John C. Bogle may not be a household name, but you’ve almost certainly heard of his creation — Vanguard. When he founded Vanguard, Bogle argued that a passive investing approach of holding low-cost index funds over the long term was the best for the vast majority of people, arguing that the high fees of managed funds aren’t worth it and will often underperform the market.
The Bogleheads’ Guide to Investing is co-authored by Mel Lindauer, Tayler Larimore, and Michael LeBoeuf and centered around this John C. Bogle-investing style. The three are a part of the ‘Boglehead’ community — one which espouses Bogle’s investment techniques and comes together in online forums from all over the world. All three are financial and business experts in their own right, with Lindauer and Larimore being dubbed the Prince and King of the Bogleheads respectively by John Bogle himself.
The book covers a wide range of topics, from the basics of stocks and bonds to more complex topics such as tax-efficient investing and asset allocation. It also includes practical advice on how to choose a brokerage, how to rebalance your portfolio, and how to avoid common investing mistakes. Each chapter centers on specific aspects of the Boglehead investing mentality, and although it contains aspects of general personal finance, it has a much clearer focus on the intricacies of investing than other books I’ve reviewed.
One of the main features of the book is the emphasis on the importance of having a clear investment plan and sticking to it, even during turbulent market conditions. The Bogleheads argue that successful investing is more about discipline and patience than picking the “hottest” stocks.
A couple of my favorite takeaways
Get the basics right for your investing journey
The initial chapters of the book focus on laying the groundwork for your investing knowledge. They discuss the basics of a healthy financial lifestyle — spending, paying off debts, investing, and emergency funds. You’ll have heard all of this before, but that’s because it’s worth repeating. You can’t properly begin your investing journey without having created a strong, stable foundation.
The Bogleheads go on to present some of the more in-depth explanations of the different types of investments — from types of stocks and bonds to mutual funds, index funds, and exchange-traded funds.
I love the use of comparison tables which start here but are also found throughout the book. Rather than just telling us which options might be best for you, we get to see all the pros and cons laid out in black and white. In many chapters, the authors have collated quotes and opinions from many of the foremost figures in the investing world, backing up their arguments. And it’s not just one or two, but rather a couple of pages worth of supporting voices.
In the latter chapters, the Bogleheads discuss other key parts of personal finance such as investing for college, managing financial windfalls, investing for retirement, and passing on your assets. Not only are the classics of investing and personal finance discussed, but also the specifics in terms of what kinds of accounts you might want to use, what your goals are, minimizing tax liability, etc.
“Index funds outperform 80% of actively managed funds over long periods of time.”
Keeping your investments simple is best
The main thesis statement of this book is that for most people, in most situations, you’re better off investing in low-cost index funds that track the market rather than attempting to pick stocks or time the market. It’s reiterated many times throughout the book and from several different points of view.
It’s well-accepted that you have little chance of outperforming the market over the long term by picking stocks, in fact, “Index funds outperform 80% of actively managed funds over long periods of time”. The couple of main reasons behind this: One, that the active fund managers actually aren’t successful at predicting where the market will go in the long term, and two, that the actively managed funds and portfolio managers often charge exorbitant fees that cut into your profits. Even if the fund is outperforming the market, after fees, it often comes in at well below market returns.
One of the more fascinating sections of this book (although slightly dry in delivery) is its explanation of all the costs different funds may have as well as fees that financial managers may charge. While I’ve always heard that fees can kill your financial gains, this is the first time I’ve read up on the specifics — and they’re eye-opening. Greg Baer and Gary Gensler are quoted as saying “Many of the costs of investing are practically invisible — you never have to write a check to anyone for fees or commissions,” and it’s never felt truer to me since reading this. Having read it, it’s somewhat like a kick in the butt for me to reevaluate my own investing strategy.
Understand the implication of taxes on your returns
Another major section of the book deals with the “devastating impact of taxes” on your returns. Whatever the kind it may be, taxes have tremendous impacts on your returns, and knowing how to limit your tax burden can save you tens, if not hundreds, of thousands by the time you retire.
The Bogleheads present explanations of different savings, investment, and retirement accounts, all of which have different implications for how much tax you have to pay and when. Here, again, the use of comparison tables is an excellent way to easily show the pros and cons of different accounts that you may want to use. Although it’s largely focused on the US tax system and accounts specific to that system, learning about them may encourage you to read up on your own national versions of them which, I’m sure, is exactly what the authors intended.
Would I recommend “The Bogleheads Guide to Investing”?
In short, yes! At 270 pages long, it’s incredibly informative and punches well above its weight. Its writing style is lean and gets to the point faster than other personal finance books with much less fluff. Previous books I’ve recommended have had a conversational style, and this is the same, yet slightly different. This comes across more as an engaging financial lecture rather than a conversation with your personal finance buddy. At times fun and at times dry, this book is sure to start the reader on the right path toward financial freedom through investing.
I also have to mention the appendices which detail all the finance definitions that we come across throughout the book and also give you a reading list (from novice to advanced) if you wish to continue your investing journey. As the entire book is an advocate for index funds, it makes sense that you can find a Q&A section regarding Vanguard funds and which ones may be right for you.
All in all, this has to be one of the go-to books for the basics of investing. With a focus on frugality, low investment costs, and building a simple, low-maintenance portfolio, the Bogleheads are saying all the right things. The idea of keeping things simple is something that all investors can learn from, and this book presents that idea masterfully.
Book cover used in banner image from Wiley
Anton is PocketSmith’s Marketing Coordinator and is currently completing his BComSci degree in Marketing and Ecology alongside working at PocketSmith. Anton started his investing journey in high school and hasn’t looked back since. He’s a strong proponent of index investing, although he still likes the thrill of individual stocks on the side.
