The Elements of Investing
In the updated edition ofThe Elements of Investing, authors Charles Ellis and Burton Malkieltwo of the world's greatest financial thinkershave again combined their talents to produce a straight-talking book about investing and saving. Written with every investor in mind, this reliable resource will put you on a path towards a lifetime of financial success.
Page by page, Malkiel and Ellis skillfully focus their message to address the essentials and offer a set of simple, but powerful thoughts on how to avoid Mr. Market and his "loser's game," and instead enjoy the "winner's" approach to investing. All the investment rules and principles you need to succeed are herewith clear advice on how to follow them.
- Shows you how to focus on the long term instead of following market fluctuations that are likely to lead to costly investing mistakes
- Contains investment insights that can carry you all the way to, and through, retirement
- Written by Burton G. Malkiel, the bestselling author ofA Random Walk Down Wall Street, and Charles D. Ellis, the bestselling author ofWinning the Loser's Game
A disciplined approach to investing, complemented by understanding, is all you need to enjoy success. This practical guide explains what you really need to know and puts you on the right course for long-term success through all kinds of markets.
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
The 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 Than the Market 31
The Index Fund Solution 34
Dont 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
Overconfidence 76
Beware of Mr. Market 79
The 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 Specific 114
VI. Timeless Lessons for Troubled Times 125
Volatility and Dollar-Cost Averaging 128
Diversification Is Still a Time-Honored Strategy to Reduce Risk 131
Rebalancing 133
Diversification and Rebalancing Together 136
Index at Least the Core of Your Portfolio 137
Fine-Tuning a Bond Diversification Strategy 142
A Final Thought 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
Burton G. Malkiel is the Chemical Bank Chairman's Emeritus Professor of Economics at Princeton University and the author of the bestsellingA 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 bestsellingWinning the Loser's Game.