Friday, March 12, 2010

Burton Malkiel: How to Invest

I do not own Malkiel's new book, but his advice is well worth heading, and makes a lot of sense to me. For investors who were diversified, this was not a lost decade, but a decade of moderate positive compounding. In addition to the average bond market compounded returns over the decade of 5 - 7% per year, the diversified investor could have reaped the following total returns:

Domestic Return International Return
Large Cap-9.1% Large Cap12.4%
Large Cap Value27.6%Large Cap Value41.4%
Small Cap Value121.3%Small Cap Value198.6%
Real Estate175.6%Emerging Markets Large Cap154.3%

Emerging Markets Small Cap176.7%

Emerging Markets Value212.7%

Hardly what I'd call a "lost decade." But this does not mean, go run out and put all your money in emerging markets as you chase last years performance. It means follow an asset allocation strategy that spreads your investment across all these classes so that if one class doesn't perform well the performance of other classes can keep your portfolio on an upward trajectory.


  1. Great point about not chasing returns. When you chase returns you get burnt.
    You make the case for rebalancing. Just imagine how much higher those returns would have been with a rebalanced portfolio.
    I personally time the markets. My perspective looks at investments that do well in up markets.

  2. Hi Daddy Paul,

    I looked at your web site, and wish you luck with your timing strategy. I have no talent for it.