First of all, the word "index" is not in the index. The book, of course, contains this famous passage on p. 226
Interestingly, he goes on to suggest that the New York Stock Exchange ought to "sponsor such a fund and run it on a nonprofit basis" and, this is the part I find interesting, "if the New York Stock Exchange (which, incidentally has considered such a fund) is unwilling to do it..." I'd like to know more about that. (Sort of an anticipation of the first ETF, the original SPDR, which was actually created and operated by the AMEX itself).What we need is a no-load, minimum management-fee mutual fund that simply buys the hundreds of stocks making up the broad stock-market averages and does no trading from security to security in an attempt to catch the winners. Whenever below-average performance on the part of any mutual fund is noticed, fund spokesmen are quick to point out "You can't buy the averages." It's time the public could.
It appears as if a large portion of the 1973 text survives with little change into the 2007 edition. The chapter "The Madness of Crowds" seems little changed, for example, although a couple of charts and illustrations have been added. A 1973 chapter called "The Clay Pedestal of SuperAnalyst, or How Good is Fundamental Analysis" is very recognizable in 2007 as "How Good is Fundamental Analysis." Maybe 3/4ths of the current chapter is lightly reworked from 1973, then somewhat expanded. There are many familiar turns of phrase and subheadings; "A Fitness Manual for Random Walkers," for example.
A "Menu of the Major Investment Choices Available" is an early version of what became the "Sleeping Scale of Major Investments." What's significant is that the 1973 menu includes only five choices, which are as follows, with his "Expected Rate of Return (1973)"
* Savings account (5 percent)
* Special Savings Certificate (5-3/4-6%)
* Corporate Bonds (good quality public utilities) (7-1/2%)
* Diversified Portfolio of Blue-Chip Common Stocks (Such as Mutual Funds) (9 percent)
* Diversified Portfolio of Relatively Risky Stocks (Such as Aggressive Growth-Oriented Mutual Funds) (11 percent).
Here are some things that stand out. Money market funds didn't exist. The abbreviation CD was apparently not common, and the quoted rates for "savings account" and "special savings certificates" remind me that the Regulation Q cap was still in effect.
Notice that it is still assumed that the investor will quite likely be investing in individual securities; whether or not they existed, bond funds are not mentioned.
I had completely forgotten that the language of Fama-French factors had not been introduced. Stocks as classified as "Blue-chip" versus "Relatively risky," and I don't know how those categories are defined. I've only skimmed the text, but I think that there is virtually no attention given to small-cap stocks--I think "relatively risky" probably means something like the S&P 425 with the Dow stocks left out.
Yes, the S&P 425. That's news to me. I thought it went straight from 90 to 500 (with perhaps a period of overlap).
I don't think there's any mention at all of international stocks. (The index entries for International are for "International Business Machines," "International Flavors & Fragance," etc.)
There's no lifecycle guide to investing, no stock/bond/cash pie charts, nothing about "asset allocation" in the index or the table of contents. It seems to be assumed that the investor will hold bonds and stocks, and somewhere in the text I'll probably be able to winkle out something suggesting what the balance should be, but "choose your asset allocation" is not a core concept.
The only index entry for "retirement" is "retirement funds," and it does not mean mutual funds. Of course, in 1973, the LifeStrategy and Target Retirement funds were far in the future, and the Wellesley Income Fund was only three years old. By "retirement funds" he means professionally operated "pension and retirement funds."
I think the big thing that strikes me is how the whole investing world changed with the 401(k). The concept of investments as a way for individuals to save for retirement was really just not there.
Before the 401(k) and IRA, I'm actually not sure what the typical goal of investments by individuals would have been!
Now this is all the vaguest memory on my part and has more to do with stereotyping than anything else, but my notion circa 1973 might have been that "investments" were ways for people who had extra, unneeded money to grow that wealth. If you were an ordinary worker, the assumption I guess was that when you got too old to work you'd have a pension and/or social security and/or go on working anyway and/or be supported by relatives and/or be poor. The wealthy were, in a sense, saving for their own retirement, but not in any closely-calculated way--no 4% rules--because it was sort of assumed they had plenty to start with, and they'd end up by leaving a substantial legacy. (The plutocrats of the Gilded Age strove to live, not on the interest, but on "the interest on the interest." but I'm sure that was just an ideal, rarely achieved in reality. But it would certainly be a "safe withdrawal rate!").