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Foreword

“Money in the bank” sounds safe, but will do little to outpace inflation. On the average, over the long run, a welldiversified portfolio that includes stocks and bonds will almost surely continue to outpace both inflation and money in the bank. However, as this book documents so well, a foolish attempt to beat the market and get rich quickly will make one’s broker rich and oneself much less so. – Harry Markowitz, Ph.D. 1990 Nobel Prize Recipient

Harry Markowitz, Ph.D. is best known for his pioneering work in Modern Portfolio Theory, for which he was awarded the 1990 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (referred to as the Nobel Prize in this book). In 1952, he developed the simple, yet profound notion that investors must consider the risk associated with their investments, not solely the return. This groundbreaking discovery sparked a financial revolution pertaining to the relationship between risk and return. He is widely known as the “Father of Modern Portfolio Theory.” Dr. Markowitz is also the recipient of the 1989 John von Neumann Prize in Operations Research Theory for his work in the areas of sparse matrix techniques and the SIMSCRIPT programming language, in addition to portfolio theory. He currently serves as an Adjunct Professor of Finance at the Rady School of Management at the University of California, San Diego and an Academic Advisor to Index Fund Advisors, Inc.

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