This Guide to Investing Will Help You Make Better Financial Decisions

Last Updated February 13th 2021

The Bogleheads' Guide to Investing

Here at Trading Education, we are passionate about helping new and would-be investors learn about how the stock markets work and how they can become successful investors themselves by learning the tricks and techniques that the pros employ.

Successful investors all have one thing in common. They are constantly scouring the market for relevant news and movements, thinking strategically about every investment and constantly building their knowledge and expertise by reading every quality investing book and guide, watching videos, listening to podcasts and attending training seminars. Nothing replaces knowledge in this fascinating game, and if you can master the skills involved in successful trading and investing on the stock market, you can make very healthy gains for the longer term.

With this in mind, we're taking a look at some of the biggest names and influencers in the stock market and investment world and sharing their insights and tips. Books are a great way to learn fresh skills and technical investment abilities and one of the most interesting ones on the market is called 'The Bogleheads Guide to Investing'.

Here's a summary of the main points.

What's the book about?

Find it on Amazon>> Bogleheads guide to investing

This investing book is all about the founder of Vanguard Group, and his approach to passive investment. It is a simple and accessible guide that is intended to show new investors that the stock market is available to everyone, rather than being so complex that they need a professional to help them navigate it. Its message is clear and in line with our own at Trading Education; learn the skills, gather the knowledge and manage your own investment portfolio!

John Bogle's investment philosophies have been so successful that his followers now read a regular website that enjoys over 50,000 hits every day. This second edition of the guide lays out the passive investment approach and its authors, Michael LeBoeuf, Mel Lindauer and Taylor Larimore, are all financially secure, aged over 70 and clear about having no hidden agenda! They aren't employed by Vanguard and earn no commission from them.

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What topics does the book cover?

The Bogleheads' Guide to Investing spans a range of topics, from money-saving tips through to modern portfolio theory and behavioural economics. Conceptual tools are explained without formulas. The message of the book is that it makes sense to be an inactive investor in order to see the best results. They explain that, with little skill, practice or effort, 'lazy' investors can actually enjoy a better result than many of their peers.

To shore up their view, the authors share a number of studies that show how passive managers tend to have better results than active managers and explain that the stock market is full of surprises.


Key messages

The book explains the need to begin investing and saving early, to adopt an asset allocation that is appropriate by age and to take diversification seriously, whilst minimising taxes and fees. They also recommend online calculators to help with these decisions and show how high fees can damage your ability to build wealth.

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The authors also believe that a diversified portfolio should include overseas investments of around 20-40% of an individual portfolio and they favour emerging markets which have higher growth forecasts and lower valuations than existing developed stock markets. Much of this, they explain, is because the labour force in developing countries is young and dynamic, with plenty of growth ahead. This contrasts with Japan, the USA, England and Europe, where the labour force is ageing.

There is a particularly interesting chapter on behavioural economics, which looks at how unchecked emotions can be a real blocker to building wealth. They explain how investors need to decide on their strategy and then stick to it for the best results.


In summary

The excellent investment guide is a really strong primer for newer investors who have heard about the Vanguard passive model and are interested in finding out more. It doesn't claim to cover new ground or to provide groundbreaking insights, but it is written in a helpful, convincing and accessible way that newer investors will find compelling and engaging. It may also encourage readers to sign up to the Bogleheads website at https://www.bogleheads.org/ and join the community of other investors there. All in all, we believe it's a great resource to support your broader learning journey into the world of successful stock market investing and we would certainly recommend it as a useful guide as you develop your own skills and knowledge.

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The CFAI Institute has published a full guide and review of the book, which you can read here: https://www.cfapubs.org/doi/full/10.2469/br.v10.n1.9

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