I am 20 years old, I have a genuine interest in finance. I heard that this the Little Book of Common Sense Investing was a good book for beginners, however this book is like reading Java coding to me. Can someone help me understand what Bogle is trying to say and Can someone give me advice on how I should understand the book? Thank you
1) "First, get diversified. Come up with a portfolio that covers a lot of asset classes. Second, you want to keep your fees low. That means avoiding the most hyped but expensive funds, in favor of low-cost index funds. And finally, invest for the long term. [Investors] should simply have index funds to keep their fees low and their taxes down."
1) Is Bogle trying to tell us that we should invest in index funds that carry a lot of successful value, is he also trying to say we should ignore the hyped stocks and purchase low-cost index funds at a low price and wait for the long term.
2) "The higher the level of their investment activity, the greater the cost of financial intermediation and taxes, the less the net return that the business owners as a group receive. The lower the costs that investors as a group incur, the higher rewards that they reap. So to realize the winning returns generated by businesses over the long term, the intelligent investor will minimize to the bare bones the costs of financial intermediation. That’s what common sense tells us. That’s what indexing is all about"
2) This quote gave me a headache, When I read it 4 times I couldn't visualize anything. I'm a visual thinker, can somebody explain this for me thank you.
3) "Buffett says, “When the stock temporarily overperforms or underperforms the business, a limited number of shareholders—either sellers or buyers—receive out-sized benefits at the expense of those they trade with."
3) I couldn't picture much of what the message was saying, can someone help explain.
4) "We can measure these emotions by the price/earnings (P/E) ratio, which measures the number of dollars investors are willing to pay for each dollar of earnings." When greed holds sway, we see very high P/Es. When hope prevails, P/Es are moderate. When fear is in the saddle, P/Es are very low. "
4) Does P/E help show where the trends are going? Since the P/E shows the emotions of what the investors are willing to pay.
5) Using Keynes’s idea, I divide stock market returns into two parts: (1) Investment Return (enterprise), consisting of the initial dividend yield on stocks plus their subsequent earnings growth, which together form the essence of what we call “intrinsic value”; and (2) Speculative Return, the impact of changing price/earnings multiples on stock prices.
5) I couldn't picture much of this, i feel as if there is no light bulb in my brain and it frustrates me.
Submitted January 26, 2017 at 02:50AM by risinginvestor007 http://ift.tt/2jA3JTF
