Burton Malkiel quotes

Why should I know Burton Malkiel?

Burton Gordon Malkiel is an American economist and writer known for the classic investing book 'A Random Walk Down Wall Street'.

Burton Malkiel quotes

“A blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

Burton Malkiel A Random Walk Down Wall Street

“A couple, both age seventy-eight, went to a sex therapist’s office. The doctor asked, “What can I do for you?” The man said, “Will you watch us have sexual intercourse?” The doctor looked puzzled, but agreed. When the couple finished, the doctor said, “There’s nothing wrong with the way you have intercourse,” and charged them $50. The couple asked for another appointment and returned once a week for several weeks. They would have intercourse, pay the doctor, then leave. Finally, the doctor asked, “Just exactly what are you trying to find out?” The old man said, “We’re not trying to find out anything. She’s married and we can’t go to her house. I’m married and we can’t go to my house. The Holiday Inn charges $93 and the Hilton Inn charges $108. We do it here for $50, and I get $43 back from Medicare.”

Burton Malkiel A Random Walk Down Wall Street

“A firm's income statement may be, likened to a bikini. What it reveals is interesting but what it conceals is vital.”

Burton Malkiel

“A stock selling at $100 per share with earnings of $10 per share would have the same P/E multiple (10) as a stock selling at $40 with earnings of $4 per share. It is the P/E multiple, not the price, that really tells you how a stock is valued in the market.”

Burton Malkiel A Random Walk Down Wall Street

“A successful investor is generally a well-rounded individual who puts a natural curiosity and an intellectual interest to work.”

Burton Malkiel

“And you must have both the cash and the confidence to continue making the periodic investments even when the sky is the darkest. No matter how scary the financial news, no matter how difficult it is to see any signs of optimism, you must not interrupt the automatic-pilot nature of the program. Because if you do, you will lose the benefit of buying at least some of your shares after a sharp market decline when they are for sale at low-end prices. Dollar-cost averaging will give you this bargain: Your average price per share will be lower than the average price at which you bought shares. Why? Because you’ll buy more shares at low prices and fewer at high prices.”

Burton Malkiel The Elements of Investing

“As an investor, you have one powerful way to keep from getting distressed by devilish Mr. Market: Ignore him. Just buy and hold one of the broad-based index funds that.”

Burton Malkiel The Elements of Investing

“As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes. In driving, it’s having no serious accidents; in tennis, the key is getting the ball back; and in investing, it’s indexing—to avoid the expenses and mistakes that do so much harm to so many investors.”

Burton Malkiel The Elements of Investing

“Avoiding serious trouble, particularly troubles that come from incurring unnecessary risks, is one of the great secrets to investment success. Investors all too often beat themselves by making serious—and completely unnecessary—investment mistakes.”

Burton Malkiel The Elements of Investing

“By buying a share in a total market index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which individual stocks, bonds, or mutual funds will beat the market.”

Burton Malkiel The Elements of Investing

“Diversify across securities, across asset classes, across markets—and across time.”

Burton Malkiel The Elements of Investing

“Experience conclusively shows that index-fund buyers are likely to obtain results exceeding those of the typical fund manager, whose large advisory fees and substantial portfolio turnover tend to reduce investment yields. Many people will find the guarantee of playing the stock-market game at par every round a very attractive one. The index fund is a sensible, serviceable method for obtaining the market's rate of return with absolutely no effort and minimal expense.”

Burton Malkiel

“Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.”

Burton Malkiel The Elements of Investing

“Forecasts are difficult to make—particularly those about the future.”

Burton Malkiel A Random Walk Down Wall Street

“High-quality bonds can moderate the risk of a common stock portfolio by providing offsetting variations to the inevitable ups and downs of the stock market”

Burton Malkiel The Elements of Investing

“Historically, the stock market is like a gambling casino with the odds in your favor. Over the long pull, stocks are given something like nine and a half to ten percent compounded per year. The banks have probably given you something in the order of four to five.”

