This is a fascinating book entitled The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns written by John C. Bogle. He seems to be the founder of the investment management company Vanguard Group. The book, which was first published in 2007, advocates for a passive investment strategy that seeks to match the overall stock market performance, rather than trying to beat it through active management.
The vast majority of active fund managers with demat accounts fail to consistently outperform the market over the long term. Investors can earn higher returns by investing in a low-cost index fund that tracks the performance of a broad market index such as the S&P 500. He argues that active management’s high fees and expenses eat into investors’ returns. Investors would be better off investing in a low-cost index fund that provides broad market exposure.
Bogle says index funds have low costs. Because index funds simply track market index performance, they require very low maintenance management. Therefore, they have much fewer fees and expenses than actively managed funds. Bogle argues that these low costs can make a significant difference in an investor’s long-term returns, especially when compounded over many years in the stock market.
Bogle says index funds are simple. Because index funds simply track market index performance, they require very little research or analysis. This means that investors can spend less time worrying about their investments and more time focusing on other significant aspects of their lives. This is done using a demat account.
Bogle also argues that index funds provide diversification that is difficult to achieve with individual stock investments. By investing in an index fund that tracks a broad market index, investors gain exposure to a large number of companies across a wide range of industries. This helps to reduce the risk of a single company or industry negatively impacting the investor’s portfolio.
While some critics argue that passive investing through index funds leads to a “herd mentality” among investors, Bogle argues that this is not the case. He emphasizes that index funds are simply a tool investors can use to achieve their financial goals. Investors can still make individual choices about how much to invest and when to buy or sell. They can also choose how to manage their overall portfolio in the stock market.
Overall, The Little Book of Common Sense Investing is a highly recommended read for anyone interested in stock market investing. While some investors may prefer an active management approach that seeks to beat the market through careful research and analysis, Bogle’s argument for passive investing through low-cost index funds is compelling. With the help of the stock market, investors can potentially maximize their returns over the long term while minimizing their risks and costs.
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