Random Walk Gde to Investing PA

Based on the million-copy seller A Random Walk Down Wall Street, this concise new guide by influential and irreverent author Burton G. Malkiel takes the mystery out of personal finance by outlining Malkiel's own ten-point plan for success. Easy to read and easy to follow, this practical book aimed at the investment novice cuts through the jargon to give readers the confidence and knowledge to make wise investment decisions that will provide consistent returns.

Burton G. Malkiel is the Chemical Bank Chairman's Professor of Economics at Princeton University and the author of A Random Walk Down Wall Street.

Preface and Acknowledgments

xvii

PART ONE: THE BASICS

1

(32)

Fire Your Investment Adviser

5

(6)

Focus on Four Investment Categories

11

(16)

Cash

12

(1)

Bonds

13

(2)

Common Stocks

15

(9)

Bubbles in Stock Prices

The Tulip-Bulb Craze

The South Sea Bubble

The Internet Craze

What Lessons Should We Learn?

Real Estate

24

(3)

Understand the Risk/Return Relationship

27

(6)

PART TWO: THE RULES

33

(136)

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)

Keep a Steady Course: The Only Sure Road to Wealth Is Regular Savings

42

(15)

Savvy Savings Tips

43

(7)

Pay Yourself First

Find a Save More Tomorrow Plan

Make Out a Budget

Change a Spending Habit or Two

Think in Terms of Opportunity Costs

Be Saving in Your Spending

Pay Off Your Credit Card Balance

Strategies for Catching Up

50

(2)

Downsize Your Lifestyle and Start Saving Now

Consider Pushing Retirement Back a Few Years

Make the Most of Your Home Equity

Retirement Planning

52

(2)

The Millionaire Next Door

54

(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)

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)

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)

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)

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)

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)

The Role of Chance

They Did It Their Way

You Never Know in Advance Who the Winners Will Be

Back Proven Winners: Model Portfolios of 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)

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 STOCK 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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Random Walk Gde to Investing PA

Summary

Author Biography

Table of Contents

Supplemental Materials