The Elements of Investing: Easy Lessons for Every Investor

Praise for THE ELEMENTS OF INVESTING "These noted authors have distilled all you need to know about investing into a very small package. The best time to read this book is when you turn eighteen (or maybe thirteen) and every year thereafter." —Harry Markowitz, Nobel Laureate in Economics 1990 "Struggling to find money to save? Befuddled by the bewildering array of investment choices? As you venture into the financial markets for the first time, it's helpful to have a trusted guide—and, in Charley Ellis and Burt Malkiel, you have two of the finest." —Jonathan Clements, author of The Little Book of Main Street Money "No one knows more about investing than Charley Ellis and Burt Malkiel, and no one has written a better investment guide. These are the best basic rules of investing by two of the world's greatest financial thinkers." —Consuelo Mack, Anchor and Managing Editor, Consuelo Mack WealthTrack

Preface to Updated Edition xi 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 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 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 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 .