The Elements of Investing

by Burton G. Malkiel, Charles D. Ellis

A timeless, easy-to-read guide on life-long investment principles that can help any investor succeed

The Elements of Investing has a single-minded goal: to teach the principles of investing in the same pared-to-bone manner that Professor William Strunk Jr. once taught composition to students at Harvard, using his classic little book, The Elements of Style. With great daring, Ellis and Malkiel imagined their own Little Red Schoolhouse course in investing for every investor around the world-and then penned this book.

The Elements of Investing hacks away at all the overtrading and over thinking so predominant in the hyperactive thought patterns of the average investor. Malkiel and Ellis offer investors a set of simple but powerful thoughts on how to challenge Mr. Market at his own game, and win by not losing. All the need-to-know rules and investment principles can be found here.

Contains sound investment advice and simple principles of investing from two of the most respected individuals in the investment world Burton G. Malkiel is the bestselling author of A Random Walk Down Wall Street and Charles D. Ellis is the bestselling author of Winning the Loser's Game
Shows how to deal with an investor's own worst enemies: fear and greed A disciplined approach to investing, complemented by conviction, is all you need to succeed. This timely guide will help you develop these skills and make the most of your time in today's market.

Genres: Finance, Nonfiction, Business, Money, Personal Finance, Economics, Audiobook

154 pages, Hardcover

First published December 14, 2009

Reviews

[Mayur Thakar · Rating 2 out of 5]

Even though I agree with most of the advice given in this book, I am giving it low ratings because I had expected more going into this, and was disappointed. Also, it is centred around US so it's more useful for the US citizens. You can finish entire book into few hours and it is still repetitive. This book can be summed up in few sentences and if you need convincing for the advice given below then maybe you should read it -

In order to ensure you have proper funds when you retire follow these simple steps -

>Start saving early because compounding does wonders.
>Never ever use credit card debt.
>Put your retirement savings into low-cost broad-based index funds and you are more likely to enjoy well-above average returns.
>If you must try to beat the market (by picking individual stocks or finding some good mutual funds) then do so only after you have put retirement savings into index funds, just to be safe.
>Don't put all your eggs into one basket. (Diversify)
>Rebalance at the start of every year.
>Avoid all the forecasts.
>Ignore over-optimism and over-pessimism going on in the market, do not let it influence you, and focus on long term goal.
>Technical analysis is bullshit like Astrology.
>Your broker doesn't want to make money for you, but from you. He wants you to act. Do not act.

[Kit Pang · Rating 4 out of 5]

Quick and to the point.

"Best friends of any investor"
-Diversification
-Rebalancing
-Dollar-Cost Averaging
-Indexing

[George Odisho · Rating 5 out of 5]

This book is intended for those who are new to investing or who have made financial mistakes and are wishing to write those wrongs.

I'm 27 years old, contribute 16% of my paycheck to my 401k (in which my company's match of 3% is also added), take advantage of my company's 6% yearly profit sharing contribution that is directly transferred to my 401k in the beginning of every year, maximize the contributions to my own personal Roth IRA every year and have contributed a considerable amount of my own money to my own personal investment portfolio (day trading, not recommended in this book and not by A Random Walk Down Wall Street).

Now if you counted my company's contributions...by taking advantage of what my company offers I have given my 401k a 9% raise every year (3% company match, 6% profit sharing), and this also decreases my taxable income by reducing the amount of salary bonuses (which you have to pay tax on) and by reducing your take home pay (which is also taxed).

After experiencing the ups and downs of penny stocks I decided that day trading is more of a form of gambling rather than a way to increase one's net worth. For some people it works and for some it doesn't. I tend to be more on the emotional side and it's difficult for me to leave my emotions out of day trading, although I've gotten much better over the last 2 years and still day trade, but hold positions much longer and focus on more known companies rather than penny stocks.

The Elements of Investing teaches you how to invest over the long term. This is not a book on how to beat the stock market and teaches you more on how to build a net worth and to avoid market trends rather than pursue them and take advantage of them.

To summarize the book is basically a guide on how to build net worth without making a lot of decisions by indexing rather than following certain companies or stock symbols.

Malkiel and Ellis have been extremely successful in indexing and building their own specific net worth and are some of the great investment minds of our time.

