VOL. XCIV, NO. 247
BOOK BREAKDOWN
NO ADVICE
Saturday, January 17, 2026
Intermediate · 2010
Common Sense on Mutual Funds
by John C. Bogle · Partly Dated
A rigorous, investor-first guide to mutual funds: why costs and taxes dominate outcomes, why indexing is the default, and how to select funds using stewardship, simplicity, diversification, and long-term discipline.
Level
Intermediate
Strategies
3 types
Frameworks
5 frameworks
Rating
Target Audience
Ideal Reader
- Investors choosing mutual funds/ETFs in a 401(k), IRA, or brokerage account
- Anyone who wants a no-nonsense framework for fund selection beyond past performance
- People who want to understand the mutual fund industry incentives (and how they hurt investors)
- Investors who already index and want the deeper why plus the practical selection rules
May Not Suit
- Readers who only want a short indexing pamphlet (this book is long and detailed)
- Stock pickers looking for company valuation and security selection methods
- Short-term traders
Investor Fit
| Strategy | Portfolio Management · Quantitative · Behavioral Finance |
| Time Horizon | Long-term (5+ years) |
| Asset Focus | Equities · Fixed Income · Multi-Asset · Mutual Funds |
| Math Level | Basic Arithmetic |
| Prerequisites | Understands what a mutual fund or index fund is · Comfortable with fees, percentages, and basic risk/return concepts |
Key Learnings
- 1What you do not pay (costs, taxes, turnover) is a durable edge
- 2In aggregate, investors cannot outperform the market; after costs, most will underperform
- 3Mutual fund marketing often sells complexity; simplicity usually wins over decades
- 4Past performance is a weak predictor; fees and behavior are stronger predictors of outcomes
- 5Index funds are a powerful default because they minimize friction and avoid manager-selection risk
- 6Diversification and asset allocation matter more than choosing the best active fund
- 7Turnover creates hidden costs and tax drag; low turnover is a feature, not a bug
- 8Fund governance and incentives matter: stewardship can separate investor-first funds from asset-gathering machines
- 9Chasing hot funds and switching managers is a common way investors sabotage themselves
- 10A long-term plan + rebalancing + low costs beats most smart activity
Frameworks (5)
Formulas (6)
Case Studies (4)
Performance chasing and fund inflows
Takeaway
Money tends to arrive after outperformance (and leave after underperformance), creating a buy-high/sell-low cycle for investors.
Low-fee vs high-fee fund compounding over decades
Takeaway
Small annual fee differences become massive long-term differences in ending wealth.
Active management and asset size
Takeaway
Skill (if present) is hard to scale; asset bloat can reduce flexibility and erode results.
Taxable accounts and distribution drag
Takeaway
Two funds with similar pre-tax returns can diverge meaningfully after taxes due to turnover and distributions.
Mental Models
- —Humble arithmetic: gross returns are shared; costs determine who keeps them
- —Agency problems: the fund company's incentives can conflict with the investor's
- —Complexity tax: more moving parts usually means more friction and behavior mistakes
- —Reversion to the mean: today winners often become tomorrow disappointments
- —Behavior > brilliance: the best fund is the one you can hold through ugly periods
Key Terms
No glossary terms documented for this book.
Limitations & Caveats
Keep in mind
- •Very US mutual-fund-industry centric (still useful, but not globally universal)
- •Long and dense for readers who only want the basic indexing case
- •Not a security-selection or valuation manual
- •Some regulatory/industry details age over time even if the incentives problem persists
Related Tools
Reading Guide
Priority Reading
- Why costs and frictions dominate long-run outcomes
- Asset allocation and diversification fundamentals
- Selecting superior funds (what to look for and what to ignore)
- Taxes and turnover (why after-tax is what matters)
- Industry structure/governance (why incentives create predictable investor harm)
Optional Sections
- —Deep industry/regulatory history if you only want the portfolio playbook
Ratings
Concept Tags
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