Owning businesses

Bogle, the founder of Vanguard, begins by reminding readers that owning stocks means owning businesses. Over the long run, the returns from stocks come from the dividends companies pay and the growth of their earnings. He calls this the investment return.

On top of that sits the speculative return, which comes from changes in how much investors are willing to pay for each dollar of earnings. That part swings with mood and tends to even out over long periods, so Bogle urges investors to focus on the business fundamentals.