sit’n cool

[Disclosure: I received a free copy from the publisher.]

This is a book all investors should own, especially if you’re looking for a place to start learning. If you’ve been a part of the indexer crowd, then it won’t reveal any surprises, but it’s a good quick read at just over 200 pages that re-enforces a basic, simple, common sense understanding of investing. John C. Bogle, founder of Vanguard Group, has written a book that should help beginners see what their options are and how to go about investing, and it should also help anyone experienced with investing, but wanting to understand the enormous advantages of index funds. The one fault I have for this book is that it’s missing a major section of the investing population as it’s written at an audience that already considers themselves investors. Although, it’s probably expecting too much from any book to cover so much ground for such different audiences, so that shouldn’t stop anyone from picking up this little book.

As the book progresses each chapter covers a little more information on investing, but there’s one basic theme throughout all of them – low cost, cap weighted, index funds will provide you with the simplest and most guaranteed return. From the first chapter, which highlights the problems with the current investment industry through a parable about the Gotrocks family (a story adapted from one told by Warren Buffett), to the last, you’ll have a hard time dodging all of the facts thrown at you like balls thrown at a high school principal sitting in the school fair’s dunking booth. Actively managed mutual funds just don’t have a chance, and each chapter makes that more obvious from multiple angles. Again, nothing surprising for anyone who’s studied up on index funds, but it’s nice having that reinforced by John and the many successful investors, professors, and business people that he quotes in the book at the end of each chapter.

All of the praise aside, I’m still waiting for a heavy weight in the industry to reach out to the smart savers. Those people who don’t consider themselves investors as they’re just putting away some money here and there, not watching the market, but still putting a portion into investments in the market like a 401(k) or a Roth IRA. They understand that a return matters, especially compounded return, and that a savings account doesn’t compare to an equity fund. Still, they’re looking for a simple and safe option that lets them step away and concentrate on their life and not day to day market events, which is why index funds are just right.

Both audiences use the same strategies and have the same options (index funds), but they approach the topic from different point of views. Either way both would benefit from reading this book. Showing this is my favorite line from the last chapter, What Should I Do Now?. It’s spot on for this blog as John writes, “You must now be as exhausted as I am by the unremitting pounding of my theme that simplicity is the answer and that complexity simply doesn’t work” (p201) [emphasis added]. After reading through this book and understanding the very basic “arithmetic of investing,” there shouldn’t be much question about the validity and proven success of this simple strategy.

Recommendation: Buy it now.
Pros: Easy and fast read packed with loads of eye opening facts.
Cons: A good starter and intermediate book on investing, but still not aimed at the smart saver. It’s all about investing and money, and nothing about the investment life cycle beyond the investment itself.

* For those looking for even greater insight and a good second phase after you’ve read John Bogle’s book, check out a copy of Richard Ferri’s books, especially All About Asset Allocation or All About Index Funds in the side bar links.