Table of Contents
Praise
Title Page
Copyright Page
Dedication
Foreword
Foreword for the Original Edition
Why This Book Is Unique
Preface to the Original Edition
“Common Sense” Defined
A Five-Part Approach
Common Sense Redux
Principles and Practices
Acknowledgements
Acknowledgments for the Original Edition
About the Author
Part I - ON INVESTMENT STRATEGY
Chapter 1 - On Long-Term Investing
Chance, the Garden, and Long-Term Investing
How Has Our Garden Grown?
Stock Market Returns
Bond Market Returns
Planting Seeds for Growth
The Financial Markets Are Not for Sale
Practice Departs from Principle
Simple Principles for Long-Term Success
Chapter 2 - On the Nature of Returns
Occam’s Razor and the Stock Market
Occam’s Razor and the Bond Market
Precision and Perversity
How Important Is It to Forecast Future Returns?
Chapter 3 - On Asset Allocation
From the Talmud to Modern Portfolio Theory
Risk to the Fore
Benefiting from Balance
A Third Dimension
Financial Scripture
Three Perspectives on the Impact of Cost
Is It Cost or Asset Allocation?
Chapter 4 - On Simplicity
When All Else Fails, Fall Back on Simplicity
Simplicity in Your Stock Portfolio
Rule 1: Select Low-Cost Funds
Rule 2: Consider Carefully the Added Costs of Advice
Rule 3: Do Not Overrate Past Fund Performance
Rule 4: Use Past Performance to Determine Consistency and Risk
Rule 5: Beware of Stars
Rule 6: Beware of Asset Size
Rule 7: Don’t Own Too Many Funds
Rule 8: Buy Your Fund Portfolio—and Hold It
The Paradigm of Simplicity
Part II - ON INVESTMENT CHOICES
Chapter 5 - On Indexing
Indexing Is a Long-Term Strategy
The S&P 500 Index Is Not the Market
Indexing Wins Largely Because of Cost
The Index Fund Is Much Better Than It Appears
The Thorny Issue of Risk
All Index Funds Are Not Created Equal
Indexing Works in All Markets
The Triumph of Indexing
Chapter 6 - On Equity Styles
Enter Tick-Tack-Toe
Comparing Apples to Apples
Equity Funds—Risks, Returns, and Costs
God, Pascal, and War Games
Chapter 7 - On Bonds
Misery Loves Company
A Flagrant Example
How Much Does Cost Matter?
What about Management Skill?
Sales Charges Exacerbate the Cost Issue
How to Avoid Excessive Costs
Chapter 8 - On Global Investing
The Global Portfolio Extreme
Currency Risk—and Returns
The Global Efficient Frontier
International Economies and Financial Markets
The Record of Global Investors
Constructing Your Own Global Portfolio
Indexing in International Markets—A Better Way?
The Accidental Tourist
“Acres of Diamonds” Revisited
Chapter 9 - On Selecting Superior Funds
The Equity Fund Record
Enter the Index Fund
The Index Fund Elicits a New Industry Mantra
Selecting Winning Funds—An Academic Activity
Funds That Have Beaten the Market—The Disappointing Reality
The Investment Advisers Who Select Funds—Another Disappointment
Returns of Funds of Funds—Yet Another Disappointment
No Holy Grail Here—Academic or Pragmatic
Part III - ON INVESTMENT PERFORMANCE
Chapter 10 - On Reversion to the Mean
Mutual Fund Champions Come Down to Earth
Gravity and Stock Market Sectors
Common Stocks Return to Earth, Too
Investing to Cope with the Force of Gravity
The Crown Jewels
Chapter 11 - On Investment Relativism
A Powerful Bogey
The Rise of Closet Indexing
The Index Fund: Villain of the Piece?
We’re All Quants Now
Measuring Managers—Where Does Your Manager Stand?
“If You Can’t Beat ’Em, Join ’Em”
Chapter 12 - On Asset Size
Isn’t Bigger Better?
Size and Fund Investment Returns
Real Size, Real Problems
What’s Size Got to Do with It?
Nothing Does Succeed Like Success—for Fund Managers
To Dream the Impossible Dream
You Can Make the Dream a Reality
Chapter 13 - On Taxes
Taxes—The Industry’s Black Sheep
Alpha Takes Another Hit . . . from Taxes
Fund Portfolio Turnover Soars
Fund Manager Turnover Doesn’t Help
A Good Solution: The Index Fund
A Better Solution: The Tax-Managed Fund
A New Idea, Sixty Years Old
Tax Strategies
The Parallax View
Chapter 14 - On Time
Reward—The First Dimension
Risk—The Second Dimension
Cost—The Third Dimension
Time—The Fourth Dimension
The Dimensional Imperative
Part IV - ON FUND MANAGEMENT
Chapter 15 - On Principles
Distribution Drives the Industry
Management versus Distribution
Information That Can Make a Difference in Your Fund Investments
Esperanto-Type Cranks
Chapter 16 - On Marketing
Your Money Is No Object
12b-1 Fees—Full Disclosure
Hawking Products, Hiding Risk
Owners versus Customers?
The True Business—Gathering Assets
Chapter 17 - On Technology
Investment Technology—Bigger, Quicker, and More Complex
Information Technology—Information versus Wisdom
Transaction Technology—Switch When the Iron Is Hot
The Report Card
The Pervasive Impact of Technology
Chapter 18 - On Directors
The Levers of Control
The Consequences of Control
What the Law Says
An Alternative Structure
Legal Action Coming?
Congress and the SEC
Summing Up
Chapter 19 - On Structure
Contrasting Ownership Structures
History in the Making
Strategy Follows Structure
Looking to the Future
The Information Age to the Rescue
Revision or Restructuring?
Part V - ON SPIRIT
Chapter 20 - On Entrepreneurship
I Meet a True Entrepreneur
A Merger, a Firing, an Idea
Steps and Stumbles
Schumpeter Describes the Entrepreneur
A Slice of the World in Context
Chapter 21 - On Leadership
The Majesty of Simplicity
A Fortuitous History
Readiness and Foresight, Purpose and Passion
Servant Leadership
Failure and Determination
Patience and Courage
Fate Takes a Hand
Chapter 22 - On Human Beings
The Investor as Human Being
Shareholders Respond
The Vanguard Crew
The Award for Excellence: Even One Person Can Make a Difference
Partnership: Sharing the Fruits of Our Labors
The Golden Rule
Afterword
Appendix I - Some Thoughts about the Current Stock Market as 2010 Begins
Appendix II - Some Thoughts about the Current Stock Market as 1999 Begins
Notes
Index