Quotes from Burton G. Malkiel

There is nothing so disturbing to one's well-being and judgment as to see a friend get rich.

For many of us, trying to outguess the market is a game that is much too much fun to give up. Even if you were convinced you would not do any better than average, I'm sure that most of you with speculative temperaments would still want to keep on playing the game of selecting individual stocks with at least some portion of the money you invest.

Forecasts are difficult to make—particularly those about the future.

In crowds it is stupidity and not mother-wit that is accumulated," Gustave Le Bon noted in his 1895 classic on crowd psychology.

There is one investment truism that, if followed, can dependably increase your investment returns: Minimize your investment costs. We

Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.

It is the definition of the time period for the investment return and the predictability of the returns that often distinguish an investment from a speculation. A speculator buys stocks hoping for a short-term gain over the next days or weeks. An investor buys stocks likely to produce a dependable future stream of cash returns and capital gains when measured over years or decades.

And if you buy the new issue after it begins trading, usually at a higher price, you are even more certain to lose.

A stock selling at $100 per share with earnings of $10 per share would have the same P/E multiple (10) as a stock selling at $40 with earnings of $4 per share. It is the P/E multiple, not the price, that really tells you how a stock is valued in the market.

As the economic historian Charles Kindleberger has stated, "There is nothing so disturbing to one's well-being and judgment as to see a friend get rich.

Kahneman and Tversky concluded that losses were 2½ times as undesirable as equivalent gains were desirable. In other words, a dollar loss is 2½ times as painful as a dollar gain is pleasurable. People exhibit extreme loss aversion, even though a change of $100 of wealth would hardly be noticed for most people with substantial assets. We'll see later how loss aversion leads many investors to make costly mistakes.

A firm's income statement may be, likened to a bikini-what it reveals is interesting but what it conceals is vital.