This book will tell you to:
Save regularly and early
Use your employer's 401K
Set aside cash for emergencies and living expenses
Take advantage of Uncle Sam
Why not to use credit cards
Turn off emotions when investing and to focus on the long term
How to use and why to use low cost index funds
Why most of your stocks should include common stocks, bonds and real estate (your actual home, or investment properties and not necessarily in stocks)

A must read for anyone investing whether a beginner or a pro. Will also remind you why you save and why it is so important to do so early and regularly. Highly recommend!

[Michelle · Rating 5 out of 5]

If you only read one book, ever, about investing, make it this one. A slender volume, I read it today in one sitting. I picked it up on the recommendation of Bill McNabb, the CEO of Vanguard Group. Anyone who's talked to me for more than 90 seconds about finances knows that I am an unabashed Vanguard fan.

The author Burton Malkiel is most famous for his book "A Random Walk Down Wall Street" which basically posits that asset prices move randomly and defy prediction. I saw him at a conference recently and was wowed.

In "The Elements of Investing" he strives with co-author Charles Ellis to explain investing in a succinct, clear way. The book is modeled after Strunk and White's "The Elements of Style".

This is a gem of a book. It strips away all the noise and nonsense out there about investing and boils it down to a few simple basics. One overriding theme: Buy index funds. Don't try to beat the market. You can't. You will lose a lot of money trying.

Simple. Elegant. Read it and profit.

[Tom Kemp · Rating 1 out of 5]

Vanilla. Max out your 401k. Buy an index fund. Stay out of debt. Could have been written as a pamphlet for your HR department. Boring.

[Markus · Rating 4 out of 5]

Not quite what I was expecting, but is solid for anyone that has little grasp of the markets or is new to the world of investing.

It lays out the fundamentals of saving and investing at an early age and charts out comparisons between some different basic long term investment strategies.

*NOT a book for investors looking for short term/hands on investing strategies - book could be titled “how to prepare for retirement”

Encourages broad stroke approach of index funds + diversification + slow and steady dollar cost averaging as a low risk way to accumulate wealth over time.

Not really for people who already know the basics and are looking for more specific market/investment knowledge, this book actually encourages knowing less and keeping it simple. It discourages worrying about picking the right stocks because doing so successfully requires you to beat the pros who have more information than you and trade for a living.

Despite already having heard most of the advice in this book, the fundamentals like diversifying, rebalancing, saving, and regular portfolio/expense management are always good habits to reinforce.

[Kelli · Rating 4 out of 5]

This is a great introductory guide to investing for the most basic investor. I do recommend that you do a little background reading on investment/economic terms just so things will make more sense.

Highly recommended for people in their 20s and 30s.

[Mohammad Mirzaali · Rating 2 out of 5]

نکات و توصیه‌های مربوط به سرمایه‌گذاری موفق، از همان اولین کتابی که درباره‌ی‌شان می‌خوانید، تکراری و بدیهی به نظر می‌رسند

[Rebecca · Rating 5 out of 5]

Very good basic advice on investing: save more, spend less, diversify. Set up in the same format as The Elements of Style, the book provides easy to understand calculations and graphs.

Highly recommended

[Chung Chin · Rating 5 out of 5]

Elements of investing is a straight-to-the-point how-to invest book. In this book, the two authors do their very best in dishing out simple advice to investors. Simple, but not easy. Because while the advices are simple, the execution is anything but.

This is a great book that would be suitable for investors at all stages of their life as well as investing knowledge. If you're just starting out, I think this will be a fantastic book to introduce you on the mental models to have. For more sophisticated investors looking for technical stuffs, this book may be a huge disappointment as it does not go in-depth about the how-to analysis of a company. The P/E, the intrinsic value, the margin of safety and everything else is not mentioned (even once!) in this book. Then again, if readers subscribe to their investing philosophy, then they won't event need to know all that - readers just need to know about total stock market index funds.

I sincerely recommend this book to a just-starting out on your investing journey readers. This will be a good book to have and I believe well-worth re-reading many times over your journey. The good writing is accompanied by well-thought out analysis and useful advice.

