Elements of Investing (Ellis & Malkiel)

Just finished the book as I downloaded onto iPad..

Great read and it had many similarities to property investing for me with not chasing the latest "hot stocks" and setting up your investments with the below 4 pillars in mind

Diversification
Rebalancing annually
Dollar cost averaging
Indexing

Also making sure you minimise fees to enhance your returns..
Good book for a L plate share investor like me

Thanks for highlighting it @austing

 

Burton Malkiel Is Still an Indexing Fan, but a ‘Smart Beta’ Skeptic

Burt has changed his tune somewhat wherein he previously referred to smart beta “smart marketing.”

An Index-Fund Evangelist Is Straying From His Gospel

 

Recent podcast

Burton Malkiel: The Man Who Claimed Monkeys Pick Better Stocks Is Vindicated

Back in the early 1970s, Malkiel wrote a book, A Random Walk Down Wall Street, that rocked the investing world and profoundly changed the way trillions of dollars are invested today. Burton Malkiel’s shocking conclusion: A monkey tossing darts at tables of stocks will outperform most investment managers.

 

Nah, most of the book was rubbish. I only recall one useful piece of information in it. Invest in well selected closed end funds (LICs) when they’re at a discount:

One of Indexer’s greatest hero’s personally invested / invests in LICs.

 

Stock Price Movements Are Unpredictable
by Charles Rotblut, Burton Malkiel

Charles Rotblut (CR):

Could you explain the term “random walk”?

Burton Malkiel (BM):

Basically, the concept is not that the market is random or capricious, really, just the opposite: that the market is quite efficient in reflecting new information and when news arises that’s true news, the market adjusts without delay. The true news is unpredictable—in other words, if we have a headline today that says “New York digs out of yesterday’s storm,” that’s not news. What was news is that the storm was much bigger than anybody had predicted. So the true news is random or unpredictable. It’s something that you didn’t know before, such as “Egypt is in crisis.” The markets will then react without delay. But since you can’t predict true news, the market is generally unpredictable. It’s not that it’s capricious; quite the contrary: It’s that it reacts to unexpected events. And if you could predict the unexpected events, you could predict the market. But since you can’t, markets are unpredictable.

The term “random walk” was first used in the science magazine Nature. The problem presented was to try to find a drunk who was left in the middle of a field at midnight. Since you have no idea where the drunk is going to go, the question was, how would you begin the search the next morning? The answer was to begin at exactly where you left the drunk, because you can’t predict in what direction the drunk is going to go. The drunk will stagger randomly around. When you look at it, the stock market looks very much like that kind of random walk where tomorrow’s price change is pretty much unrelated to today’s price change, and it’s basically unpredictable. So the idea is that neither individuals nor professionals can predict the short-run direction of the stock market.

Continues..Link

 

One significant advantage over ETFs is that LICs are traded on fear making bargains possible.

 

Depends on the LIC and the market circumstance. During times of market pessimism fear tends to be more pronounced with index ETFs. The older large LICs shareholder base is dominated by charities, long term buy and hold and dividend focused investors. That is, more steady hands. More buyers, less sellers hence potentially higher NTA premium. The index ETF on the other hand is generally the opposite being more sellers, less buyers so I’m a keen buyer.