But investors should also consider including some actively managed funds in the portfolio, says Malkiel.
Who knows, perhaps even Mr Buffett will fail eventually to beat Mr Malkiel's blindfolded chimpanzee.
No, says Malkiel, the problem is that these indexes are weighted for market capitalization.
Dan knows a thing or two about index investing, Burton Malkiel and Jack Bogle.
FORBES: Malkiel Shills For Indexing Again, But Backs Baidu Just In Case
In the email below Dan pokes holes in a recent WSJ article written by Malkiel.
FORBES: Malkiel Shills For Indexing Again, But Backs Baidu Just In Case
Click here to immediately get a free downloadable pdf of the Burton Malkiel interview.
FORBES: Burton Malkiel Advises Running From Bonds Into Dividends, Emerging Markets
In fact Malkiel is also the Chief Investment Officer of the China focused ETF firm AlphaShares.
FORBES: Malkiel Shills For Indexing Again, But Backs Baidu Just In Case
Burton Malkiel has been working on and writing about Wall Street for more than half a century.
FORBES: Burton Malkiel Advises Running From Bonds Into Dividends, Emerging Markets
But Malkiel remains adamant that the long-run relationship between risk and reward will return as Asian markets recover.
Indeed, Malkiel argues that the reasons to diversify now are stronger than ever.
Malkiel expects 7.5% economic growth above inflation to 2010, which is down somewhat from recent years but astounding nonetheless.
It was Burton Malkiel, author of A Random Walk Down Wall Street , the classic on efficient financial markets.
Malkiel has recommended both funds to institutional investors for whom he is consulting.
Malkiel and Mei have shown that investors who diversify globally will end up with a smaller percentage of broken eggs.
What if Malkiel had extended his testing period to include 1996 and 1997, two dismal years for Asia's emerging markets?
As Professor Malkiel colourfully put it, you might as well be a monkey throwing darts at the Wall Street Journal.
Malkiel: It is, and in fact I'm just working on--it'll be out in November--the 10th edition of my Random Walk book.
Thus even index investing god Burton Malkiel thinks he can beat the market by adding some Chinese octane to his asset mix.
FORBES: Malkiel Shills For Indexing Again, But Backs Baidu Just In Case
Charts and tables are produced by Mr Malkiel to back his assertion.
Financial Advisors: Please join Steve Forbes, Bill Gross, Burton Malkiel and others in an interactive online conference hosted by NAPFA and Forbes.
And in making these calculations, Mr Malkiel plays fair: he deducts the typical running expense (one-fifth of 1%) charged by an index fund.
Random walk advocates like Princeton Professor Burton Malkiel say that stocks move randomly from day to day and that technical analysis is foolish.
FORBES: CME Group Pays You Well To Wait For The Next Big Move
It's "the next best thing to a free lunch, " write Malkiel and partner Mei, a professor at New York University's Stern School of Business.
Malkiel: Well, look, as an indexer, I probably, to be consistent, should tell you, you just put it in depending upon where the capitalization is.
Even though Malkiel dismisses the usefulness of near-term predictions, he does not refrain from holding strong views on the influence of macroeconomic trends over longer term investment performance.
FORBES: Burton Malkiel Advises Running From Bonds Into Dividends, Emerging Markets
Attend Forbes' online Advisor iConference--a virtual experience on June 29 and June 30 featuring Steve Forbes, Burton Malkiel, Marty Cohen and many more speakers to help you thrive.
At the other end of the spectrum are proponents of modern portfolio theory and efficient markets, academicians like Burton Malkiel of Princeton University and Eugene Fama of The University of Chicago.
Malkiel was in essence embracing the efficient markets theory that says fund managers as a group cannot outperform the market, so investors who pay big commissions and other management expenses are cheating themselves.
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