Burton G. Malkiel

A sanity check on what investing is really about and where it differs from magic. Particularly fun and refreshing in its debunk of almost any known expert approach, and yet realistic about their relative value.

A must read for anyone before they invest...

Professors teaching security analysis in business schools face an interesting dilemma: We train people how to identify situations where a stock’s price and intrinsic value may differ, despite the fact that a substantial portion of our academic preparation strongly suggests that security markets are efficient to the point that such activity is unlikely to lead to abnormal profits over time. While it is certainly possible to reconcile these polemical positions—for instance, when there is a show more cost to acquiring and processing financial information—the more interesting question probably involves establishing which view of the world defines an individual’s core belief.

My own opinion is that investors are far better off in the long run with a null hypothesis that markets are efficient; this creates the burden of having to convince themselves why price and value might differ in a particular situation. That is certainly Malkiel's view as well and, within that context, A Random Walk Down Wall Street is the most compelling and user-friendly statement of the nature and portfolio implications of the efficient market hypothesis that an investor could hope to find. I have used it as a supplementary text in my classes for years and it remains an insightful and highly entertaining reference. show less

A Random Walk Down Wall Street gets its title from Malkiel's view that markets are mostly efficient and therefore stocks' prices take into account all available information and that their day to day movements are random and difficult if not impossible to predict. This leads him to an investing philosophy much like Vanguard group's Bogle (Malkiel is a trustee) which is to veer away from trying to pick individual stocks and to go with a low-cost index fund. But while Bogle very much limited show more his recommended choice to a few funds that represented the market, like the S&P 500 Index, and some bond index funds, Malkiel's investment portfolio is more expansive. He agrees that Bogle's choices should be a person's bedrock foundation, but also allows for other vehicles like Multi Factor Smart Beta, REITs, ETFs, and a few others. His book is no Little Book of Investing and therefore he has chapters on various historical and contemporary bubbles, theories of investing, asset management, and retirement planning, topics not covered in Bogle's book. At 300+ pages, it looks intimidating when you first flip through it, with multiple sections, chapters, tables, and graphs. But for the most part it is extremely plainly written for the lay investor and with a few exceptions here and there, pretty easy to follow. It's also actionable. While I did not go out and buy any new products after finishing it, I did review my asset allocation and determined that I may be too heavily invested in stocks for my age and I turned on my rebalancer. Much of your own decision making will come down to your particular risk tolerance - what Malkiel refers to as your risk to sleep index. If you can tolerate a lot of risk and not lose any sleep over what many feel is an inevitable drop, you may want to go all in on the current bull market even into retirement. show less

This book courageously opposes all the categories of voodoo that tempt the born-a-minute fools swarming the worldwide securities markets. Yes, you may make ninety percent timing the market today, but you will lose just as much the next day and the next. And then you have to pay your broker. And the tax man.

Better to buy index funds and hold them until you retire. If that's too boring for you, take five percent of your money and speculate with that. But don't fool yourself into thinking that show more you can beat the market. Avalanches of data show that market timing is not a matter of skill, but luck. And any gains will be shaved to uselessness by the Uncle Sam and your broker.

Even the seemingly scientific techniques of technical analysis are destroyed in the blast of Malkiel's empirical artillery. Markets are random. Trends reverse without warning. Your head and shoulders pattern is not going to make you money. Sorry.

Yes, Malkiel's thesis is "buy and hold." But he's not trying to depress you with his thesis; he's trying to help you make as much money as possible with your investments. If you need to gamble, Malkiel gives advice for gambling in the sanest possible way.

This book is a frank, level-headed approach to squeezing the best returns from your invested dollars. And, after more than 30 years in print, there is no point in trying to argue against Random Walk. If you really feel the need to get disgustingly rich on Wall Street, open a brokerage already. show less