John Bogle on Investing: The First 50 Years

Part I

INVESTMENT STRATEGIES FOR THE INTELLIGENT INVESTOR

IN MY MISSION to bring the simplicity of investing to American families—the wisdom of focusing on the long term, the futility of trying to outguess the market, and the powerful burden that the high cost of investing places on investment success— I've constantly strived to translate abstract financial ideas into down-to-earth terms to which ordinary human beings can relate. Perhaps my efforts to do so will be obvious in the opening three chapters of this book. Chapter 1, “Investing in the New Millennium: The Bagel and the Doughnut,” was inspired by an essay by New York Times journalist William Safire. While he was writing about, well, bagels and doughnuts, I use these baked goods as an analogy for both the stock market (the hard-crusted nutrition of corporate earnings and dividends versus the tempting but transitory sweetness of price-earnings multiples) and the mutual fund industry (the solid, patient index fund versus the frenetic, but finally undernourishing, actively managed mutual fund).

The next two chapters pursue the same theme in different ways, with “The Clash of the Cultures in Investing” describing the disappointing records achieved by four groups of moneymanagers and financial advisers following traditional active strategies. These approaches face long odds, I conclude, so gamblers should use them only for their ...