BOOK REPORT: Common Sense on Mutual Funds by John C. Bogle

BOOK REPORT: Common Sense on Mutual Funds by John C. Bogle
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1 What are the main arguments that Mr. Bogle is making in the book?
Investing in mutual is not a smart investment move. He points out that mutual funds bleed their shareholders/investors money through the fees they charge their clients for stock -picking. He also points out that mutual funds barely outperform the market in the long run.
2 Are Mr. Bogle and Mr. Buffett in agreement with the main arguments?
Bogle in the book cites some assertions made by Buffet about index fund investing. He points out that an investor who does not understand economics who wants to own American industry in the long run should “periodically invest in an index fund.” In this way, “the know nothing investor can actually outperform most investment professionals (pg.36).
Bogle agrees with Buffet on the fact that mutual funds cut the earnings/profits earned by investors. He cites Buffet in the Berkshire Hathaway Annual Report for 1996: ‘Seriously, costs matter. For example, equity mutual funds incur corporate expenses largely payments to the funds ’managers that average about 100 basis points, a levy likely to cut the returns their investors earn by 10 percent or more over time’(pg.120).
Bogle echoes Buffet’s argument that the only way to have guaranteed returns is to invest in index funds with minimal fees. Bogle cites Warren E. Buffett, 1996 Annual Report of Berkshire Hathaway Corporation: Warren E. Buffett, from the 1996 Annual Report of Berkshire Hathaway Corporation: ‘Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals’(pg.157).
3 What are three personal takeaways you learned from the book?
* Mutual funds hardly ever beat the market in the long run. Few successful stock-pickings cannot guarantee future success and evidence points to mutual funds have performed worse than markets and index funds in the long run (chapter 1).
* Mutual funds are more expensive and earn lower returns to the investor compared to index funds in the long run. The small percentages of fees charged by mutual fund investors which cater for their bonuses and salaries cumulatively add up to substantial reductions to the returns that the investor should get (Chapter 18).
* The best time to invest is now to maximize on the timeframe. Maximizing the timeframe allows for the peaks and valleys in market cycles to average out and the returns build up significantly (Chapter 1).
4 After reading the book, do you think about investing differently?
Yes. First, I understand that that mutual fund investing is not a smart investment move. Mutual funds...