[Jenna Spencer · Rating 5 out of 5]

This book is perfect for the person who has no clue. I have just stepped into the investment world myself, and can barely ever get past the first sentence because I don't understand the vocabulary. It is like a whole new language, and this book is the perfect introduction. Everything is explained simply and gives you a basic understanding and a good list of warnings. Once you finish there is a nice list of other books you can read. Every word written in backed up in some way, and if the authors feel bi-est they tell you so and why. Everyone in investing, or thinking about beginning, or wants a basic comprehension to hold up a conversation should read this book.

[Ruchi · Rating 4 out of 5]

Short concise book for beginners. No new information really, but a good read.

[Darin Shreves · Rating 4 out of 5]

Overall, a great book on personal finance fundamentals. After an extremely strong start, it loses some organization and becomes repetitive towards the end, but nonetheless I highly recommend it.

[Chase · Rating 4 out of 5]

I would give this book 5 stars, but I don't know enough about investing yet to know what's what.
What I do know is that this is the first book not to spoon-feed me "get rich quick" bullshit. The authors approach investing very realistically. If I've learned anything at all it's to:

- Diversify
- Rebalance
- Dollar-cost average, and
- INDEX, INDEX, INDEX, INDEX, INDEX, INDEX, INDEX. FOR THE LOVE OF GOD, INDEX.

[David · Rating 5 out of 5]

10/10 book. Short. Sweet. Simple. A great book on how to invest for anyone. Emphasis on staying out of debt, investing and time in the market being the 3 pillars of their successful method.

[Jay Perkins · Rating 5 out of 5]

Very helpful for one unfamiliar with the investing world. Will probably read again soon.

[Trent Thompson · Rating 4 out of 5]

Helpful primer on basic investing strategy. Also I like any homage to The Elements of Style.

[Ashraf Bashir · Rating 4 out of 5]

Why not 5 stars? It is very dedicated to US investors.

[Leon Chan · Rating 4 out of 5]

Simple and straightforward advice on the basics of investing your savings. This book requires 2 hours reading time, and is divided into clear sections on the essential principles of investing.

[Stephanie · Rating 4 out of 5]

Great for beginners

Open my eyes to a whole different world. I would recommended it for individuals who need a better understanding in investing in your personal wealth. Pay yourself first always.

[Todd N · Rating 5 out of 5]

Xmas 2009 present. This is one of two excellent overviews of investing that were published this year. (The other is The Investor's Manifesto by William Bernstein.) Malkiel is famous (at least in our house) for writing A Random Walk Down Wall Street, and co-author Ellis wrote a book I've been meaning to read, Winning The Loser's Game.

The two of them teamed up to write a simple book on investing, a la Strunk and White's Elements of Style. It's a very simple book that covers a lot of topics succinctly. It can be read in about two hours.

The problem with this book is that the people who would benefit from it will probably never pick it up, unless they get it as a gift. This is the book that people in their 40s and 50s will wish that they had read in their 20s or 30s. People who are already managing their retirement plans well will find nothing new here. And if you having started saving for retirement by 50, forgoing lattes isn't going to prevent you from dying in a government-run nursing home.

The best use of this book would be to buy it for a college graduate and bribe him or her $250 to read it. Stick a print out of Scott Adam's 9 point summary of financial planning in the book for good measure. For someone who has been working for a while unless they are completely clueless about money, The Investor's Manifesto would be a much better choice.

One topic covered in Elements of Investing that isn't covered in most investing books is how to save money. Obviously if you can't save you will have nothing to invest. For comparison, The Investor's Manifesto's covers this topic in just one sentence: "If you cannot defer current consumption you will die poor." (By the way, the best book covering how to save money by reducing spending is Andrew Tobias's The Only Investment Guide You Will Ever Need.)

In one of the later chapters asset allocation recommendations by age are presented. I was very surprised to see the high percentages of equities recommended by Mr. Ellis, especially after the 2008 meltdown. I think percentages that high are only appropriate for people who are very confident in their earning power.

In summary, you will not find better advice more concisely stated but if you are already confident about your retirement plans you will find nothing new here.

