The Elements of Investing Easy Lessons for Every Investor

by Malkiel, Burton G.; Ellis, Charles D.

• ISBN13: 9781118484876
• ISBN10: 1118484878
• Edition: 2nd
• Format: Hardcover
• Copyright: 2013-01-22
• Publisher: Wiley

Summary

The Elements of Investing has a single-minded goal: to teach the principles of investing in the same pared-to-bone manner that Professor William Strunk Jr. once taught composition to students at Harvard, using his classic little book, The Elements of Style. With great daring, Ellis and Malkiel imagined their own Little Red Schoolhouse course in investing for every investor around the world-and then penned this book. The Elements of Investing hacks away at all the overtrading and over thinking so predominant in the hyperactive thought patterns of the average investor. Malkiel and Ellis offer investors a set of simple but powerful thoughts on how to challenge Mr. Market at his own game, and win by not losing. All the need-to-know rules and investment principles can be found here. This new edition includes an extra chapter on how and why the timeless investment lessons presented in this book are even more relevant in today's volatile markets than when the book first published.

Author Biography

Burton G. Malkiel is the Chemical Bank Chairman's Emeritus Professor of Economics at Princeton University and the author of the bestselling A Random Walk Down Wall Street. Malkiel has served on the President's Council of Economic Advisers, as dean of the Yale School of Management, as chair of Princeton's Economics Department, and as a director of major corporations.

Charles D. Ellis is a consultant to large public and private institutional investors. For three decades, he was managing partner of Greenwich Associates, the international business strategy consulting firm. He has taught investing at both Harvard and Yale and is the author of fifteen books, including the bestselling Winning the Loser's Game.

Table of Contents

Preface to Updated Edition xi

Foreword xvii

Introduction xxiii

It All Starts with Saving 1

I. Save 3

First Do No Harm 6

Start Saving Early: Time Is Money 7

Th e Amazing Rule of 72 9

Savvy Savings 14

Small Savings Tips 18

Big Ways to Save 20

Let the Government Help You Save 22

Own Your Home 24

How Do I Catch Up? 25

II. Index 29

Nobody Knows More Th an the Market 31

Th e Index Fund Solution 34

Don’t Some Beat the Market? 38

Index Bonds 43

Index Internationally 44

Index Funds Have Big Advantages 44

One Warning 46

Confession 49

III. Diversify 51

Diversify Across Asset Classes 54

Diversify Across Markets 58

Diversify Over Time 60

Rebalance 65

IV. Avoid Blunders 73

Overconfi dence 76

Beware of Mr. Market 79

Th e Penalty of Timing 84

More Mistakes 85

Minimize Costs 87

V. Keep It Simple 93

Review of Basic Rules 95

Asset Allocation 105

Asset Allocation Ranges 107

Investing in Retirement 112

Getting Specifi c 114

VI. Timeless Lessons for Troubled

Times 125

Volatility and Dollar-Cost Averaging 128

Diversifi cation Is Still a Time-Honored

Strategy to Reduce Risk 131

Rebalancing 133

Diversifi cation and Rebalancing Together 136

Index at Least the Core of Your Portfolio 137

Fine-Tuning a Bond Diversifi cation Strategy 142

A Final Th ought 148

A Super Simple Summary: KISS

Investing 151

Appendix: Save on Taxes Legally 153

Individual Retirement Accounts (IRAs) 154

Roth IRAs 156

Pension Plans 158

Tax-Advantaged Saving for Education 161

Recommended Reading 165

Acknowledgments 167

About the Authors 169

Index 171