The Elements of Investing Quotes

“Predicting the stock market is really predicting how other investors will change estimates they are now making with all their best efforts. This means that, for a market forecaster to be right, the consensus of all others must be wrong and the forecaster must determine in which direction-up or down-the market will be moved by changes in the consensus of those same active investors.”
― Burton G. Malkiel, The Elements of Investing

“There is one investment truism that, if followed, can dependably increase your investment returns: Minimize your investment costs. We”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“You, far more than the market or the economy, are the most important factor in your long-term investment success.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Nobody knows more than the market.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Similarly, the buy-and-hold investor who prudently holds a diversified portfolio of low-cost index funds through thick and thin is the investor most likely to achieve her long-term investment goals.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“The first concerns how an investor should choose among different types of broad-based index funds. The best-known of the broad stock market mutual funds and ETFs in the United States track the S&P 500 index of the largest stocks. We prefer using a broader index that includes more smaller-company stocks, such as the Russell 3000 index or the Dow-Wilshire 5000 index. Funds that track these broader indexes are often referred to as “total stock market” index funds. More than 80 years of stock market history confirm that portfolios of smaller stocks have produced a higher rate of return than the return of the S&P 500 large-company index. While smaller companies are undoubtedly less stable and riskier than large firms, they are likely—on average—to produce somewhat higher future returns. Total stock market index funds are the better way for investors to benefit from the long-run growth of economic activity.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“By buying a share in a “total market” index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which individual stocks, bonds, or mutual funds will beat the market.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Average Annual Returns of Actively Managed Mutual Funds Compared with S&P 500 20 years, Ending June 30, 2012 Sources: Lipper, Wilshire, and The Vanguard Group. S&P 500 Index Fund 8.34% Average Active Equity Mutual Funda 7.00% Shortfall +1.34%”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Percentage of Actively Managed Mutual Funds Outperformed by the S&P 500 Index (Periods through June 30, 2012) Sources: Lipper and The Vanguard Group.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“ETFs tend to have very low expense ratios, and they can be more tax efficient than mutual funds because they are able to sell holdings without generating a taxable event. This could be an advantage for taxable investors. However, brokerage commissions are charged on the purchase of ETFs, and for small and moderate purchases these commissions can overwhelm those other advantages. No-load indexed mutual funds typically have no purchase fees. However, if you are investing a lump sum (as, for example, when rolling over an established plan such as an IRA), an ETF may be an optimal choice.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“The best choice for your equity investments is a fund indexed to the total world stock market. If you are truly uncomfortable investing in “foreign” stocks, you could choose a domestic total stock market fund. We recommend that you be diversified internationally because the United States represents less than half of the world’s economic activity and stock market capitalization. For your bonds, choose a total U.S. bond market index fund.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“The secret to success and enjoyment in so many parts of life is to know your capabilities and stay within them. Similarly, the key to success in investing is to know yourself and invest within your investing capabilities and within your emotional capacities.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“There is no simple road to riches for you and your family. The secret to getting wealthy is that there is no secret. The only way to get rich—unless you inherit or marry a fortune or hit the lottery—is to get rich slowly. Start early and contribute as much as possible to your savings for as long as possible.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“You are also allowed to “Roth and Roll.” You can roll the balance of your traditional IRA into a Roth, again if your income level qualifies.* You need to pay tax on the amount converted, but from then on neither the earnings nor the withdrawals in retirement are taxed. Moreover, you are not required to take the money out at retirement, and contributions can continue to be made into your seventies and eighties if you wish. Thus, significant amounts can be accumulated tax free for future generations.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“High-quality bonds can moderate the risk of a common stock portfolio by providing offsetting variations to the inevitable ups and downs of the stock market. For”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“To overcome the drag of expenses and taxes, an actively managed fund would have to outperform the market by 4.3 percentage points per year just to break even with index funds.* The odds that you can find an actively managed mutual fund that will perform that much better than an index fund are virtually zero.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Here’s why: Past performance is not a good predictor of future returns. What does predict investment performance are the fees charged by the investment manager. The higher the fees you pay for investment advice, the lower your investment return. As our friend Jack Bogle likes to say: In the investment business, “You get what you don’t pay for.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Psychologists also remind us that investors are far more distressed by losses than they are delighted by gains. This leads people to discard their winners if they need cash and hold onto their losers because they don’t want to recognize or admit that they made a mistake. Remember: Selling winners means paying capital gains taxes while selling losers can produce tax deductions. So if you need to sell, sell your losers. At least that way you get a tax deduction rather than an increase in your tax liability.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“As an investor, you have one powerful way to keep from getting distressed by devilish Mr. Market: Ignore him. Just buy and hold one of the broad-based index funds that”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“The stock market as a whole has delivered an average rate of return of about 9½ percent over long periods of time. But that return only measures what a buy-and-hold investor would earn by putting money in at the start of the period and keeping her money invested through thick and thin. In”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“You don’t care if it’s cold and raining or warm and sunny 10,000 miles away because it’s not your weather. The same detachment should apply to your 401(k) investments until you approach retirement. Even”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Indeed, when pessimism is rampant and market prices are down is the worst time to sell out or to stop making regular investment contributions. The time to buy is when stocks are on sale.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Note also that during the punishing bear market of 2007–2008, new record withdrawals were made by investors who threw in the towel and sold their mutual fund shares—at record lows—just before the first, and often best, part of a market recovery.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Just as contagious euphoria leads investors to take greater and greater risks, the same self-destructive behavior leads many investors to throw in the towel and sell out near the market’s bottom when pessimism is rampant and seems most convincing. One of the most important lessons you can learn about investing is to avoid following the herd and getting caught up in market-based overconfidence or discouragement. Beware of “Mr. Market.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“As an investor, what should you do about forecasts—forecasts of the stock market, forecasts of interest rates, forecasts of the economy? Answer: Nothing. You can save time, anxiety, and money by ignoring all market forecasts.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“The largest, longest study of experts’ economic forecasts was performed by Philip Tetlock, a professor at the Haas Business School of the University of California–Berkeley. He studied 82,000 predictions over 25 years by 300 selected experts. Tetlock concludes that expert predictions barely beat random guesses. Ironically, the more famous the expert, the less accurate his or her predictions tended to be.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Investors should avoid any urge to forecast the stock market. Forecasts, even forecasts by recognized “experts,” are unlikely to be better than random guesses. “It will fluctuate,” declared J. P. Morgan when asked about his expectation for the stock market. He was right. All other market forecasts—usually estimating the overall direction of the stock market—are historically about 50 percent right and 50 percent wrong. You wouldn’t bet much money on a coin toss, so don’t even think of acting on stock market forecasts.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes. In driving, it’s having no serious accidents; in tennis, the key is getting the ball back; and in investing, it’s indexing—to avoid the expenses and mistakes that do so much harm to so many investors.”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor

“Avoiding serious trouble, particularly troubles that come from incurring unnecessary risks, is one of the great secrets to investment success. Investors all too often beat themselves by making serious—and completely unnecessary—investment mistakes. In”
― Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor