9780393058543

Random Walking Guide to Investing : Ten Rules for Financial Success

by
  • ISBN13:

    9780393058543

  • ISBN10:

    0393058549

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2003-09-17
  • Publisher: W W NORTON

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Summary

For over thirty years, Burton G. Malkiel's informative, irreverent, and gimmick-free books, "the best investment advice money can buy," have been the first places investors turn to understand the market and to use it to their best advantage. With this concise new guide, Malkiel takes the mystery out of the money game by distilling his reliable plan into ten easy-to-follow rules. Beginning with the basics--"Fire your investment adviser" and "Start now"--Malkiel carefully and with no small measure of humor lays out the rest of his plan, including such rules as "#3: Stiff the Tax Collector" and "#8: The Market Is Smarter than You Are." This 200-page guide is essential for anyone starting a portfolio, rebuilding after the dot-com crash, or simply looking for reassurance in the puzzling world of personal finance.

Table of Contents

Preface and Acknowledgments xvii
PART ONE: THE BASICS 1(32)
BASIC POINT 1: FIRE YOUR INVESTMENT ADVISER
5(6)
BASIC POINT 2: FOCUS ON FOUR INVESTMENT CATEGORIES
11(16)
Cash
12(1)
Bonds
13(2)
Common Stocks
15(9)
Bubbles in Stock Prices
The Tulip Bulb Graze
The South Sea Bubble
The Internet Graze
What Lessons Should We Learn?
Real Estate
24(3)
BASIC POINT 3: UNDERSTAND THE RISK/RETURN RELATIONSHIP
27(6)
PART TWO: THE RULES 33(136)
RULE 1: START SAVING NOW, NOT LATER: TIME IS MONEY
37(5)
Returns Throughout U.S. History
38(1)
The Miracle of Compound Interest
38(2)
The Million-Dollar Difference
40(2)
RULE 2: KEEP A STEADY COURSE: THE ONLY SURE ROAD TO WEALTH IS REGULAR SAVINGS
42(15)
Savvy Savings Tips
43(7)
1. Pay Yourself First
2. Find a Save More Tomorrow Plan
3. Make Out a Budget
4. Change a Spending Habit or Two
5. Think in Terms of Opportunity Costs
6. Be Saving in Your Spending
7. Pay Off Your Credit Card Balance
Strategies for Catching Up
50(2)
1. Downsize Your Lifestyle and Start Saving Now
2. Consider Pushing Retirement Back a Few Years
3. Make the Most of Your Home Equity
Retirement Planning
52(2)
The Millionaire Next Door
54(3)
RULE 3: DON'T BE CAUGHT EMPTY-HANDED: INSURANCE AND CASH RESERVES
57(11)
Establishing a Cash Reserve
57(1)
Money-Market Mutual Funds
58(2)
Bank Certificates of Deposit (CDs)
60(1)
Internet Banks
61(1)
Treasury Bills
61(1)
Tax-Exempt Money Market Funds
62(1)
Buying Insurance
63(4)
Variable Annuities
67(1)
RULE 4: STIFF THE TAX COLLECTOR
68(15)
Individual Retirement Accounts
69(2)
Roth IRAs
71(2)
Pension Plans
73(2)
401(k) and 403(b) Pension Plans
Self-Employed Plans
What Can You Invest In?
Priorities in Saving for Retirement
75(2)
A Caveat
77(1)
Possible New Tax-Favored Vehicles
77(1)
Tax-Free Savings Strategies for Education
78(3)
Saving for College: As Easy as 529
Education Savings Accounts
Education Savings Bonds
The Best Tax Strategy of All
81(2)
RULE 5: MATCH YOUR ASSET MIX TO YOUR INVESTMENT PERSONALITY: HOW TO ALLOCATE YOUR ASSETS
83(13)
A Reminder: Risk and Return Again
84(3)
Your Time Horizon
87(3)
Your Capacity for Risk
90(2)
Your Temperament
92(2)
Rebalancing, or Keeping an Even Temperament
94(2)
RULE 6: NEVER FORGET THAT DIVERSITY REDUCES ADVERSITY
96(15)
The Benefits of Diversification
96(2)
An Investment Horror Story
98(1)
The Potential Crises in Some 401 (k) Plans
99(1)
How Much Diversification Is Enough?
100(3)
Do You Need to Diversify Internationally?
103(1)
Diversification Also Means Buying Other Asset Classes
104(2)
Diversification Over Time
106(5)
RULE 7: PAY YOURSELF, NOT THE PIPER
111(7)
Pay Off All Credit Card Bills
112(1)
Look Out for Mutual Fund Expenses
113(2)
Costs Matter for All Financial Products
115(2)
Don't Get Wrapped Up
117(1)
RULE 8: BOW TO THE WISDOM OF THE MARKET
118(17)
Why the Market Is Smarter Than You Are
119(3)
Being Smarter Doesn't Always Mean Being Smart
122(1)
Timing Isn't Everything
122(2)
Why Do Most Professionals Get C's?
124(3)
But Don't Some Active Managers Beat the Market Every Year?
127(4)
Managers Who Deserve an A
131(4)
1. The Role of Chance
2. They Did It Their Way
3. You Never Know in Advance Who the Winners Will Be
RULE 9: BACK PROVEN WINNERS: INDEX FUNDS
135(18)
The Index Advantage
136(2)
But Not All Index Funds Are Alike
138(1)
Exchange Traded Funds
139(2)
Indexing Works for Bonds, Real Estate, and Other Asset Classes
141(1)
What Index and What Funds Should Be Chosen?
142(4)
A Life-Cycle Guide to Asset Allocation
146(7)
RULE 10: DON'T BE YOUR OWN WORST ENEMY: AVOID STUPID INVESTOR TRICKS
153(16)
Overconfidence
154(2)
Herding
156(4)
Illusion of Control
160(2)
Loss Aversion
162(1)
Other Psychological Pitfalls
163(2)
Susceptibility to Hot Tip Investing
Gin Rummy Behavior
Believing in Foolproof Schemes
Ignoring Costs
165(1)
Getting Entranced by New Issues
166(3)
PART THREE: TAKING STICK AN INVESTMENT SCORECARD 169(16)
Questions Frequently Asked About Indexing
176(5)
A Summing Up
181(4)
REFERENCES 185(4)
INDEX 189

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