The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Book Big Profits)

216 Pages·2007·3.31 MB·english

by  John C. Bogle

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T T LE
L I B
E O
H
O
T
K
of
COMMON SENSE
INVESTING
The Only Way to Guarantee Your
Fair Share of Stock Market Returns
J C. B
OHN OGLE
John Wiley & Sons, Inc.
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L I T TLEB
E O
H O
T K
of
COMMON SENSE
INVESTING
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Little Book Big Profits Series
In the Little Book Big Profits series, the brightest icons in the finan-
cial world write on topics that range from tried-and-true investment
strategies we’ve come to appreciate to tomorrow’s new trends.
Books in the Little Book Big Profitsseries include:
The Little Book That Beats the Market, where Joel Greenblatt,
founder and managing partner at Gotham Capital, reveals a
“magic formula” that is easy to use and makes buying good com-
panies at bargain prices automatic, giving you the opportunity to
beat the market and professional managers by a wide margin.
The Little Book of Value Investing, where Christopher Browne,
managing director of Tweedy, Browne Company, LLC, the oldest
value investing firm on Wall Street, simply and succinctly explains
how value investing, one of the most effective investment strategies
ever created, works, and shows you how it can be applied globally.
The Little Book of Common Sense Investing, where Vanguard
Group founder John C. Bogle shares his own time-tested philoso-
phies, lessons, and personal anecdotes to explain why outperform-
ing the market is an investor illusion, and how the simplest of
investment strategies—indexing—can deliver the greatest return to
the greatest number of investors.
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T T LE
L I B
E O
H
O
T
K
of
COMMON SENSE
INVESTING
The Only Way to Guarantee Your
Fair Share of Stock Market Returns
J C. B
OHN OGLE
John Wiley & Sons, Inc.
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Copyright © 2007 by John C. Bogle. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
Wiley Bicentennial Logo: Richard J. Pacifico
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
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Library of Congress Cataloging-in-Publication Data:
Bogle, John C.
The little book of common sense investing : the only way to guarantee
your fair share of stock market returns / John C. Bogle.
p. cm.
ISBN-13: 978-0-470-10210-7 (cloth)
ISBN-10: 0-470-10210-1 (cloth)
1. Index mutual funds. I. Title.
HG4530.B635 2007
332.63'27—dc22
2006037552
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
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To Paul A. Samuelson, professor of economics
at Massachusetts Institute of Technology,
Nobel Laureate, investment sage.
In 1948 when I was a student at Princeton
University, his classic textbook introduced me
to economics. In 1974, his writings reignited my
interest in market indexing as an investment strategy.
In 1976, his Newsweekcolumn applauded my cre-
ation of the world’s first index mutual fund. In
1993, he wrote the foreword to my first book, and
in 1999 he provided a powerful endorsement for my
second. Now in his ninety-second year, he remains
my mentor, my inspiration, my shining light.
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Contents
Introduction xi
Chapter One
A Parable 1
Chapter Two
Rational Exuberance 9
Chapter Three
Cast Your Lot with Business 23
Chapter Four
How Most Investors Turn a Winner’s Game
into a Loser’s Game 35