March 20, 2025
Over the years many “new and improved” investing strategies have popped up claiming to beat the market - but do they deliver??
John Bogle, the father of index investing, wasn’t convinced.
He shares why in The Little Book of Common Sense Investing.
Here are 3 of my fav takeaways that made me a better investor…
Investing in index funds means you don’t have to worry about short-term market swings.
Over time, the highs and lows balance out, leading to a more predictable long-term return.
This happens because of something called reversion to the mean.
Bogle explained it so well. I’ve read countless books on investing, but I’ve never read one that explained this so clearly!
The market goes through cycles - sometimes it’s up, sometimes it drops - but in the long run, it tends to return to the historical average.
(Remember in 2024 when the S&P 500 was up 24%? Ohhh, those were the days!)
Basically…
⬆️ If an index fund has an unusually strong year, future returns may be lower.
⬇️ If it has a bad year, it’ll probably bounce back.
💰 That’s why staying invested, rather than trying to time the market, is so important!
Bogle says, "Reversion to the mean is the iron rule of the financial markets."
Index fund returns may go up or down, but they always settle back to their long-term average.
Investing is much less stressful once you know what to expect!
By holding a diversified index fund, you let this natural balancing process work in your favour.
As I write this, my investments have lost 5 months of gains in days.
(Talk about averaging out last year’s sky-high returns!)
Keeping your portfolio steady can help protect you when the market takes a dive - like an anchor that keeps you from drifting too far.
Having bonds in a portfolio adds stability, making it less likely someone will panic and sell when the market drops.
When things are good it’s easy to feel like bonds are a waste, thinking if that money was in a growth fund, I’d have so much more!
It’s only when the market goes red that bonds get love from more investors.
Bogle considers bonds to be a necessity:
“The long run is a series of short runs, and during many short periods, bonds have provided higher returns than stocks.”
He points out that between 1900 and 2017, bonds outperformed stocks in 42 years.
Bogle says the question is not “Why should I own bonds?,” but “What portion of my portfolio should be allocated to bonds?”
What if you could do better than index investing - with the same amount of work?
That’s the idea behind specialty ETFs.
Unfortunately, it rarely pans out.
Bogle says these funds “promise market-beating strategies but often come with higher fees and underwhelming results.”
Unlike broad-market index funds which aim to capture the entire economy’s growth, specialty ETFs try to outperform by focusing on a particular trend.
These include:
At first glance, these specialty ETFs might seem like a smart choice - but the results show otherwise.
The book quotes Jim Wiandt, founder of etf.com:
“Remember what makes indexing, well, indexing: low fees, broad diversification, hold, hold, hold. Don’t believe the hype. Try to beat the market—in any manner—and you’re likely to get beaten.”
John Bogle’s advice boils down to one simple truth: investing works best when you don’t overcomplicate it.
Just keep investing consistently in index funds, and let the ‘magic of the market’ do the rest.
That’s why we created Passiv!
It makes investing easier by automating portfolio management, keeping you balanced, and keeping your portfolio on track.
If you’re into simple long-term investing, Passiv is for you.
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