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.

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December 2017 Update + 2018 perspectives

Hi,

Happy new year to you all!

It is time for the last monthly update of 2017.

December 2017

December 2017 was quite good in terms of saving. The savings rate for this month is 34.67%. There was a lot of expenses with all the insurances and parking arriving at the end of the year, but I also got half of my 13th salary this month, which obviously helped.

In terms of spending, I have been able to keep it very low. I have been three weeks in the army, so I haven’t been going out a lot and haven’t needed a lot of food since I’ve been fed for free (at least one advantage to the army). I bought a few gifts and new gaming headset for my computer, nothing really fancy.

Here is an overview of my spendings:

  1. Insurances: 255.00 CHF – average
  2. Transportation: 1373.60 CHF – well above average (insurances and parking)
  3. Communications: 186.80 CHF – average
  4. Personal: 503.76 CHF – below average
  5. Food: 162.65 CHF – well below average
  6. Apartment: 1783.05 CHF – well above average (power and caution)
  7. Taxes: 705.45 CHF -average

As for my earnings, I’ve received a few gifts for Christmas (200 CHF) and the first dividend from my portfolio (50 CHF).

Portfolio

I’ve almost finished moving my portfolio to DEGIRO. Still one fund to sell from PostFinance, that I’ll sell when it gets back to earning.

Here is what I settled on for my portfolio:

  • 55% World Stocks – Vanguard Total World
  • 10% Swiss Medium Stocks – UBS SMIM
  • 10%  Europe Stocks – Ishares Europe
  • 10% High Divident – Vanguard High Dividend Int.
  • 5% Tech – Vanguard Information Technology
  • 5% Pacific – Vanguard FTSE Pacific
  • 3% Bitcoin – XBT ETN
  • 2% Ethereum – XBT ETN

I’m pretty satisfied of this portfolio except for the cryptocurrency part. I’ve been investing in cryptocurrencies for only one month and I already don’t like it. The volatility is way too high. Once they are back to earning, I’m going to sell both and transfer to an European bond ETF, probably from Ishares.

In total, my net worth is now 54’279.49 CHF.

2018 Perspectives

Starting from February, I’ll be finally be paid at 100% (from 85% now) since I’ve finished my Ph.D. This will make a nice increase in revenue. Moreover, this year, my company will increase very slightly the salaray, so that’s also a nice bonus as well. In August, I’ll very likely change my job, but nothing is final now, so more on that later. In any case, I’ll have a better salary from August. My current expenses should not increase in 2018, but there will be some big expenses in 2018, we’ll see how bad it turns.

As for January, it should be good, just a few gifts to buy. I expect a good saving rate, but I’m often wrong about that, so we’ll see about that.

 

First deposit at DEGIRO and first ETF investment

My first deposit just reached my DEGIRO broker account! Let’s start with the good, there is no fee for transfer! I’ve transferred 1000 CHF and exactly 1000 CHF arrived in my account. I was afraid of an hidden fee or transfer fee. With the bad now: The transfer took 8 days. I sent the transfer Friday 17th, it was debited from my account Monday 20th and only arrived today, Tuesday 28th on my broker account. I’ve contacted DEGIRO several times in the meantime to inquiry as to the whereabouts of my money. They did have an issue with their bank (CIC Bank, Basel) that was not transferring the money statements to them for about a week. So, normally, this should not be so slow. I’m inclined to give them the benefit of the doubt for this one. I’ll see what happens to my second transfer that was debited yesterday (should arrive tomorrow on my DEGIRO account). If this is something that happens regularly, this is a really bad thing for DEGIRO, but we’ll see.

With some part of this money, I bought 13 shares of Vanguard Total World Stock ETF (VT) at 73.16 USD. This ETF is a passive fund that holds 7955 stocks in the entire world, weighted by capitalization. It contains around 50% of the stocks from US and the rest is from the entire world. It contains 2.6% of stocks from Switzerland. It has a very low Total Expense Ratio (TER) is 0.11%, which is very low and absolutely fine for me.

Since this ETF is in the list of free ETF offered by DEGIRO, I didn’t pay any fee to buy the shares. Nevertheless, I paid a small fee for the currency conversion. I paid 0.19CHF on an order of 936.80 CHF, which means a fee of 0.02%. This is pretty good since I was used to pay 0.5% fee for funds on PostFinance 🙂

The buy was pretty easy do on DEGIRO, no issues here. At first, not very clear, but it turned out quite OK. I’ll post more information on the future on how to use DEGIRO. I received a mail notification for both the deposit and the trading transactions. Everything seems fine.

I’m not totally sure on my final portfolio, but VT will definitely be a part of it and probably a large part at that. I’ll keep you up to date as soon as I update my portfolio.

N.B. I’m not a financial advisor and not nearly an expert in investing. What I share here is my experience, not financial advices.