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Illusion of Outperforming the Market
Bogle argues that for every investor who outperforms the market, another must underperform. The aggregate return of all investors, before costs, must equal the market's return.
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187 reads
Illusion of Outperforming the Market
Author introduces the concept of "speculative return," which arises from changes in market valuations (like price-to-earnings ratios) and is distinct from the "investment return" generated by dividends and earnings growth of businesses. While speculative return can drive short-term market fluctuations, long-term investment returns are primarily driven by business fundamentals.
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129 reads
outperforming 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
JOHN C. BOGLE
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115 reads
Power of Indexing
Author explains that index funds offer broad diversification, low turnover, and significantly lower expense ratios compared to actively managed funds. He highlights the historical performance of the Vanguard 500 Index Fund as evidence of the success of this strategy.
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115 reads
Detrimental Impact of Costs
Bogle emphasizes that investment returns are a zero-sum game before costs. After deducting expenses (management fees, trading costs), the average active investor's net return will always be lower than the market's returns. He argues that even seemingly small differences in expense ratios can have a significant cumulative impact on long-term returns.
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96 reads
Failure of Active Management to Consistently Outperform
Bogle presents evidence showing that the vast majority of actively managed funds fail to beat their benchmark indexes over the long term, especially after accounting for fees and taxes.
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91 reads
Role and Limitations of Financial Advisors
While acknowledging that financial advisors can provide valuable services like financial planning and behavioral coaching, Bogle argues that they generally cannot consistently select actively managed funds that will outperform the market.
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90 reads
IDEAS CURATED BY
CURATOR'S NOTE
The book discusses powerful and well-supported case for the superiority of low-cost index fund investing as the most effective way for the vast majority of investors to achieve their long-term financial goals.
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Different Perspectives Curated by Others from The Little Book of Common Sense Investing
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