And because Burt has updated it consistently over its lifespan, he has managed to stay current with the times. So many people read it when they first enter the investment industry. And he thinks it’s okay for you to do the same as long as your core nest egg is secure so you can count on it for retirement.Ī Random Walk Down Wall Street is a perennial book. Because his essential retirement assets are invested 100 percent in index funds, he is fine with getting creative around the edges. ![]() But it’s like looking for a needle in a haystack.”īefore anyone sees fit to protest, Burt confesses that he does buy some individual stocks. “I’m not saying it’s impossible to outperform,” Burt admits. ![]() The S&P index runs away with a clear victory most of the time. And, moreover,” he points out, “the one-third that win in one year aren’t the same as the one-third that win in the next year.” Perhaps even more eye-opening is that compounding the numbers over ten and twenty years only makes the contrast more lopsided. “What’s fascinating about this,” Burt exclaims, “Is that every year when they do the report, about two-thirds of active managers do worse than, are outperformed by, a simple index. As Burt pointed out, Standard & Poor’s now generates a SPIVA Report to compare the S&P indexes vs. Since those days, investors have become more than comfortable relying on index funds. So for a time, it was them against the world! It’s fine for an academic to go and write a book and say, ‘Go buy index funds.’ But Jack bet his whole company on starting an index fund.”īurt used to joke with Jack that they were the only people who held index funds when they first came out. And I’ll tell you one of the reasons he was the hero. We got along famously because we both did have the same philosophy. “I was on the Vanguard board for twenty-eight years. “Jack Bogle was a great friend,” he told me. It seemed to me Jack and Burt were of a similar mind, and it turned out I was right. And for folks to hold low-cost index funds for a lifetime, reinvesting the dividends purchased utilizing dollar cost averaging. His philosophy was to put long-term patience over short-term action, and reduce broker fees. Those familiar with the early days of index funds are probably aware of the man credited with its creation, Jack Bogle, who went on to find The Vanguard Group. But, in fact, the data show that it’s superior investing.” They would tell people, “You don’t want an index fund. The industry insiders claimed to be able to out-pick the right stocks to outperform the market. And it was becoming clear that the emperor didn’t have any clothes,” Burt revealed. ![]() “I would gather the data on returns, and some of my academic colleagues had done the work. It was the heyday of the stockbrokers, and they were not eager to relinquish the high commissions they earned from trading and managing the assets of so many. ![]() And Burt, indeed, is.īefore Random Walk’s publishing in 1973, it was not common practice for investors to use passively managed index funds as the primary tool of their investment portfolios. When those highlights aren’t even the best thing on your resumé, you know you’re something special. from Princeton, and even served on the President’s Council of Economic Advisers in Washington, D.C. I recently sat down to interview him for an episode on my Retire Sooner podcast and found him as delightful as ever.īy the way, he insisted that I call him Burt.īurt has undergraduate and graduate degrees from Harvard, a Ph.D. Many of us who work in finance stand on the shoulders of this giant. I can’t emphasize enough how much of an impact it had on the entire financial industry. His all-time classic, A Random Walk Down Wall Street, is widely regarded as one of the most influential books in the history of investment management. Doctor Burton Malkiel is a living legend!
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