by John C. Bogle
Reviewed by Michael L. Jones, ChFC, CFP®, MSFS
Michael L. Jones, ChFC, CFP®, MSFS, is president of Lifetime Financial Solutions, Inc., in Louisville, Kentucky.
As founder and former CEO of the Vanguard Mutual Fund Group, John Bogle delivered this timely gem of a book during a period of great uncertainty and economic unrest. I say it's timely because what I am finding in my own life, as well as that of clients and colleagues, is a return to core values. Core values such as frugality, adding value to the lives of others, and the development of value through excellence in all we do to bring stability to our lives.
Bogle's perspective in brief volume clarifies just how these core values can and should be implemented in business and the professional world. I've picked a few powerful quotes from the book to give you a picture of just how he does this. His words should provide motivation enough for financial professionals and their clients to read this book.
Chapter 1: "Not Enough Value"
" ... On balance, the financial system subtracts value from our society." (page 30)
"The financial industry is not only the largest sector of our economy; it is the only industry in which customers don't come anywhere near getting what they pay for." (page 46)
I merely quote Bogle here, but he does build a pretty convincing case for his thesis in chapter 1.
Chapter 2: "Too Much Speculation, Not Enough
"When our market participants are largely investors focused on the economics of business, the underlying power of our corporations to earn a solid return on the capital invested by their owners is what drives the stock market, and volatility is low. But when our markets are driven, as they are today, largely by speculators..." (page 52). Here Bogle makes the clear distinction between speculation and true investing and notes how speculation has become so dominant that it is destroying value, not creating it.
And later in chapter 2, one of the sub headings tells it all: "Tortoises Win." His main thesis is that the only real way to successfully invest is to focus on the value of long-term holding of financial instruments and the avoidance of speculation (market timing, costly derivatives, etc.).
The point of the book is not to bash or trash the financial industry or society. Rather, it strongly calls attention to the core values that made the capitalistic system our great country was built upon and urges a return to those core values.
In the remainder of the book, Bogle calls for simplicity, greater professional conduct, eschewing salesmanship for stewardship, and greater leadership versus management. He calls for each person and institution to clearly determine how much is enough, and then live and operate from that basis.
John Bogle on Speculation, Stewardship, and Self-Interest (Journal of Financial Planning, October 2009)