The Elements of Investing Easy Lessons for Every Investor

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.

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

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