Financial literacy is not a large part of our education system. Few schools ever teach concepts of personal finance, taxation, and investing. The start of my journey to financial literacy began when I decided to minor in Business and Accounting. However, I continued reading and learning about anything finance related even after graduation.
Start Investing With John. C Bogle
The first book I read and absolutely recommend to anyone wanting to start investing for their future is John C. Bogle’s “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)”
Don’t let the long name intimidate you because it is a must read for all investors. Unfortunately the world of investing is filled with snake oil salesmen trying to get their cut from the money you invest. This can be through all sorts of fees labelled as “service fee” or a “management fee” among many others. Luckily, this book clears the path between future wealth and you. This book guides you through the treacherous land of scam artists and into the land of passive index fund investing.
Passive index fund investing is what 99% of the population should be doing. Simply put away your money into the whole of the U.S. stock market, own every single company, and watch your wealth grow with the growth of the U.S. economy. It is as simple as that.
Investing sounds like a monolithic task to take on, obfuscated by the financial system to either turn you away or leech off of you when you decide to invest. However, John C. Bogle, the author of this book and founder of Vanguard, cleared the path for the average Joe who wants to invest.
I’ll quickly summarize some of the main takeaways from this book but I do not want to give away too much since this book is a worthwhile read.
A Quick Summary
The main points are as follows:
- Focus on Broad U.S. Market Index Funds with the lowest Expense Ratio or Fee.
- Reinvest Dividends and never withdraw them.
- Avoid Mutual Funds, especially the ones with a High Turnover Rate.
- Use Roth or Tax-Deferred accounts to minimize your tax burden.
- Invest according to your age and risk tolerance level
- Invest part of your portfolio into the Broad U.S. Bond Index Funds to add stability to your portfolio.
- Avoid Investment Managers or Advisers at all costs as they cannot beat the market or beat it on a consistent basis. They are salespeople at the end of the day and want to sell you a product and make their commission. This added cost eats away from your wealth and returns.
- Avoid anyone who promises to beat the market.
- You want to be average, you want your portfolio to track the broad U.S. economy. In the past century, the average return in the U.S. Stock Market was 10.1% per year. After inflation (average 3.4%) you are left with 6.7% annual return. Do not let an adviser or other fees eat away at this return.
- The book lists several index funds as suggestions for you to get started.
- John C. Bogle closes the 10th Anniversary edition with parting words and his outlook for the stock and bond market in the coming decade. He believes over the next decade the returns from stocks and bonds will be lower.
I have included links to the book and audio-book for your convenience. All future investors should start here. I will continuously develop my recommendations page with everything I think you will find useful.
-E J
