The Elements of Investing – Charley Ellis & Burton Malkiel

Burton Malkiel and Charley Ellis speak at a fireside chat on the topic of what’s changed in the last 10 years—a retrospective on personal finance and investing. Burton is returning to Google 10 years after his first talk here, when he was invited by Jonathan Rosenberg and Sergey Brin to discuss personal finance and investing in advance of the Google IPO at the time.

Notes

  • Financial advisors are incentivized in selling you the product with the largest kickback to the advisor, not necessarily the best for the advisor
  • What happens in the market often happens in the short-term and are cyclical. You don’t need to know what is happening in the short-term as long you can outlast it in the long-term
  • Pay attention to the signal, ignore the noise. And as long you have an advantage to determining a signal you can resonance with, then you will do very well
  • Money always flows in when people are optimistic and the money goes out at the market bottom
  • Noise is making you do the wrong thing
  • Beating the market back then where the market was mainly individual investors who only invested in a few large companies made it easy to beat the market. Now over 90% of the trades are done by institutional investors who are experts in their fields. Individual investors are now in the disadvantage and most likely underperforms the market
  • You can let the market (aka the experts) do all the work, and just invest in an index
  • Put in money regularly in the market overtime, regardless what the market is doing (dollar cost averaging)
  • Only control what you can control: cost, taxes, diversification
  • Tax lost harvesting: sell the loser in your portfolio and buy a similar company
  • Never do something where you’re not able to hold it for 10 years
  • Mutual Funds: 80% of funds under perform the index they are going to match, but are paying significant fees to be invested in these funds
  • Technical relocation doesn’t work: allocate based on predicting that one sector will underperform and another will outperform
  • Rebalancing can be done: 75% US and 25% emerging and you rebalance to that