Original thought is a valuable thing.

An original idea that has stood the test of time over 30 years in a fast-changing investment world is both rare and valuable.

Dr Burton Malkiel* is an economics professor at Princeton University in the US and author of A Random Walk Down Wall Street the best-selling book on investing that has sold more than 1 million copies since it was first published in 1973. The breakthrough idea that Dr Malkiel proposed back in 1973 was the idea for index funds - funds that track the broad market rather than actively pick shares - which Vanguard in the US turned into commercial reality with the first publicly offered index fund in 1976.

In Australia this week Dr Malkiel shared his thoughts on investing in uncertain times - in particular the outlook for the US economy - and some basic strategies to keep investors on track.

Dr Malkiel says it is still not clear whether the United States will have an official recession - an official recession is two quarters of negative growth.

"However, whether or not the U.S. has an official recession it is very clear that the U.S. economy will have a slow time in the year 2008 and will probably not recover until some time in 2009," he says.

He believes that the "deleveraging" of the US economy must slow any recovery because the days of easy credit and funding for private equity type deals are over. He also believes that an inevitable consequence of the US sub-prime mortgage mess will be more federal government regulation.

Malkiel is more optimistic about the Australian economy than the US - thanks in large part to our growing economic ties to China. "Australia has benefited greatly from the growth of China, as well as India and other emerging markets. The Australian economy is relatively rich in natural resources and the Chinese and other developing economies have had a ferocious appetite for raw materials. Thus, I am optimistic about Australia and I am optimistic about its future growth," he says.

Now in its 9th edition Dr Malkiel's book A Random Walk Down Wall Street contains some timely reminders to investors about the difficulty of trying to time markets and pick stocks.

Dr Malkiel puts it simply: "Investors should avoid market timing. They should invest by dollar cost averaging that is simply putting their savings in the market at regular intervals and not try to time the market. There is nobody I have ever known who can effectively and consistently time the market."

He also advises against over trading and argues strongly for diversifying your portfolio.

"Investors should from time to time rebalance their portfolio to keep it within the risk bounds that are consistent with their age and attitude towards risk.

"They ought to diversify very widely and most important they should use low cost index funds for at least the large core of their portfolio. In my view investors should use index funds for at least 50% of their investments.

His six key tips are:

• Set reasonable investment goals (We live in a single digit world)
• Accumulators use dollar cost averaging
• Costs are especially important today
• Consider a core index-satellite strategy
• Diversify broadly
• Rebalance and tax manage (when appropriate)

*Dr Burton Malkiel is the Chemical Bank Chairman's Professor of Economics at Princeton University. He was a director on the Vanguard US board until July 2005.