Most investors aim to outperform their peers. Either they try to identify investments that have better than average prospects, or they try to buy low and sell high, or they pay an investment manager to play the money game on their behalf. Professor Malkiel's thesis is that they would probably do better to put their capital into cheap, passive mutual funds that seek to do nothing more ambitious than merely track market indices. If they follow this strategy, he suggests, they'll not only save themselves a lot of time, hassle and worry; in the long run, they'll probably also make more money than most of those who think that markets can be outsmarted. Discussing cash, gold, property and collectibles as well as fixed-interest securities and equities, Professor Malkiel's book tells you everything that you need to know in order to put his investment philosophy into practice, including how to tweak your asset mix according to your age, your appetite and capacity for risk and how the markets are fluctuating.
Professor Malkiel's argument is, I think, very persuasive. His notably accessible book - clear, humorous and free from mathematical gobbledegook - makes his case very cogently indeed, and adduces a mountain of evidence to support it. If I'd read it as a youngster and followed its advice, by now I'd be a multi-millionaire.
I can think of only two caveats. The first is that the book is aimed primarily at American readers. Its core ideas are as applicable in the UK as in the US, but some of Professor Malkiel's material about taxes and pensions is irrelevant to people in Britain. Secondly, and more importantly, adopting the professor's method entails sharing in the profits of businesses whose activities not everyone is comfortable with - companies involved in tobacco, alcohol, armaments, pornography, environmental degradation... Some people - myself included - would say that this objection to passive investment is insurmountable. If you're not one of them, this book could well be one of the most useful that you'll ever read.
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