Book Review: The Bogleheads Guide to Investing

Here is another book review about an investing book. This is the second book I read in my way to personal finance enlightenment: The Bogleheads Guide to Investing, by Taylor Larimore, Mel Lindauer and Michael LeBoeuf.

This book is a complete guide about personal investing, how to save money and how to invest it. I personally think it’s a really good book, well-written and full of very good advice. The book is full of quotes from other financial figures and every argument is well supported by facts.

What is really good about this book is that it’s very complete, it covers a lot of different subjects and contains really tangible advice that you can follow.

This book contains several very important messages:

  1. Avoid debt: This one is a no-brainer 😛
  2. You should start to invest early: By the magic of compounding, starting early even with small sums, will amount to a large amount
  3. Know what you are buying: This one is very important. You should only consider investing in assets that you actually understand. If you don’t understand an asset, you should not invest, you should always research before you invest or seek advice
  4. Know how much you need for retirement: If you plan to retire early, you should know exactly how much money you’ll need and how much expenses you have each month.
  5. Keep it simple: Invest in few index funds that are replicating the entire stock market and stick with you strategy
  6. Minimize the costs of your investments: Only use no-load funds with very low fees.
  7. Don’t try to time the market: Market timing is not possible in the long term, simply stick with your long-term strategy.
  8. Rebalance if necessary: If some of your assets are doing extremely well, as will be the case for stocks in a long run bull market, you should rebalance by selling some of your stocks and invest them into bonds. This should help you by buying low and selling high automatically. Not everybody likes this rebalancing idea, so you need to be careful about that. The important thing is to be aware that unbalancing will occur eventually.
  9. Diversify: Don’t put all your eggs in the same basket. There is no point in investing in two funds that have the same assets inside.

All these messages (and a lot more) are quite well explained and well supported by facts.

Overall, I think it’s a great book that deserve to be read. If you are willing to invest but don’t know exactly how, you should definitely take a look at this book and profit from its advice in order to elaborate a sound investment strategy.


Book Review: The little book of common sense investing

Since I started to pay closer attention to my finance, I’ve read a few books about investing and finance. I’m going to review them on this blog.

The first book I have read is “The little book of Common Sense investing”, by John C. Bogle. It is coming from the founder and former CEO of the Vanguard Mutual Fund Group. This book is highly recommended by a lot of people in the bogleheads community, so I decided to give it a try.

This is a good book, with sound basis. The idea of the book is simple: You should only invest in low-cost, no-load, mutual funds that replicate the entire market (index funds) and you should buy-and-hold these funds for as long as you don’t need the underlying money (no market timing). This message is quite repeated along the book. I honestly think that this book insists upon itself. It could have been much shorter than it his. Most of the chapters are simply showing, using strong facts, that most active funds cannot beat the market. Therefore, index funds are better for indexing, since over a long time, your returns will the same as those of the market. Moreover, the costs of passive index funds are generally significantly lower than active funds. The costs of the funds is actually one of the only things you have control over, therefore you should always minimize them. However, this book is quite well written and there a lot of strong facts with evidence. The author advice mutual funds rather than Exchange Traded Funds (ETFs). However, it is stated that ETFs are a good alternative as long as you don’t trade them but buy them and hold them.

Let’s review the main points of the book:

  • Prefer passive index funds rather than active funds
  • Use index funds that replicate the entire stock market or the entire bond portfolio
  • Choose the funds with the lowest costs (no-load, low TER)
  • Buy and hold for long-term
  • Never time the market
  • You can use ETFs but not trade them (buy-and-hold)
  • Minimize taxes

Overall, it’s a good book. If you already are convinced that passive index funds are better than active funds or stock selection, then, you probably wont’ learn anything new in this book. On the contrary, if you prefer active funds or prefer to hold stocks, you should probably read this book to get a different point of view. On the other hand, it lacks in advices on exactly which ETF to use, which allocation to bond and to international stocks, but it’s a very good starting point.