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Scheduled air date: June 13, 2003
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Burton Malkiel Greg Forsythe
Christine Fahlund


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Burton Malkiel
Professor, financial economics
Princeton University
Burton Malkiel

Malkiel didn't invent efficient market theory, but he might be its most-read interpreter.

Investment advice comes and goes, but Malkiel's A Random Walk Down Wall Street -- whose eighth edition was released a few months ago -- is perhaps the one guide that's a true classic of its genre. The book lays out efficient market proponents' case in easy-to-understand chapters that also contain lessons in how to apply theory to the real world, although the argument basically boils down: keep the bulk of your holdings in index funds, because almost no one beats the market in the long run.

Other would-be financial wizards have been repeated and repackaged the same message time and again since Random Walk was first published 30 years ago. Not that everyone agrees with it -- plenty of professional portfolio managers scorn Malkiel's arguments, largely because the implication of an efficient market is that active money management is a fruitless exercise, purely from a profit point of view. And even Malkiel says that there are brief periods -- such as the late 1990s bubble -- when markets go crazy.

Wall Street's professional opposition didn't stop random walkers from rapidly growing in numbers. FORTUNE magazine described Malkiel's book as playing "the biggest role in bringing efficient-markets thinking to the retail investing masses." Vanguard launched the first index fund for individual investors two years after A Random Walk's 1973 debut.

Market events of recent years haven't shaken Malkiel's belief in index investing as the foundation of any portfolio. He views stocks' downturn from 2000 to 2003 as a prime example of the market's efficiency because it corrected the bubble prices of the late 1990s.

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Christine Fahlund
Vice president,
T. Rowe Price Investment Services

When T. Rowe Price needs someone to talk about retirement and estate planning, Fahlund often gets the call.

What does she tell people in today's uncertain market? To a large extent, it's all about expectations. People who have scaled theirs down are less likely to be disappointed. "They've adjusted their life a long time ago: simple, wholesome meals, the beauty of a sunset," Fahlund recently told Newhouse News Service. "It's the ones who want the Armani suits that are really in trouble."

Fahlund is a senior financial planner in T. Rowe Price's corporate marketing unit. Before T. Rowe Price hired her in 1995, Fahlund was vice president of business affairs at Shawmut Trust Company; and prior to that, she was vice president of personal trust sales with Bank One Wisconsin Trust Company.

She received a bachelor's degree in biochemistry from Mount Holyoke College and a doctorate in biochemistry from the University of Massachusetts. She is a certified financial planner.

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Greg Forsythe
Senior vice president
Charles Schwab & Co.

As the director of for Charles Schwab & Co.'s equity model development team, Forsythe spends his time figuring out how to create high quality research for the individual investors that make up Schwab's clientele. He was one of the driving forces behind Schwab's grading system that rates stocks on an A through F scale.

Despite his job, which necessarily revolves around picking individual stocks, Forsythe actually believes in the idea that markets are generally efficient in the long run. However, he views Schwab Equity Ratings as a way to take advantage of two market tendencies: overlooking short-term changes in companies; and overreacting to long-term trends.

In 1990, Forsythe co-founded Chicago Investment Analytics, and was director of research & product development until 2000, when the company was bought by Schwab. Prior to that, he worked at Zacks Investment Research, where he was responsible for quantitative modeling, brokerage research, and client consulting services.

Forsythe is a chartered financial analyst and a member of numerous professional societies. He received a bachelorís degree in industrial engineering from Purdue University and an MBA in finance from University of Chicago.

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