The Elements of Investing. Burton G. Malkiel

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THE ELEMENTS OF INVESTING

      Easy Lessons for Every Investor

       10 ^th Anniversary Edition

       Burton G. Malkiel

       Charles D. Ellis

      Preface to Anniversary Edition by Gus Sauter

      Foreword to Original Edition by David Swensen

      10th Anniversary Foreword by Tim Buckley

Cover design: John Wiley & Sons, Inc.

      Copyright © 2021 by Burton G. Malkiel and Charles D. Ellis. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      First Edition published by John Wiley & Sons, Inc. in 2010.

      Published simultaneously in Canada.

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      ISBN 978‐1‐119‐77373‐3 (cloth); ISBN 978‐1‐119‐77378‐8 (epub);

      ISBN 978‐1‐119‐77380‐1 (epdf)

To our delightful grandchildren, Porter, Mackie, George, Jade, Morgan, Charles, and Rays

PREFACE TO ANNIVERSARY EDITION

      At her death in 1999, at the age of 91, Oseola McCarty bequeathed $150,000 to The University of Southern Mississippi. For her generosity, she received an honorary degree from the university and the Presidential Citizens Medal, the second‐highest civilian award in the United States. Her gift was all the more extraordinary because she earned her living washing clothes.

      At a very young age, Ms. McCarty was taught by her mother to be a great saver. She made tradeoffs, spending what she needed to live on, but forgoing any luxuries. She had a used TV, but only watched shows that she could pick up over the airwaves. She did not own a car, electing to walk everywhere. She lived in a house that she had inherited from her uncle. Over the course of her lifetime, she amassed a remarkable nest egg, estimated to be about $250,000.

      Ms. McCarty was the very model of a disciplined saver. Her example shows that a little bit of will power—and yes, thrift—can add up to big things. This is Lesson Number 1 in any sound financial plan, and it is the first lesson in this wonderful book by Burton G. Malkiel and Charles D. Ellis.

Over the past several decades, Malkiel's A Random Walk Down Wall Street and Ellis's Winning the Loser's Game have helped millions of people to understand the fundamentals of investing and to reach their financial goals. In The Elements of Investing, Malkiel and Ellis distill their wisdom and experience into a sensible plan for people to save and invest.

      Some money managers warn that successful investing can be carried out by only the most sophisticated and talented professionals. And, of course, these managers claim to be members of that small club. Malkiel and Ellis argue that successful investing should not be the province of a select few. Football games are not always won by the best quarterback; they are won in the trenches. Investors have to win the war of blocking and tackling.

      The Elements of Investing provides a roadmap that can multiply your savings to reach your financial target. It starts with understanding some basic questions, like: When will you need this money? How well can you tolerate investment risk? The answers to those questions can help you build an appropriate asset allocation between stocks,