Malkiel’s Timeless lessons for Investors

(Notes from Burton Malkiel’s talk at Google in 2010)

Lesson #1: Buy-and-hold is still the best strategy
Not only timing the market is tough but people who are trying to time the market loose more often than not.

Lesson #2: Dollar-cost Averaging
Since it is impossible to guess whether the market is going to go bull or a bear, it is better to invest over a period rather than in one-shot.

Lesson #3: Rebalance yearly
It guarantees minimum volatility and unless the market is going monotonically upwards, it guarantees best returns as well.

Lesson #4: Diversifying helps
Even though markets across the world are correlated, gains in emerging markets are usually higher.

Lesson #5: Costs matter
Always judge the mutual funds by the expense ratio, lower the expense ratio, usually better the fund.

Lesson #6: Indexing helps
Roughly 2/3rd (actively managed) mutual funds are beaten by (unmanaged) S&P 500 every year.
Core portfolio must be held in low-cost index funds, small proportions can then be invested in risker investments for seeking higher alpha.

Good chinese ETFs (He was personally managing some of these funds at that time).
FXI – only 25 companies
YAO – 150 companies (recommended)
HAO – small private companies

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