The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns author: John C. Bogle rating: asin: 0470102101 binding: Hardcover list price: CDN$ 23.99 CAD amazon price: CDN$ 17.51 CAD

I am a big fan of the "Little Book" series from Wiley publishing. They are small, easy to read, and are focused enough to really deliver.

The Little Book of Common sense investing is a book dedicated to Ben Graham's idea of "Defensive Investing" from his book "The Intelligent Investor".

The book is written by John C. Bogle (The founder of the Vanguard Group, Inc. and president of its
Bogle Financial Markets Research Center).

The book does a great job explaining how active trading is rarely a sound strategy, and more often that not, does a great job of eating your returns. Furthermore, Bogle explains that humans tend to buy mutual funds where managers have performed well, speculating that future returns will be similar. Statistically, this is a false assumption. In reality, all these active managers cannot possibly succeed since their trading merely shifts ownership from one holder to another.

The winning game, according to Bogle, is to invest in low-fee index mutual funds (or ETFs) in order to match the markets returns. Low-fee's, and owning a slice of the whole stock market, enable index funds to provide the gross return earned in the stock market minus a scintilla of cost. He further argues that index funds eliminate individual stock risk, style risk and manager risk, with only market risk remaining.

He also introduces a lovely concept called "Funny Money". The account, never to exceed 5% of your total portfolio is where you can go nuts exploring aggressive investment strategies, that sketchy mining company, individual tech stocks, etc. Go nuts. Click that "Buy" button and feel the adrenaline pump. But never more than 5% of your overall portfolio, because you'll likely learn some valuable lessons from it.

This is a great book for people just starting out in investing, but also for those who keep dumping money into high fee (MER) mutual funds that are not performing up to expectations.