The Little Book of Common Sense Investing
Are you mystified about the best ways to invest your money? Then check out The Little Book of Common Sense Investing by John C. Bogle. This short book is not exactly thrilling reading, but it packs a lot of good information into a small package. And the good news is, Bogle’s done the math and makes a great case for the idea that the best thing you can with your money is also one of the simplest: buy low-cost index funds and hold them for the long term. By doing just that, you can beat the returns of about 80% of investors. Why? Because most people invest emotionally (e.g. buy high because they have to get in on a “hot” stock, sell low because they freak out when the market dips) and pay too much for the privilege (through fees and taxes). I’m all for strategies that make my life simpler, and it turns out that this one is really sound.
If you just can’t resist the temptation to play the stock market, you might try the strategy that The Motley Fool calls “Index Plus a Few” – put the bulk of your money in index funds and spend a small portion on individual stocks (2-5, but no more than you can reasonably keep up with). There are plenty of low-cost online brokers to make the process easy. Zecco.com even offers free trades (with some restrictions), although their site can be a bit clunky to use.