Talking the Walk With Burton Malkiel

The Life-Cycle Investment Guide, by the way, has held up remarkably well during the past few years. I am happy to mention that the conservative portfolio for older investors -- which includes a 50% weighting in bonds -- has actually made money over the past few years. And the most aggressive portfolio, for investors in their mid-20s, only lost about 7% a year during the past three years. Assuming the investor used dollar cost averaging over the 2000-2002 period.

I should also note that I am a strong believer in Markowitz's modern portfolio theory. Markowitz proves that diversification across several asset classes is a sensible strategy for individuals who want to reduce their risks.

While I do invest in index funds, I should also add that I have had a long interest in stock markets and I was drawn to investing because of my gambler's mentality. I think anyone who goes to work on Wall Street likes to think that they have the ability to choose winning stocks.

While the core of my investments is in index funds, I use a small amount of side money to invest in stocks, which satisfies the part of me that wants to beat the market. I'm not at all sure I do beat the market but I have fun doing it.

What stocks are grabbing your attention?

Professor Malkiel: In the 1990s, I did invest in several technology companies. I served on the board of directors at a Silicon Valley computer company and therefore studied the technology industry fairly closely. Based on what I knew and my contact with experts in the industry, I chose some stocks that did quite well.

I had owned Intel(INTC Quote) for many years. In fact, I made a substantial amount of money from owning Intel over the years. I would've made even more had I sold the stock in early 2000. But we can't predict the future, and we certainly cannot time the market.