19 September 2010

The Elements of Investing

Disclosure: I received a free copy of this book.

The Elements of Investing, by Burton Malkiel and Charles Ellis, is a fine (and very concise) book with basic principles of investing.

Burton Malkiel is also the author of the (much longer) book A Random Walk Down Wall Street; if you have read that book, you may not be surprised to learn that the core of the advice is this: Buy and hold index funds.

Malkiel and Ellis lay out the arguments that suggest you should keep a substantial chunk of your assets in broad index funds (or index-tracking ETFs, which have similar characteristics). Foremost among them, individuals are not very good at picking stocks or at timing the market, and fund managers are no exception. (Having your assets properly diversified can help you sleep at night, and that's probably worth something to you too.)

There's other good advice as well, such as how to take advantage of 401(k) plans and IRAs.

I consider the advice presented here to be a good set of defaults for most people. Those who are exceptions (or are in exceptional situations) will need to consult sources other than this book, but those people ought to know who they are. Meanwhile, if you have already read A Random Walk Down Wall Street, there is little truly new material presented here (same goes, probably, if you are already just generally well read in personal finance). However, you may still find it convenient to have a bunch of essential actionable elements in a single short book.

No comments:

Post a Comment