Review: The Bogleheads’ Guide To Investing

This review is going to be inescapably biased. I read Ramit Sethi’s I Will Teach You To Be Rich a few months back. Since then, I’ve become very interested in personal finance, and I’ve been on a hunt for more reading material on the subject. A large portion of this review will be comparing and contrasting The Bogleheads’ Guide with Sethi’s book.

You may wonder, after all the praise I gave Sethi’s book, why I would even want to read another personal finance book. First, I wanted some resources to confirm the advice given in that book. More importantly, I wanted some more detail on a few topics that I felt Sethi’s book glossed over. In his book, Sethi advises average readers to invest in life-cycle funds. These funds do all of the investing grunt work for you, making them easy to use and maintain. You just keep adding money. He also advises the reader on how to set up personalized asset allocation and invest in individual index funds manually. He describes the potential for a slightly higher return by managing your own individual investments compared to simply choosing a life-cycle fund. Unfortunately, he does not give a lot of detail on how to distinguish various index funds from each other. I started looking for personal finance books that could offer more insight into how to evaluate an index fund. I actually found The Bogleheads’ Guide To Investing through Sethi’s book recommendations page.

The Bogleheads' Guide to InvestingThe Bogleheads’ Guide To Investing ended up being much more than I anticipated. I was happy to see that it was not simply a rehash of the same information and ideals found in I Will Teach You To Be Rich. This book was something altogether different and yet written from a similar perspective. Bogleheads are a group of investors who have been influenced by John Bogle. Bogle is the founder of The Vanguard Group (an investment company), and he has been a long-time advocate of indexed mutual funds. Vanguard created the world’s first indexed mutual fund under Bogle’s supervision. Thus, Bogleheads are Vanguard proponents who believe in the advantages of indexed mutual funds.

This book is set up to be a sort of personal finance bible. It has everything from how to save money, how to get started with investing, why you should invest in index funds, and a lot more. The sheer scope of this book is phenomenal. It goes beyond simple personal finance advice. There were two chapters on tax efficient investing, a chapter on setting up college funds for your children, and even a chapter or two on estates and how to pass on your wealth effectively.

I am comparing this book to Sethi’s for a few reasons. One of the things I noticed is that they actually complement each other pretty well. Sethi’s book gives better motivation for getting started with investing. It contains specifics (with numbers) of how to set up a conscious spending plan (or budget) and it’s very task and goal-oriented. “This week, you should complete tasks X, Y, and Z.” It also caters to a fairly specific audience, people in their 20s to mid-30s. The Bogleheads’ Guide is built for all age groups. It talks about the importance of starting early and how compounding interest works in your favor. It gives advice for changing your investments as you progress towards and into retirement. It has chapters on saving for your children’s college education and even what types of insurance are appropriate for different people at different ages. It also talks about ways to minimize taxes on investments and how to pass on an inheritance to your family.

I can’t say that this book answered all of the questions I had about asset allocation, choosing funds, and vetting fund quality. I can say that I was pleasantly surprised by all the detail about retirement and education planning that will be useful in the future. But more importantly, after reading the chapters on asset allocation and getting started with fund selection, I realized that both books were telling me that choosing specific funds isn’t nearly as important as asset allocation and fund expense fees. In fact, I could picture Ramit face-palming himself and yelling, “Quit debating minutiae and get started already!”

While I liked both books a lot, there are a few reasons that I will likely recommend Sethi’s more often, at least to people around my age. First, I liked his motivational writing style. It instantly motivated me to get started. Second, while The Bogleheads’ Guide is very thorough and will be useful to me over the years, for someone who has never invested (or even thought about investing before), it would probably be overwhelming. Sethi also warns about debating minutiae (because it leads to inaction), and The Bogleheads’ Guide is full of tweaks and sometimes unnecessary details that could precipitate this inactivity.

Overall, I did like the book a lot, and it’s one I will definitely be keeping around for future reference. If you’re young and looking to get a handle on your personal finances, I recommend you start with I Will Teach You To Be Rich. If you’re older than 40 or you just want some more detail than Sethi has to offer, The Bogleheads’ Guide is an excellent choice. Just don’t forget to put things into action right away! Remember Ramit’s 85% solution. It’s better to be 85% of the way right and actually doing something than be 0% right by doing nothing. Don’t become paralyzed by the fear of making a mistake. Doing nothing is the mistake.


8 thoughts on “Review: The Bogleheads’ Guide To Investing

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