A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

by Burton G. Malkiel

There is no reason to adjust the long-standing advice of the earlier editions of this book: The core of every portfolio should consist of low-cost, tax-efficient, broad-based index funds. If you do want to take a chance that some risk factor will generate excess returns in the future, you can do so most prudently if the core of your portfolio consists of capitalization-weighted broad-based index funds. And if you do wish to add an additional risk factor to your portfolio, such as some extra exposure to small-company stocks, you can do so most efficiently and effectively by purchasing a low-cost, capitalizationweighted fund that follows an index of small-cap stocks.