More on Bogle's New Book

Right after I posted about John Bogle's new book last week a UPS man knocked on my door and awarded me a copy of it. The publisher sent it to me thinking I might be interested in it. I'm thankful and appreciative, though sending me books is not the best way to promote them -- and I'll devote a post to that subject in the near future.

The Little Book of Common Sense Investing is well-written and carries endorsements from none other than Warren Buffett and Charlie Munger. Buffett says a low-cost index fund is "the most sensible equity investment for the great majority of investors." And I have no doubt that's true. But, at the risk of sounding immodest, I don't count myself in that category and most readers of this blog probably don't either.

What's more, Warren Buffett didn't consider his partners in the Buffett Partnership in that group. Or at least I am certain he didn't.

Why? Because when Buffett closed the Buffett Partnership in 1969, he gave the partners a choice of receiving shares of Berkshire Hathaway or cash. Those taking cash were encouraged by Buffett to put their money in the Sequoia Fund, run by his friend Bill Ruane. The Sequoia Fund was, and is, an actively managed fund with an excellent long-term record. I haven't tracked its performance lately, yet I'd venture to say it has outperformed the indexes over the long term.

Maybe index funds didn't exist in 1969. Whether or not they did, does anyone think Buffett regrets urging is partners to put money in Ruane's fund? Of course no one does.

John Bogle's a great guy. His new book is a good read. And low-cost index funds makes sense for retail investors unable or unwilling to put the necessary time and study into researching actively managed mutual funds. Not to mention spending the time needed to manage their own portfolios.

If someone is willing to put in the required hours, they'd do better reading several of the books in the "Essential Reading" menu at the right.