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The Elements of Investing: Easy Lessons for Every Investor Hardcover – January 22, 2013
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"Rebound" by Kwame Alexander
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From the Inside Flap
Since the original edition of The Elements of Investing was published over three years ago, investors have faced difficult economic times along with unprecedented market volatility. It's not surprising that many investors simply abandoned the stock market. It seemed to be too risky a place for retirement savings, and the situation was too unnerving for most to handle. Moreover, some professionals started to announce the death of "buy and hold" and "diversification" strategies.
Burton Malkiel and Charles Ellis, two of the investment world's greatest thinkers, understand how you could get thoroughly confused by today's markets and the often-conflicting advice that comes with it. That's why they've returned with an Updated Edition of The Elements of Investing. While staying true to the original editionand discussing the timeless investing and saving lessons that will put you on a path towards a lifetime of financial successthis book also contains fresh insights found in an additional chapter on rebalancing, which focuses on important issues such as fine-tuning your bond diversification strategy to reflect the realities of today's markets.
Written with every investor in mind, this short, straight-talking book skillfully offers a set of simple, yet powerful thoughts on how to avoid Mr. Market and his "loser's game," and instead enjoy the "winner's game" approach to investing. All the investment rules and principles you need to know are herewith clear advice on how to follow them.
Divided into six essential elements of investing, this little book packs a big message that can help secure your financial future all the way through retirement. Malkiel and Ellis touch on a variety of topics, from focusing on the long term instead of following market fluctuations to using employer-sponsored plans to supercharge your savings and minimize taxes. Along the way, they also address the best friends of any investor: diversification, rebalancing, dollar-cost averaging, and indexing.
The timeless lessons presented in this book are even more relevant in today's volatile markets. If you take the time to learn them, you will be able to take control of your financial future.
From the Back Cover
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 guideand, 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
Author interviews, book reviews, editors picks, and more. Read it now
Top customer reviews
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Much of the book has the same advice as you'd find in a Dave Ramsey or other financial basics course. Pay off your debts, do not take on credit card debt, save all you can and take advantage of the "magic" of compounding interest, avoid insurance products you don't understand, etc. Where it differs is on investment advice, where some groups (Crown Financial, Dave Ramsey, etc.) advise you to pick one of their own certified investment managers, Malkiel would encourage you to open your own Vanguard fund. Use index funds. Only buy index funds with <=0.2% in fees. Once you factor in fees and risk, you're guaranteed to be better than 2/3 of actively managed mutual funds. (The book also looks a bit at index bonds.) Pick a strategy and stick with it (I recommend Jim Paul's What I Learned from Losing a Million Dollars as also helpful on this point). Asset allocation makes up more than 100% of investment returns. Consider an allocation according to your age, investing more heavily as a percentage of your portfolio in low-risk/low-return assets like AAA bonds as you age. The authors examine Warren Buffett and note his wisdom of avoiding the herd. Dollar cost averaging is one way to ensure you go against the herd, putting in a constant dollar amount that buys more during downturns and less during booms.
I give this book 4 stars out of 5. I would give it to someone before recommending a Dave Ramsey course, it's cheaper for one.
Nobel laureate Harry Markowitz reviewed it best: "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."
If you are a stock picker or fret about what the market is doing on a day-to-day basis, prepare to have your world rocked, though.
Through a quick, bare bones and easy to read method, the authors take you into the world of indexing. For those of you who don't know, indexing involves purchasing indexes of sections of the market, or the entire market, to diversify your portfolio without actually buying individual stocks. Why would you want to do this? Think about this: If you invest in only a few stocks, they are likely to face a lot of volatility and may not reflect the actual market. Indexes on the other hand, try to take a piece of each section of their specified pool. By doing that, they are less risky over time. Also, they have much lower expense ratios, typically in the range of .1 to .4%. This means more of your hard earned money can be used for investing, rather than paying fees. Go figure!
This wasn't my first book on investing. Sadly, I started with something much more complicated that didn't provide much help. If I had to start over again, I would read this or the Bogleheads Guide to investing first. This book was much more compact, so it might win out in that regard. The intent of the authors was to create a quick but useful guide on investing. I believe they succeeded in this regard. And both authors have tremendous resumes and plenty of experience in the stock market, adding years of wisdom behind the straightforward logic of this book.