Main Points

This book is, frankly, very repetitive and could have honestly been a blogpost or booklet. So, instead of chapter-by-chapter notes, I’ll just create a list of the main points that Bogle goes over (and over and over) in the book.

1. Investing is a common-sense game, and common-sense suggests that ‘simple is best’. The simplest portfolio is the best portfolio.
2. Compounding is magic — understand it.
3. The brokers always win, so avoid them (and their fees) as best you can by trading less.
4. For investors, returns decrease as motion increases. This is all because of the costs of investing.
5. Expanding on the previous point: for Wall Street, the more you move your money around (through their services), the more money they make. It’s in their best interest to keep you coming back to them.
6. “Over time, the aggregate gains made by … shareholders must of necessity match the business gains of the company.” If it does not, then something is fishy.
7. Use P/E multiples in your decision-making — when multiples are high, a stock is overvalued; when low, it is undervalued.
8. The market will always regress to the mean (RTM); any exceptionally good or bad performance is just that — an exception.
9. Do not predict the future based solely on the past — predict the future based on lessons from the past, and the reality of the present. If a stock has been doing good in the past, while that may be a good sign, it does not mean it will continue to do good.
10. When you invest in the entire stock market, you are investing in both the profits and losses of other investors; the opportunity cost of this is the 1% chance of massive gains, but you have no chance of massive losses either.
11. Actively managed funds underperform benchmark indexes.
12. Before the costs of brokers, beating the market is a zero-sum game. After costs, it is a loser’s game. These costs also compound, which can be costly in the long-term.
13. Dividends, when reinvested, result in massive gains — but mutual funds take away most of them in costs.