[Front Cover of 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.

This article has 10 comments

  1. Thanks for saving me the $17… that’s a few trades :)

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  3. I’ll look this one up next time I’m at the bookstore. The KISS principles they layout pretty much follow the fundamental ideas around passive index investing that we’ve all heard before. Thanks for the quick review.

  4. Investing for the long term…..you must be a mutual fund adviser!

  5. This book seems to resonate along the lines of “Unconventional Success” by David Swensen as well as “Common Sense on Mutual Funds” by John Bogle. There are people who are under the mistaken belief that to generate good returns the average investor’s portfolio must have complex asset allocation and esoteric holdings. On the contrary, the simpler the portfolio the higher the chance of a more pure market return.

    1) Start saving early by setting realistic goals
    2) Ensure the asset allocation in your portfolio remains in sync with your level of risk aversion and overall investment objectives
    3) Keep costs and taxes to a minimum by avoiding most high turnover actively managed mutual funds and opting for tax-deferred savings whenever possible (not only do their investments grow tax-sheltered but for most people their MTR at retirement would be lower than it is during their working years)
    4) Balance your portfolio at least annually (some individuals may choose to do so semi-annually)
    5) Hammer away at your debt first — for example, when it comes to contributing to an RRSP or TFSA vs. paying down your mortgage, ideally you should do both. However, if you have a large mortgage, it may be worthwhile to allocate more money to paying it off as opposed to maximizing your RRSP contribution room

  6. I’ll look this one up next time I’m at the bookstore. The KISS principles they layout pretty much follow the fundamental ideas around passive index investing that we’ve all heard before. Thanks for the quick review.

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