Burton Malkiel: How to invest

Burton MalkielI have come across a nice interview with Burton Malkiel. I mentioned his name several times on my blog. He is a professor of economics at Princeton University, he served as a dean of the Yale School of Management, in the 70s he was a member of the Council of Economic Advisers - a group of three economists that advise the President of the United States. This council is moreover part of the Executive Office of the President of the United States. What is more, he has been a longstanding supporter of the theory of efficient markets and investing into passive index funds.

In the interview for CBS he points out that passively managed funds have beaten at least two thirds of mutual funds over this lost decade. He encourages investors to diversify – over bonds, international equity markets, emerging markets, domestic markets etc. In his opinion (and I totally agree with him) is investing a very easy process. Do not let advisors, bankers or investment managers fool you into believing that investing is a rocket science when in reality it’s very simple.

You only have to obey a couple of dead easy principles and you will be better off than the majority of active investors. Moreover, professor Malkiel do not recommend investing into commodities outright which has been in vogue for the last couple of years. It is wiser to invest into equity markets of commodity rich countries (Russia, Chile, Australia, etc…).  By buying index funds covering such countries you can achieve commodity-like advantages.

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