Burton Malkiel

“I have become increasingly convinced that the past records of mutual fund managers are essentially worthless in predicting future success. The few examples of consistently superior performance occur no more frequently than can be expected by chance.”

Burton Malkiel

“I have never known anyone who could consistently time the market. And in fact I’ve never known anyone who knows anyone, who was able to consistently time the market.”

Burton Malkiel

“I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and /or appreciation over the long term.”

Burton Malkiel A Random Walk Down Wall Street

“If you bought $1,000 worth of Nortel stock one year ago, it would now be worth $49. If you bought $1,000 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, and traded in the cans for the nickel deposit, you would have $79. My advice to you… start drinking heavily.”

Burton Malkiel A Random Walk Down Wall Street

“Investors should avoid any urge to forecast the stock market. Forecasts, even forecasts by recognized experts, are unlikely to be better than random guesses. “It will fluctuate,” declared J. P. Morgan when asked about his expectation for the stock market. He was right. All other market forecasts—usually estimating the overall direction of the stock market—are historically about 50 percent right and 50 percent wrong. You wouldn’t bet much money on a coin toss, so don’t even think of acting on stock market forecasts.”

Burton Malkiel The Elements of Investing

“It is not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored.”

Burton Malkiel A Random Walk Down Wall Street

“It is the definition of the time period for the investment return and the predictability of the returns that often distinguish an investment from a speculation. A speculator buys stocks hoping for a short-term gain over the next days or weeks. An investor buys stocks likely to produce a dependable future stream of cash returns and capital gains when measured over years or decades.”

Burton Malkiel A Random Walk Down Wall Street

“It's not that stock prices are capricious. It's that the news is capricious.”

Burton Malkiel

“J.P. Morgan once had a friend who was so worried about his stock holdings that he could not sleep at night. The friend asked, 'What should I do about my stocks?' Morgan replied, 'Sell down to your sleeping point'.

Every investor must decide the trade-off he or she is willing to make between eating well and sleeping well. High investment rewards can only be achieved at the cost of substantial risk-taking. So what is your sleeping point? Finding the answer to this question is one of the most important investment steps you must take.”

Burton Malkiel

“Look for growth situations with low price-earnings multiples. If the growth takes place, there’s often a double bonus—both the earnings and the multiple rise, producing large gains. Beware of very high multiple stocks in which future growth is already discounted. If growth doesn’t materialize, losses are doubly heavy—both the earnings and the multiples drop.”

Burton Malkiel A Random Walk Down Wall Street

“Never buy anything from someone who is out of breath.”

Burton Malkiel A Random Walk Down Wall Street

“Nobody knows more than the market.”

Burton Malkiel The Elements of Investing

“One asset class that belongs in most portfolios is bonds. Bonds are basically IOUs issued by corporations and government units.”

Burton Malkiel The Elements of Investing

“One of the most important lessons you can learn about investing is to avoid following the herd and getting caught up in market-based overconfidence or discouragement.”

Burton Malkiel The Elements of Investing

“Only liars manage always to be out of the market during bad times and in during good times.”

Burton Malkiel The Elements of Investing

“Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

Burton Malkiel The Elements of Investing

“Predicting the stock market is really predicting how other investors will change estimates they are now making with all their best efforts. This means that, for a market forecaster to be right, the consensus of all others must be wrong and the forecaster must determine in which direction-up or down-the market will be moved by changes in the consensus of those same active investors.”

Burton Malkiel The Elements of Investing

“Protect yourself: Every investor should always diversify.”

Burton Malkiel The Elements of Investing

“Psychologists also remind us that investors are far more distressed by losses than they are delighted by gains. This leads people to discard their winners if they need cash and hold onto their losers because they don’t want to recognize or admit that they made a mistake. Remember: Selling winners means paying capital gains taxes while selling losers can produce tax deductions. So if you need to sell, sell your losers. At least that way you get a tax deduction rather than an increase in your tax liability.”

Burton Malkiel The Elements of Investing

“Put time on your side. Start saving early and save regularly. Live modestly and don't touch the money that's been set aside.”

