After the mortgage meltdown and subsequent recession, it was sometimes claimed that the economics profession had been turned on its head and the textbooks would all have to be rewritten. EVERYTHING has changed! NOTHING IS THE SAME, they cried! Even the rules of investing were supposed to have changed.
My goodness, such extremes merely from failing to predict the future. When did economics become fortune telling? I have been teaching and studying economics for over 30 years. Somehow I missed that memo.
The fact is that the old rules still very much apply. We still live in a world of scarcity and thus face tradeoffs and opportunity costs, productivity and innovation still drive our standard of living, and buying, holding, diversifying, and rebalancing is still the most prudent way to invest. Despite all the hype and rhetoric, not all that much is different.
In the videos linked below, Burton Malkiel, Princeton University economist and author of the investments classic A Random Walk Down Wall Street, explains why the “rules” are still the same.
Burton Malkiel Explains Why The Old Rules Are Not Dead
Malkiel Questions and Answers
MM
