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Inside this Book – EVEN BEFORE YOU THINK about “index funds”—in their most basic form, mutual funds that simply buy all the stocks in the U.S. stock market and hold them forever—you must understand how the stock market actually works. Perhaps this homely parable—my version of a story told by Warren Buffett, chairman of Berkshire Hathaway Inc., in the firm’s 2005 Annual Report—will clarify the foolishness and counterproductivity of our vast and complex financial market system. Once upon a Time … A wealthy family named the Gotrocks, grown over the generations to include thousands of brothers, sisters, aunts, uncles, and cousins, owned 100 percent of every stock in the United States. Each year, they reaped the rewards of investing: all the earnings growth that those thousands of corporations generated and all the dividends that they distributed. 4 Each family member grew wealthier at the same pace, and all was harmonious. Their investment had compounded over the decades, creating enormous wealth, because the Gotrocks family was playing a winner’s game.
Inside this book –The Little Book of Common Sense Investing PDF Book by John C. Bogle – For most of the past 80 years, the accepted stock market portfolio was represented by the Standard & Poor’s 500 Index (the S&P 500), which was created in 1926 and now lists 500 stocks. It is essentially composed of the 500 largest U.S. corporations, weighted by the value of their market capitalizations. 9 In recent years, these 500 stocks have represented about 80 percent of the market value of all U.S. stocks. The beauty of such a cap- weighted index is that it automatically adjusts to changing stock prices and never has to buy and sell stocks for that reason. With the enormous growth of corporate pension funds between 1950 and 1990, it was an ideal measurement standard, the benchmark or hurdle rate that would be the comparative standard for how their professional managers were performing. Today, the S&P 500 remains a valid standard against which to compare the returns earned by the professional managers of pension funds and mutual funds. In 1970, an even more comprehensive measure of the U.S. stock market was developed. Originally called the Wilshire 5000, it is now named the Dow Jones Wilshire Total Stock Market Index. It includes some 4,971 stocks, including the 500 stocks in the S&P 500. However, because its component stocks also are weighted by their market capitalization, those remaining 4,471 stocks account for only about 20 percent of its value. Nonetheless, this broadest of all U.S. stock indexes is the best measure of the aggregate value of stocks, and therefore a superb measure of the returns earned in U.S. stocks by all investors as a group.
The Little Book of Common Sense Investing by John C. Bogle PDF : eBook Information
- Full Book Name – The Little Book of Common Sense Investing
- Author of this Book – John C. Bogle
- Language – English
- Book Genre – Non-Fiction, Money, Finance, Economics, Currency
- Download Format – PDF
- Size – 1.9 MB
- eBook Pages – 160
- Price – Free