Burton Malkiel A Random Walk Down Wall Street

“Rebalancing will not always increase returns. But it will always reduce the riskiness of the portfolio and it will always ensure that your actual allocation stays consistent with the right allocation for your needs and temperament.”

Burton Malkiel The Elements of Investing

“Res tantum valet quantum vendi potest. (A thing is worth only what someone else will pay for it.)”

Burton Malkiel A Random Walk Down Wall Street

“Stupidity well packaged can sound like wisdom.”

Burton Malkiel A Random Walk Down Wall Street

“The average actively managed mutual fund charges about one percentage point of assets each year for managing the portfolio. It is the expenses charged by professional 'active' managers that drag their return well below that of the market as a whole. Low-cost index funds charge only one-tenth as much for portfolio management. Index funds do not need to hire highly paid security analysts to travel around the world in a vain attempt to find 'undervalued' securities. ”

Burton Malkiel The Elements of Investing

“The best choice for your equity investments is a fund indexed to the total world stock market. If you are truly uncomfortable investing in foreign stocks, you could choose a domestic total stock market fund. We recommend that you be diversified internationally because the United States represents less than half of the world’s economic activity and stock market capitalization. For your bonds, choose a total U.S. bond market index fund.”

Burton Malkiel The Elements of Investing

“The buy-and-hold investor who prudently holds a diversified portfolio of low-cost index funds through thick and thin is the investor most likely to achieve her long-term investment goals.”

Burton Malkiel The Elements of Investing

“The cardinal rule of investing: Broad diversification is essential.”

Burton Malkiel The Elements of Investing

“The greatest of all gifts is the power to estimate things at their true worth.”

Burton Malkiel A Random Walk Down Wall Street

“The harsh truth is that the most important driver in the growth of your assets is how much you save, and saving requires discipline. Without a regular savings program, it doesn’t matter if you make 5 percent, 10 percent, or even 15 percent on your investment funds. The single most important thing you can do to achieve financial security is to begin a regular savings program and to start it as early as possible. The only reliable route to a comfortable retirement is to build up a nest egg slowly and steadily. Yet few people follow this basic rule, and the savings of the typical American family are woefully inadequate. It is critically important to start saving now. Every year you put off investing makes your ultimate retirement goals more difficult to achieve. Trust in time rather than in timing. As a sign in the window of a bank put it, little by little you can safely stock up a strong reserve here, but not until you start.”

Burton Malkiel A Random Walk Down Wall Street

“The index performance is not mediocre—it exceeds the results achieved by the typical active manager.”

Burton Malkiel A Random Walk Down Wall Street

“The largest, longest study of experts’ economic forecasts was performed by Philip Tetlock, a professor at the Haas Business School of the University of California–Berkeley. He studied 82,000 predictions over 25 years by 300 selected experts. Tetlock concludes that expert predictions barely beat random guesses. Ironically, the more famous the expert, the less accurate his or her predictions tended to be.”

Burton Malkiel The Elements of Investing

“The lesson about timing is: not only do you not know when to get in, you don’t know when to get out. And when you market-time you got to be right twice. You got to know when to get out and when to get in. And nobody and I really believe this: nobody but nobody can do that.”

Burton Malkiel

“The secret of getting rich slowly but surely is the miracle of compound interest. Albert Einstein is said to have described compound interest as the most powerful force in the universe. The concept simply involves earning a return not only on your original savings but also on the accumulated interest that you have earned on your past investment of your savings.”

Burton Malkiel The Elements of Investing

“The secret to success and enjoyment in so many parts of life is to know your capabilities and stay within them. Similarly, the key to success in investing is to know yourself and invest within your investing capabilities and within your emotional capacities.”

Burton Malkiel The Elements of Investing

“The stock market as a whole has delivered an average rate of return of about 9½ percent over long periods of time. But that return only measures what a buy-and-hold investor would earn by putting money in at the start of the period and keeping her money invested through thick and thin.”

Burton Malkiel The Elements of Investing

“There are few, if any, absolute rules in saving and investing, but here’s ours: Never, never, never take on credit card debt. This rule comes as close as any to being an inviolable commandment.”

