The Elements of Investing

Preface to Updated Edition xiForeword xviiIntroduction xxiiiIt All Starts with Saving 1I. Save 3First Do No Harm 6Start Saving Early: Time Is Money 7The Amazing Rule of 72 9Savvy Savings 14Small Savings Tips 18Big Ways to Save 20Let the Government Help You Save 22Own Your Home 24How Do I Catch Up? 25II. Index 29Nobody Knows More Than the Market 31The Index Fund Solution 34Don't Some Beat the Market? 38Index Bonds 43Index Internationally 44Index Funds Have Big Advantages 44One Warning 46Confession 49III. Diversify 51Diversify Across Asset Classes 54Diversify Across Markets 58Diversify Over Time 60Rebalance 65IV. Avoid Blunders 73Overconfidence 76Beware of Mr. Market 79The Penalty of Timing 84More Mistakes 85Minimize Costs 87V. Keep It Simple 93Review of Basic Rules 95Asset Allocation 105Asset Allocation Ranges 107Investing in Retirement 112Getting Specific 114VI. Timeless Lessons for Troubled Times 125Volatility and Dollar-Cost Averaging 128Diversification Is Still a Time-HonoredStrategy to Reduce Risk 131Rebalancing 133Diversification and Rebalancing Together 136Index at Least the Core of Your Portfolio 137Fine-Tuning a Bond Diversification Strategy 142A Final Thought 148A Super Simple Summary: KISSInvesting 151Appendix: Save on Taxes Legally 153Individual Retirement Accounts (IRAs) 154Roth IRAs 156Pension Plans 158Tax-Advantaged Saving for Education 161Recommended Reading 165Acknowledgments 167About the Authors 169Index 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.