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Book Review: John Bogle's Don't Count on It

One of my heroes, a man whose efforts have inspired me greatly, is John Bogle, known to many as Saint Jack for good reasons. He has spent almost his entire career fighting for individual investors, or as I like to say, on the side of the angels and against the forces of the Dark Side -- Wall Street.

If Bogle writes it, it's worth reading. His latest, Don't Count On It, is a collection of 35 essays, every one of them filled with wisdom and insight. They cover the same themes Bogle has been expounding on over the past four decades:

  • The unconscionably high costs charged by the actively managed fund industry
  • The failure of the vast majority of the industry to abide by fiduciary standards of care
  • The focus of so much intellectual talent on financial manipulation rather than projects useful to society
  • The triumph of hype, hope and emotion over wisdom, reason and experience for so many investors (in other words, the triumph of speculation over investing)
The first part of the book focuses on what Bogle calls "Investment Illusions." He describes the catastrophic consequences that can follow when investors fail to understand the simple mathematics of investing.

The second section focuses on "The Failure of Capitalism," basically the failure of the investment industry to act as fiduciaries. He describes the consequences and offers solutions.

The third section focuses on "What's Wrong with Mutual Funds." He shows the devastating impact of high expense ratios and the costs of excessive turnover (both in trading costs and tax inefficiencies).

The next chapter is "What's Right With Indexing." Its focus is on the simple arithmetic that shows that both active and passive investors alike earn the same market returns on a gross basis, but because active investors have higher costs, they earn lower net returns, the only kind we get to spend. He shows clearly just how devastating an impact these higher costs have.

The final two chapters cover "Entrepreneurship and Innovation," and "Idealism and the New Generation" (his call to tomorrow's leaders to continue the fight on behalf of investors).

While I have read Bogle's views on these issues many times, I'm always impressed with the quality of his writing (Where else can you read quotations from Adam Smith to Winston Churchill to Cato?), the wit and humility he shows and his passion to help investors. The book is a compelling read, one that in effect tells the story and mission of a great man. We're lucky and privileged to have him fighting on our side.

As Bogle noted in his book, Machiavelli "described the accumulation of worldly 'glory' as the motivating principle that drives leaders to undertake 'great enterprises' and do 'great things' on behalf of their fellow citizens and not just themselves." Hard to find a better description of Bogle himself.

More on MoneyWatch:
The Costs of Active Management Why Keeping Your Investments Local Is a Bad Strategy How Uncertainty About Government Policy Affects Stock Prices The Motley Fool's Record Doesn't Bode Well for Its Funds Quest for Alpha: 10 Rules for Being a Successful Investor
Three ways I can help you become a wiser investor:

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