Two classic books on long-term investing are out in new editions

Want to learn how to become a better investor in 2023? Two classic books on long-term investing are out in new editions. If your New Year’s resolution is to learn more about the stock and bond markets, nothing better than reading these books.

Here’s why every investor should read.

This week, Professor Burton Malkiel of Princeton University said: A Random Walk Down Wall Street: A Guide To The Best Investing Money Can Buy. The impact this book has had on the investment community cannot be underestimated. It was first published in 1973, and by the time I met Burton Malkiel in the late 1990s, it had been in print for 25 years and had already become an investment classic. I spread the idea of ​​indexing as and why you can’t beat the market. Malkiel is Jack Bogle’s best friend and served on the Vanguard board for 28 years. This is a brand new update.

In December, Wharton School’s Jeremy Siegel published a new edition (6th edition) of his classic. Long-Term Stocks: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies. First published in 1994, Siegel examined the returns of stocks and bonds going back 200 years and found that, on average, stocks produced an annual inflation-adjusted return of 6.5% to 7%, more than bonds. concluded that it is much better. This was an important study that convinced many that the simple buy-and-hold strategy was the best long-term investment.

Two other investment classics complete the “must read” list for long-term investors.

Common sense of investment trusts By Jack Bogle (10th Anniversary Edition, 2009). Meeting Jack Bogle in the mid-1990s changed my life. It was an era of superstar investors like Bill Miller of Legg Mason. Bogle tells me that 1) low-cost index funds are best for most investors, and 2) the outperformance of a small (very small) group of active managers is what they charge. Once offset by high fees and 3) having the right mix of assets commensurate with your risk tolerance, the key is to stick to your plan and not panic when the market goes down. More than anyone, including Warren Buffett, Bogle has changed an entire generation’s view of investing.

win the loser’s game By Charles Ellis (8th edition, 2021). Ellis, who founded the international consultancy Greenwich Associates in 1972, advising large institutional investors, and Barton, like Malkir, served on Vanguard’s board for many years. In 1975, he published an essay in The Financial Journal, “The Loser’s Game,” in which he stated his central proposition:Belief: A professional money manager can win the market. Winning the Loser’s Game: Timeless Strategies for Successful Investing. The book went on to distill much of the separately published wisdom of Malkir, Bogle, and Siegel on beating the market, efficient market hypotheses, market timing, and asset allocation.

Like Malkir, Ellis encouraged investors to diversify their investments in low-cost index funds.

The market eventually caught up with Malkir, Siegel, Ellis and Bogle. Jack Bogle not only launched his first index mutual fund (based on the S&P 500) in 1975, but 18 years later, he also launched the first exchange-traded fund (based on the S&P 500). ETF) was launched. Investors now have not only an index fund, but a low-cost, tax-efficient wrapper to buy it.

Since then, what Charlie Ellis called the “Index Revolution” has only grown. ETFs are now a nearly $7 trillion business that is closing in on the shrinking mutual fund business. For investors confused by the constant noise and the need to “do something”, these books provide a calming antidote.

Note: Burton Malkiel will be on CNBC’s “The Exchange” this Friday at 1:30 PM ET.