Burton Malkiel The Elements of Investing

“There are four factors that create irrational market behavior: overconfidence, biased judgments, herd mentality, and loss aversion.”

Burton Malkiel A Random Walk Down Wall Street

“There is no simple road to riches for you and your family. The secret to getting wealthy is that there is no secret. The only way to get rich—unless you inherit or marry a fortune or hit the lottery—is to get rich slowly. Start early and contribute as much as possible to your savings for as long as possible.”

Burton Malkiel The Elements of Investing

“There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.”

Burton Malkiel A Random Walk Down Wall Street

“There is one investment truism that, if followed, can dependably increase your investment returns: Minimize your investment costs.”

Burton Malkiel The Elements of Investing

“This simple investment strategy—indexing—has outperformed all but a handful of the thousands of equity and bond funds that are sold to the public. But you wouldn’t know this when Wall Street throws everything but the kitchen sink at you to convince you otherwise. This is the plan we use ourselves for our retirement funds, and this is the plan we urge you to follow, too.”

Burton Malkiel The Elements of Investing

“To overcome the drag of expenses and taxes, an actively managed fund would have to outperform the market by 4.3 percentage points per year just to break even with index funds. The odds that you can find an actively managed mutual fund that will perform that much better than an index fund are virtually zero.”

Burton Malkiel The Elements of Investing

“Trust in time rather than timing.”

Burton Malkiel A Random Walk Down Wall Street

“Two behavioral economists, Terrance Odean and Brad Barber, examined the individual accounts at a large discount broker over a substantial period of time. They found that the more individual investors traded, the worse they did. And male investors traded much more than women, with correspondingly poorer results.”

Burton Malkiel A Random Walk Down Wall Street

“We conclude that hedge funds are far riskier and provide much lower returns than commonly supposed.”

Burton Malkiel

“We have believed for many years that investors will be much better off bowing to the wisdom of the market and investing in low-cost, broad-based index funds, which simply buy and hold all the stocks in the market as a whole. As more and more evidence accumulates, we have become more convinced than ever of the effectiveness of index funds. Over 10-year periods, broad stock market index funds have regularly outperformed two-thirds or more of the actively managed mutual funds.”

Burton Malkiel The Elements of Investing

“What does diversification mean in practice? It means that when you invest in the stock market, you want a broadly diversified portfolio holding hundreds of stocks. For people of modest means, and even quite wealthy people, the way to accomplish that is to buy one or more low-cost equity index mutual funds. The fund pools the money from thousands of investors and buys a portfolio of hundreds of individual common stocks. The mutual fund collects all the dividends, does all the accounting, and lets mutual fund owners reinvest all cash distributions in more shares of the fund if they so wish.”

Burton Malkiel The Elements of Investing

“When pessimism is rampant and market prices are down is the worst time to sell out or to stop making regular investment contributions. The time to buy is when stocks are on sale.”

Burton Malkiel The Elements of Investing

“You can reduce risk by building up your investments slowly with regular, periodic investments over time. Investing regular amounts monthly or quarterly will ensure that you put some of your money to work during favorable periods, when prices are relatively low. Investment advisers call this technique 'dollar-cost averaging'. With equal dollar investments over time, the investor buys fewer shares when prices are high and more shares when prices are low. It won’t eliminate risk but it will ensure that you don’t buy your entire portfolio at temporarily inflated prices.”

Burton Malkiel The Elements of Investing

“You can save time, anxiety, and money by ignoring all market forecasts.”

Burton Malkiel The Elements of Investing

“You don’t care if it’s cold and raining or warm and sunny 10,000 miles away because it’s not your weather. The same detachment should apply to your 401(k) investments until you approach retirement.”

Burton Malkiel The Elements of Investing

“You should diversify over time. Don’t make all your investments at a single time.”

Burton Malkiel The Elements of Investing

“You, far more than the market or the economy, are the most important factor in your long-term investment success.”

Burton Malkiel The Elements of Investing