Review: The Bogleheads’ Guide to Investing

Jack Bogle and his followers, the Bogleheads, are famous for giving sound investing advice for getting great returns over the long haul while keeping costs low.

A culture of investing named after one man (John C. Bogle or “Jack”) sounds at first like a very dangerous and fanatical culture to be a part of. Anyone smart with their money knows that there can never be one person with all of the right answers. Thankfully, the Bogleheads follow some of the simplest and most portable investing principles. You do not need to be a Boglehead to manage personal finance the way that Bogleheads do, but the Bogleheads will probably call you one of their own just for how you treat your money using informed common sense.

It is obviously important that the readers of Biglaw Investor take investing seriously, and the Bogleheads believe they have the least anxiety-inducing, least headache-causing, and most fundamentally sound strategy to go about it. The Bogleheads’ Guide to Investing, Second Edition, is a great place to start learning about Boglehead investing and is written by three actual Bogleheads: Mel Lindauer (“Prince of the Bogleheads”), Michael LeBoeuf, and Taylor Larimore (“King of the Bogleheads”). There is also a neat foreword by Jack Bogle himself.

What is Boglehead investing?

You may be wondering what Bogleheads can teach you about successful investing. After all, why pick up an investment book when there are trained professionals that you can pay to manage your money? The Bogleheads will tell you that your money will not only grow more using their strategies but will conversely grow less whenever you do the opposite by paying fees to whoever is managing your money! In addition, part of the mission of the Bogleheads is to help people “unlearn many popular beliefs propagated by Wall Street and the media.” When the average investor earns far below the average annual stock market return, perhaps popular beliefs are worth unlearning.

Here are a few insights straight out of the book to give you a glimpse into the Boglehead investing roadmap:

1. “Good wealth builders have just one thing in common: They spend less than they earn.” It may sound obvious reading this, but the real value of understanding the statement is by being able to recognize what does NOT go into the recipe for good wealth building.

There is no need to know when the “next big crash” is coming or what the “next Amazon” stock will be. There is no need to follow daily charts. There is no need for a finance degree in order to build wealth. There is no need to chase the most complex investment strategy. The bottom line is this: the only thing that matters is that you save money by spending less than you earn and grow your savings by investing it properly.

2. “Stocks and bonds are so efficiently priced that the majority of investors, including full-time professional fund managers, will not outperform an unmanaged index fund after transaction costs.” Here, the book will show how academic research, history, and personal experience all point to the most likely way by which you can make your money grow.

The Bogleheads are very excited about this principle. Thankfully, the rules of the Boglehead investing strategy are simpler than just about any other investing strategy. As Jack Bogle says “the shortest route to top quartile performance is to be in the bottom quartile of expenses.” Boglehead investors understand that costs matter, as every dollar that you pay the fund manager (usually with fancy degrees like a CFS or CFA) is a dollar you do not get to invest for yourself.

3. Structure a long-term asset allocation plan and then stay the course. Now that you know how powerful and straightforward stocks and bonds are as investing tools, the asset allocation between those stocks and bonds is the number one decision that you must make.

Asset allocation is also a simple strategy to learn, and the best part is that you rarely need to adjust it or even look at your money afterwards! Boglehead investing is for the one-and-done, the lazy, the patient, the anxious, the risk-averse, and all at the same time, for the intelligent and informed long-term investor.

If it’s so simple, what does the book even teach you?

The first few chapters of the book aim to give you an understanding of the underlying principles that go beyond just your retirement plan. Unfortunately, becoming an investor and wanting to “Choose a Sound Financial Lifestyle” (Chapter 1) is not always the starting point for readers.

Many also think that investing and retirement planning is something that can be pushed off until later but learning why it is important to “Start Early and Invest Regularly” (Chapter 2) will hopefully change those perspectives. Members of the Boglehead community are quite often on the track for financial independence and the book is an excellent window into setting that sort of financial goal.