[Philip · Rating 4 out of 5]

Malkiel and Ellis combine their investment experience and share the basic "elements" of investing with us, inspired by the same concept Shrunk and White used to streamline key writing principals into the book Elements of Style. Their main concepts are: 1) Save, and save NOW. 2)Index your stocks and bonds (their main theory is that as a long-term investor it's virtually impossible to "beat the market," so buy mostly low-cost index funds instead of large numbers of individual stock shares. 3)Diversify your holdings, particularly between stocks, bonds and real estate, as well as diversifying across markets internationally and spreading your investments out over periods of time (to avoid putting everything in during a particularly high or low market). 4) NEVER carry credit card debt-it puts you in the hole faster than you can make money to get out. 5)Allocate your assets based upon your age and risk tolerance, with more in stocks (vs. bonds) the younger you are. The authors then finish up with specific fund recommendations. This book is the simplest and clearest book on investing I've read yet and I like the "no complications" strategy. The authors weave relevant literary quotes with sound advice, making for a great read (or listen--try the audiobook first, then the hardcopy to follow up on the recommended funds). I highly recommend this book, particularly to those who are just starting to find their way in the investing world!

[Evgeniy Vasilev · Rating 4 out of 5]

Targets mostly US market, but nevertheless holds sound and simple guidelines.

[Derek Postlewaite · Rating 3 out of 5]

I borrowed this book from the library to get a bare bones understanding of investing. Bare bones instruction was the stated objective of the authors. Mission accomplished. Some of the biggest takeaways: index funds outperform traditional mutual funds for one reason only--low expense ratios. Next, take advantage of tax deductions on investments. For example, the authors say that a person of moderate income (although they don't put a number on moderate) can invest $5,000 in an IRA, deduct every dollar, and if they fall in the 28% tax bracket it'll only cost them $3,600 to do so (once they get $1,400 back from their tax return). They stress staying out of credit card debt--a no brainer--and insist that the reader saves regularly. I also learned about "dollar cost averaging" which is the idea--proven by data--that if you invest a consistent dollar amount on a regular basis, like once a month or every few months, rather than investing a big dollar amount at one time, you end up with a higher return because you, on average, buy more shares when prices are low, and less shares when prices are high.

[Kristie J. · Rating 5 out of 5]

If you only read one book about investing, this one should be it. I listened to the audiobook because my library only had the audiobook on CD (3 CD's long) and not the printed book. Many of the concepts I already knew from reading other investing books (like Suze Orman's books), but they are solid, important concepts for managing your finances. I really appreciated that the book was short and to-the-point and mentioned specific funds to look for. I would like to read more investing books, but most of them are so long, complicated, and tedious that I can't bring myself to read them. This book was like a breath of fresh air. Everything you need to know about investing your 401k and IRA for retirement in one short book.

[Christopher Durand · Rating 5 out of 5]

I've always thought that a random walk down wall street was one of the best investment books ever written, but found that it may be too in depth for your average investor trying to make sense of their 401k. This book remedies the problem by being concise and easily read in a afternoon. It hits all of the major points and should sit on everyone's bookshelves. High school students would be served well by reading this before they graduate and for any college student Its a must read. Far too many people are totally confused about investing and with a little basic knowledge they could certainly find themselves in a better financial position later in life.

[Gavin · Rating 5 out of 5]

Malkiel and Ellis distill the best practices of sound investing in this short, easily understandable book. If you are just looking for good practical investment advice, this book is a fine one to turn to. If you are not satisfied with the advice itself and want a better understanding of why practices like indexing and diversification are best practice, try Malkiel's A Random Walk Down Wall Street instead.

[Ben · Rating 4 out of 5]

I love this book. You can read through the whole thing in a few hours. With a pleasant, conversational writing style, the authors cover some absolute basics regarding how to take care of your finances. I actually read this first when I had very little money, but since my financial success I've reread it, followed their advice pretty closely and I'm happy with what I've done. Recommended.

[Stefan · Rating 4 out of 5]

I have been wanting to educate myself more on investing (I really would like to retire before 65, more time to read: -) ) and this book is a great starting point for grasping the basics. The material is not dry nor too condensed to leave a beginner with more questions than answers. If you are looking to learn more about personal investing this book is a good place to start.

[Trevor Price · Rating 5 out of 5]

The first book to read about investment. It's a great start, crystal clear, and very helpful. I really appreciate that the authors don't lose focus and that their message is finely tuned.

Even this very brief intro was sometimes repetitive, but I felt the points being driven home were so important that I can overlook it.