Book Review: The Elements of Investing

The authors of this slim volume need no introduction. Burton Malkiel’s A Random Walk Down Wall Street is a classic that was first published in 1973 and is still in print. Charles Ellis is a legendary portfolio manager and author of Winning the Loser’s Game (I reviewed it here). They have combined forces to boil down investing to its elements in this short book that you can breeze through in a couple of hours. The authors say the book follows the format of The Elements of Style, a short classic on the art of powerful writing, which I confess isn’t a title I had heard about before.

In the book, the authors lay out a super simple approach to investing that can be profitably employed by anyone. They call it KISS Investing and it includes the following steps:

1. Save regularly and start early.
2. Use company- and government-sponsored retirement plans to supercharge your savings and minimize your taxes.
3. Diversify broadly over different securities with low-cost “total market” index funds and different asset types.
4. Rebalance annually to the asset mix that’s right for you.
5. Stay the course and ignore market fluctuations; they are likely to lead to serious and costly investing mistakes. Focus on the long term.

If you’ve read other popular tomes on investing, you won’t find much that is new here and can safely skip this one (and thank me for saving you $17 or so). But investors of all ages who are new to investing will be delighted to learn that the basic principles for achieving financial success are not exactly rocket science. The book is published by John Wiley and has a cover price of $23.95.