Minimizing costs and trading frequency increases the chances of earning a fair share of the market. Similar to gambling’s motto of “house always wins,” financial intermediaries make a lot of money while others are investing. Reducing these costs increases the chances of earning higher shares from the market.
- Related Note(s):
- Just as compound interest multiplies wealth over time, investment costs compound negatively, eating away returns year after year.
- Capitalism creates wealth through innovation, but intermediaries extract value without creating it. Minimize their take.
- The solution is simple—buy low-cost index funds and hold them. Simple ideas prevent complicated problems.
- Source(s): The Little Book of Common Sense Investing by John C. Bogle, p. XX-XXI