The book will educate you in a clear and concise manner on what is happening underneath the surface when you follow the rules of the Boglehead investing strategy. JL Collins, author of The Simple Path to Wealth,  is very attuned to the Boglehead investing strategy and has mentioned that he wrote his book in order to teach his daughter how to invest with as little effort as possible.

To invest like a Boglehead, you do not need to learn exactly what stocks and bonds are, the mechanisms of inflation, taxes, mutual funds, bond funds, international stocks, ETFs, Roth IRAs, behavioral economics, credit cards, that the market is a zero-sum game, or even why diversification matters (and it matters a lot!). But if you want to learn, it won’t hurt you and the book is there as a resource for all of these topics.

Many Bogleheads are diehards for Vanguard and Vanguard funds. Bogleheads will also very often suggest a reliable three-fund portfolio built with low cost index funds, which is surprisingly simple considering how complex personal finance and investing may appear on the surface. The book will explain all of the different moving parts to your investment vehicle. Once your vehicle is up and running, it will be a smooth ride for decades.

The book also explores the psychology of investing. Personal risk tolerance, the temptations of market timing, how to keep it simple, how to tune out unnecessary noise, and what to do with your own investments while you ride out market turbulences are all important things to be familiar about. Understanding how the usual investor behaves and eliminating the natural psychological mistakes will be crucial to protecting your assets long-term.

The book finishes off with a number of chapters on certain decisions you may have to make during your investment lifetime such as managing a windfall, when to get a financial advisor, rebalancing your asset allocation, passing on your wealth at the end of your journey, and other general concerns regarding your net worth.

Your money is not just a number that you enjoy seeing go up over the years; it is tied to your life and plays a significant role in just about everything. The Bogleheads’ Guide to Investing tries to touch on some of the financial decisions that one may run into as they navigate an otherwise inactive investment strategy.

As a lawyer or law student…

I am a law student, and I have taken on debt to attend law school. Debt is an emotionless villain-like shadow of Boglehead investing. While Boglehead investing can go wrong (particularly in the short term), debt never fails and does not make human errors. Because of how powerful debt can be, it is incredibly important that I take steps to ensure my hard-earned money grows safely. The worst outcome would be to earn money and to lose it from unsuccessful investing – to be left with nothing to stop your debt from growing out of control. To fight the predictable and inevitable behavior of debt, a strategy like the one that the Bogleheads have might be the best defense given how simple and straightforward it is.

For attorneys, which many readers of Biglaw Investor happen to be, The Bogleheads’ Guide to Investing has some added appeal. Many attorneys will not have the time to constantly watch and adjust their investments. Attorneys come from all sorts of educational backgrounds, and law school itself does not care to prepare students for managing personal finance. The Boglehead investment strategy is the perfect fit for high and low earners alike, requiring far less time and technical expertise than other investment strategies or – even worse – fads.

For those earning the biglaw salary, the stakes go up for the decisions you make with your money. It is no secret that the high earning capacity often comes at a sacrifice for other important parts of life such as family, leisure, and sometimes even health. By building and protecting your wealth and using a proven, secure, and consistent investment strategy like that of the Bogleheads, you are giving yourself the best chance at having your sacrifices payoff.

Similar resources

For the avid readers and advocates of successful investing, some other books to put on your wish list that are similar to The Bogleheads’ Guide to Investing are:

–         The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William J. Bernstein

–         A Random Walk Down Wall Street by Burton G. Malkiel

–         The Simple Path to Wealth by JL Collins

You may also interact with Bogleheads at where there is now a free version of the first edition of The Bogleheads’ Guide to Investing. There are also plenty of blog posts here at Biglaw Investor for you to read that echo a lot of the same investing strategies!

Joseph Kim is a 3L at Notre Dame Law School. Joseph grew up in California where he developed an interest in working with music, powerlifting, and bowling. He’s been a member of the FIRE community since before law school and plans to pursue FatFIRE following graduation.

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