Mutual funds pioneer John C. Bogle shares investing tips for today's economy

Common Sense on Mutual Funds
Common Sense on Mutual Funds

Ten years after the success of the book "Common Sense on Mutual Funds," Wall Street legend John C. Bogle revises this classic to address the current financial crisis. The founder of The Vanguard Group and creator of the first index fund takes time out of his busy schedule to talk investment strategy for 2010.

Why did you feel the need to update this book?

I did it for a couple of reasons. One, the first edition was written within a month or two of the market high, after two fantastic decades in which the stocks produced 17% annual returns, totally unprecedented in American's financial history. It's not to a great surprise that the next decade did not do that. The next decade, I think the number is about -1% a year on the SP500 taking into account dividends. So it seemed like it was a good time to do a retrospective.

It also gave me a chance to reaffirm the investment ideas in the original book. As I mentioned in my introduction, I told the reader I had two objectives: 1. to help make him or her a more successful investor, and 2. to chart a course for change in the mutual fund industry. On the first one, just about every word in that book has been borne out by experience over the last decade Yes, stock returns would be much lower. Yes, bonds should play a part in any intelligent investment program. Yes, safety is important and minimizing risk is important. Yes, asset allocation is important. Yes, be sure and keep costs at a minimum, keep tax efficiency at the maximum. Don't chase past returns. And treat mutual funds as long-term investments rather than short-term speculation. Every single word of that has come true and has been validated by the experience of a very difficult decade. So in a funny way, I am awarding myself a batting average of 1000.