We know it is difficult for the average investor to outperform the market on a risk-adjusted basis after costs are considered; in fact, by definition this is virtually impossible. Conclusion: buy low cost index trackers. Many on Wall Street, however, would have you believe that if you could just take - and pay for - their advice, then you will surely achieve superior returns.
On Money, it is no surprise then that Jack Bogle, inventor of the Vanguard 500 Index Fund, lambastes Wall Street’s culture of high commissions and fees, reminding us that ultimately the more the financial system takes, the less the investor makes.
On Business, Bogle asks why chief executives’ pay grows at a faster rate than company earnings and makes some important contrasts between management and leadership. He also shares his views on how to build a great organisation.
Finally, on Life, Bogle wonders: are the rabbits we are chasing real? With society obsessed with wealth, fame and power, are these true measures of success? They are not, he concludes. Character, moral values and happiness are.
This fascinating book reminds me of the classic Where Are the Customers’ Yachts? but for modern times. For example, Bogle claims that more than half of equity fund managers don’t own any shares in the funds they manage.
Bogle believes, on balance, the financial system subtracts value from society. Controversial, since its central role in a market economy is supposed to benefit a capitalist society. On the other hand, how can we excuse the fact that many financial sector chief executives who have so greatly failed their shareholders have walked away with their fortunes largely intact?
Bogle, clearly not a fan of securitization, is harsh on financial engineering. He also says he doesn’t know of anyone who can speculate successfully.
But in the end, because this book is filled with so many interesting observations from Bogle’s vast experience in the mutual fund industry and well selected examples from history and literature, it left me more than enough satisfied.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.