The Little Book of Common Sense Investing. Bogle John C.

ting: The Only Way to Guarantee Your Fair Share of Stock Market Returns

      Little Book Big Profits Series

      In the Little Book Big Profits series, the brightest icons in the financial world write on topics that range from tried-and-true investment strategies to tomorrow’s new trends. Each book offers a unique perspective on investing, allowing the reader to pick and choose from the very best in investment advice today.

      Books in the Little Book Big Profits series include:

      The Little Book That Still Beats the Market by Joel Greenblatt

      The Little Book of Value Investing by Christopher Browne

      The Little Book of Common Sense Investing by John C. Bogle

      The Little Book That Makes You Rich by Louis Navellier

      The Little Book That Builds Wealth by Pat Dorsey

      The Little Book That Saves Your Assets by David M. Darst

      The Little Book of Bull Moves by Peter D. Schiff

      The Little Book of Main Street Money by Jonathan Clements

      The Little Book of Safe Money by Jason Zweig

      The Little Book of Behavioral Investing by James Montier

      The Little Book of Big Dividends by Charles B. Carlson

      The Little Book of Bulletproof Investing by Ben Stein and Phil DeMuth

      The Little Book of Commodity Investing by John R. Stephenson

      The Little Book of Economics by Greg Ip

      The Little Book of Sideways Markets by Vitaliy N. Katsenelson

      The Little Book of Currency Trading by Kathy Lien

      The Little Book of Market Myths by Ken Fisher and Lara W. Hoffmans

      The Little Book of Venture Capital Investing by Lou Gerken

      The Little Book of Stock Market Cycles by Jeffrey A. Hirsch and Douglas A. Kass

      The Little Book of Stock Market Profits by Mitch Zacks

      The Little Book of Big Profits from Small Stocks by Hilary Kramer

      The Little Book of Trading by Michael W. Covel

      The Little Book of Alternative Investments by Ben Stein and Phil DeMuth

      The Little Book of Valuation by Aswath Damodaran

      The Little Book of Bull’s Eye Investing by John Mauldin

      The Little Book of Emerging Markets by Mark Mobius

      The Little Book of Hedge Funds by Anthony Scaramucci

      The Little Book of the Shrinking Dollar by Addison Wiggin

Books by John C. Bogle

THE LITTLE BOOK OF COMMON SENSE INVESTING

The Only Way to Guarantee Your Fair Share of Stock Market Returns

10th Anniversary Edition | Updated & Revised

JOHN C. BOGLE

      Cover design: Wiley

      Copyright © 2017 by John C. Bogle. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      First edition published 2007 by John Wiley & Sons, Inc.

      Published simultaneously in Canada.

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      ISBN 978-1-119-40450-7 (Hardcover)

      ISBN 978-1-119-40452-1 (ePDF)

      ISBN 978-1-119-40451-4 (ePub)

To the memory of the late 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 Newsweek column applauded my creation 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. While he departed this life in 2009, he remains my mentor, my inspiration, my shining light

      Introduction to the 10th Anniversary Edition

Don’t Allow a Winner’s Game to Become a Loser’s Game

      SUCCESSFUL INVESTING IS ALL about common sense. As Warren Buffett, the Oracle of Omaha, has said, it is simple, but it is not easy. Simple arithmetic suggests, and history confirms, that the winning strategy for investing in stocks is to own all of the nation’s publicly held businesses at very low cost. By doing so you are guaranteed to capture almost the entire return that these businesses generate in the form of dividends and earnings growth.

      The best way to implement this strategy is indeed simple: Buy a fund that holds this all-market portfolio, and hold it forever. Such a fund is called an index fund. The index fund is simply a basket (portfolio) that holds many, many eggs (stocks) designed to mimic the overall performance of the U.S. stock market (or any financial market or market sector).1 The traditional index fund (TIF), by definition, basically represents the entire stock market basket, not just a few scattered eggs. It eliminates the risk of picking individual stocks, the risk of emphasizing certain market sectors, and the risk of manager selection. Only stock market risk remains. (That risk is quite large enough, thank you!) Index funds make up for their lack of short-term excitement by their truly exciting long-term productivity. The TIF is designed to be held for a lifetime.

The index fund eliminates the risks of individual stocks, market sectors, and manager selection.