The Index Fund Revolution
The more the managers and brokers take, the less investors make.
Book summary
Foundational TextPerennial Seller
The Little Book of Common Sense Investing
by John C. Bogle
The Only Way to Guarantee Your Fair Share of Stock Market Returns
Vanguard founder's guide to low-cost index fund strategy
4.7(2.5k)Published 2007
Topics
FinanceInvestingPersonal FinanceIndex FundsWealth Building
Reading companion
How to read The Little Book of Common Sense Investing with Readever
Read this book as a practical guide to implementing Bogle's investment philosophy. Focus on understanding the mathematical principles behind compounding costs and why low-cost index funds consistently outperform active management. The book builds from basic concepts to specific implementation strategies, so read sequentially. Pay special attention to the chapters on costs and behavioral psychology, as these contain the core insights that make Bogle's approach so effective.
Things to know before reading
Before reading, assess your current investment approach and costs. Understanding your starting point will help you appreciate Bogle's arguments about fee impact. No advanced financial knowledge is required—Bogle explains concepts clearly for beginners. Keep a calculator handy to work through the compounding cost examples, as seeing the math makes the principles more compelling. Be prepared to challenge conventional wisdom about active investing and market timing.
Brief summary
The Little Book of Common Sense Investing in a nutshell
John C. Bogle's timeless guide to simple, effective investing through low-cost index funds, showing how ordinary investors can beat most professionals by avoiding high fees and market timing.
Key ideas overview
The Little Book of Common Sense Investing summary of 3 key ideas
Bogle's investment philosophy centers on simplicity, low costs, and long-term thinking
The Tyranny of Compounding Costs
In investing, you get what you don't pay for.
Business Reality vs. Market Expectations
The stock market is a giant distraction from the business of investing.
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Stop Trying to Beat the Market—Start Owning It
This book reveals why most active investors fail to beat the market and provides a simple, proven strategy for capturing your fair share of stock market returns through low-cost index fund investing.
Deep dive
Key ideas in The Little Book of Common Sense Investing
Key idea 1
The Index Fund Revolution
The more the managers and brokers take, the less investors make.
Bogle demonstrates how index funds provide market returns at minimal cost, outperforming most actively managed funds over the long term due to lower fees and expenses.
Remember
- Index funds capture 100% of market returns minus tiny fees
- Active funds typically underperform after accounting for costs
- Simplicity beats complexity in long-term investing
Key idea 2
The Tyranny of Compounding Costs
In investing, you get what you don't pay for.
Even small differences in fees compound dramatically over decades, making low-cost investing essential for wealth accumulation.
Remember
- A 2% annual fee can consume 60% of your returns over 50 years
- Costs are the only certain predictor of investment performance
- Focus on what you can control: costs, taxes, and time
Key idea 3
Business Reality vs. Market Expectations
The stock market is a giant distraction from the business of investing.
Bogle emphasizes focusing on business fundamentals (dividends and earnings growth) rather than market speculation and short-term price movements.
Remember
- Long-term returns come from business performance, not market timing
- Ignore market noise and focus on economic reality
- Dividends and earnings growth drive stock returns over time
Context
What is The Little Book of Common Sense Investing about?
The Little Book of Common Sense Investing presents John Bogle's case for passive investing through low-cost index funds. The book systematically dismantles the myth that most investors can beat the market, showing how high fees, taxes, and poor timing decisions erode returns. Bogle provides a simple, elegant alternative: buy and hold a broad market index fund, reinvest dividends, and let compounding work its magic over decades.
The book covers the history of index funds, the mathematics of compounding costs, and the psychological barriers that prevent most investors from following this simple strategy. Bogle's message is both radical and conservative: stop trying to outsmart the market and instead own the entire market at the lowest possible cost.
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Review
The Little Book of Common Sense Investing review
This book is a masterpiece of financial wisdom that has stood the test of time. Bogle writes with the authority of someone who revolutionized the investment industry and the humility of someone who understands how difficult it is for investors to follow simple advice. The book's strength lies in its relentless focus on what matters: costs, diversification, and time.
While some critics argue that Bogle's approach is too conservative or misses opportunities for alpha, the data overwhelmingly supports his thesis. For the vast majority of investors, index fund investing provides superior risk-adjusted returns compared to active management. The book's enduring popularity speaks to its practical wisdom and the growing acceptance of passive investing.
- Warren Buffett has recommended this book as essential reading for all investors
- Transformed how millions of people think about investing and retirement
- The single most important book on investing for non-professionals
- Saved investors billions in unnecessary fees and poor investment decisions
Who should read The Little Book of Common Sense Investing?
Beginning investors looking for a simple, effective strategy
Experienced investors tired of underperforming the market
Anyone saving for retirement or long-term financial goals
Financial advisors seeking evidence-based approaches
People overwhelmed by complex investment products
About the author
John C. "Jack" Bogle (1929-2019) was the founder of The Vanguard Group and creator of the first index mutual fund available to the general public. A Princeton University graduate, Bogle revolutionized investing by introducing low-cost index funds that allowed ordinary investors to capture market returns without paying high fees to active managers.
Known for his integrity and commitment to investor interests, Bogle built Vanguard as a mutual company owned by its fund shareholders. His "Bogleheads" philosophy emphasizes low costs, broad diversification, and long-term discipline. Despite significant health challenges including a heart transplant, Bogle remained an active voice in finance until his death, authoring numerous books and advocating for investor rights.
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Revolutionized personal investing for millions worldwide
Foundation of the Bogleheads investment philosophy
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Final summary
The Little Book of Common Sense Investing delivers a powerful, evidence-based message: stop trying to beat the market and start owning it. Bogle's simple strategy of investing in low-cost index funds has proven remarkably effective over decades, outperforming the vast majority of professional money managers. The book's enduring wisdom lies in its focus on what investors can control—costs, diversification, and time—while ignoring the market noise that leads most investors astray.
This book isn't just about investing; it's about financial freedom through simplicity and discipline. By following Bogle's advice, investors can avoid costly mistakes, reduce stress, and build wealth steadily over time. It remains one of the most important and practical investment guides ever written.
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