho más el otro libro de Bogle. Este señor es una leyenda por crear los fondos indexados, pero este libro es bastante pesado.

[Mark Harris · Rating 3 out of 5]

Though the book is copyrighted 2015, much of it seemed greatly out of date.

[Matt · Rating 5 out of 5]

This book gives a very good illustration of indexing, of buying stocks and equities, of buying bonds and fixed income, how they move in relation to each other, and what all this means to mutual funds. It also talks about many mutual fund issues, such as what the fees actually are and how costs impact your portfolio. And the book helps put into perspective mutual fund performance so you can align expectations.

Some parts took a lot of mental horse power - I couldn't just read along and soak it up. I had to analyze it to see what "price moves inversely" meant and why it made sense that it did so. And I felt the information was fantastic.

Given the blare of modern popular financial thinking - from TV & magazine analysts to armchair retirement experts - the specter of doubt gets cast rather easily over this book. Is the book still relevant? The financial world would seem to look pretty different from 1994. I'm not a financial professional and I simply don't know.

The one thing I keep coming back to is this: Most financial companies and professionals make their money by servicing you, the investor. They make money when you buy or sell, when pay fees. They earn commissions off certain investments they pitch to you. Most of them do NOT make THEIR fat cash by the same means they claim they'll make you YOURS. Even if you don't feel paranoid about this, it does seem to make sense to cast your information net very wide. And the fact that this book does dive into the pertinent fundamentals and does offer some of a counterpoint to some modern popular thinking cements its value to conscientious investors, in my opinion.

[Luca De Benedictis · Rating 5 out of 5]

A must to read for everyone who wants to discover and understand how the mutual fund works.

Likewise the intelligent investor written by B. Graham this is one of The best financial book ever written.

[Rimas · Rating 3 out of 5]

Ar dabar aš žinau kaip pasirinkti vieną ar kitą investicinį fondą pensijai ir kaip nuspręsti kada keisti fondus? Sakykim, kad dabar žinau kur tokios informacijos ieškoti reikalui prispyrus. Bet nensutebčiau jeigu kai kuri pateikta medžiaga pasirodytų šiek tiek mažiau aktuali dabar negu 1992 metais. Iš kitos pusės, kai kurios tiesos, matyt, yra amžinos. Pvz., knygoje nieko neminima apie karštus naujadarus - žaliuosius investicinius fondus, kurie dabar (2021 metais) yra ant bangos. Tačiau Bogle'as perspėja apskritai nieku gyvu nekišt pinigų į bet kokius karštus naujadarus. Tai reiškia, kad dar kurį laiką savo pensijomis maitinsim klimato kaitą.

[Dan · Rating 2 out of 5]

Not a bad book, but not for the faint at heart, either. Mr. Bogle is a very intelligent individual and his advice is sound, but it's also very math-y and has a lot of vocabulary that could benefit from a glossary.

If you've been reading a lot of finance literature and are ready for something with a lot of content, give this a try. If you're just getting started, though, you might want to start with something more welcoming to the uninitiated.

[Chris Kemp · Rating 3 out of 5]

Good investment advice for the intelligent investor.

[Hom Sack · Rating 5 out of 5]

Clear and convincing argument for the index class of mutual funds.

[Kyle · Rating 2 out of 5]

Mistakenly purchased Bogle on Mutual Funds thinking it had been updated and brought into the present day. Oops.

[Vijay]

what to know complete information on mutual fund