A Random Walk Down Wall Street: Completely Revised and Updated Edition [Paperback]

Burton G. Malkiel (Author)

Book Description

Publication Date: January 1, 2003

The million-copy bestseller, now fully up-to-date and ready for post-dot-com investors.

Using the dot-com crash as an object lesson in how not to manage your portfolio, here is the best-selling, gimmick-free, irreverent, vastly informative guide to navigating the turbulence of the market and managing investments with confidence.

A Random Walk Down Wall Street is well established as a staple of the business shelf, the first book any investor should read before taking the plunge and starting a portfolio. With its life-cycle guide to investing, it matches the needs of investors at any age bracket. Burton G. Malkiel shows how to analyze the potential returns, not only for stocks and bonds but also for the full range of investment opportunities, from money market accounts and real estate investment trusts to insurance, home ownership, and tangible assets like gold and collectibles.

Whether you want to verse yourself in the ways of the market before talking to a broker or follow Malkiel's easy steps to managing your own portfolio, this book remains the best investing guide money can buy.

Editorial Reviews

Amazon.com Review

It's unlikely that you'll spot many dog-eared copies of A Random Walk floating amongst the Wall Street set (although bookshelves at home may prove otherwise). After all, a "random walk"--in market terms--suggests that a "blindfolded monkey" would have as much luck selecting a portfolio as a pro. But Burton Malkiel's classic investment book is anything but random. Since stock prices cannot be predicted in the short term, argues Malkiel, individual investors are better off buying and holding onto index funds than meddling with securities or actively managing mutual funds. Not only will a broad range of index funds outperform a professionally managed portfolio in the long run, but investors can avoid expense charges and trading costs, which decrease returns.

First published in 1973, this seventh printing of a A Random Walk looks forward and does so broadly, examining a new range of investment choices facing the turn-of-the-century investor: money-market accounts, tax-exempt funds, Roth IRAs, and equity REITs, as well as the potential benefits and pitfalls of the emerging global economy. In his updated "life-cycle guide to investing," Malkiel offers age-related investment strategies that consider one's capacity for risk. (A 30-year-old who can depend on wages to offset investment losses has a different risk capacity from a 60-year-old.) In his assessment of rocketing Internet stocks, Malkiel defends his "random" position well, explaining how "the market eventually corrects any irrationality--albeit in its own slow, inexorable fashion. Anomalies can crop up, markets can get irrationally optimistic, and often they attract unwary investors. But eventually, true value is recognized by the market, and this is the main lesson investors must heed." Written for the financial layperson but bolstered by 30 years of research, A Random Walk will help individual investors take charge of their financial future. Recommended. --Rob McDonald --This text refers to an out of print or unavailable edition of this title.

From Publishers Weekly

The eternal truth of this updated investment classic, originally published in 1973, is simple: you can't beat the market. Well, technically, you can beat the market, but not profitably, because the transaction costs of your brilliant trading will eat up the extra returns. You can also beat the market by pure luck-but you can't deliberately beat the market, because you can't predict future stock prices. You can't predict them by divining Wall Street's crowd psychology; or by charting trends in stock prices; or by doing lots of research on companies' business prospects. You can't predict them from hemlines (though there's been "some evidence" for correlation between skirt length and market prices in the past, Malkiel poo-poos future possibilities) or Super Bowl winners (this, he says, makes "no sense"). In fact, according to the efficient market theory, which states that all knowable information about a stock's value is already reflected in its share price, you can't predict them at all. Malkiel, a Princeton economist and professional investor, backs it all up with statistics, charts and studies, and gives an entertaining review of the sorry history of market bubbles, panics and delusions of omniscience, from the Dutch tulip craze to the Beardstown Ladies. This edition looks at new wrinkles (it seems you can't beat the market by buying companies with ".com" in the name), and provides a lucid overview of novel investment vehicles. Standing by his notorious claim that "a blindfolded chimpanzee throwing darts" at the NYSE listings could pick stocks as well as the Wall Street pros, Malkiel advises investors to "buy and hold" a diversified portfolio heavy on index funds that passively mirror the market, which usually out-perform actively managed funds. His witty, acerbic style and persuasive arguments will delight readers but, alas, leave Wall Street unmoved.
Copyright 2003 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

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Product Details

• Paperback: 416 pages
• Publisher: W. W. Norton & Company; Completely Revised and Updated edition (January 1, 2003)
• Language: English
• ISBN-10: 0393325350
• ISBN-13: 978-0393325355
• Product Dimensions: 8.4 x 5.5 x 1.2 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (182 customer reviews)
• Amazon Best Sellers Rank: #89,398 in Books (See Top 100 in Books)

More About the Author

Burton G. Malkiel is the Chemical Bank Chairman's Professor of Economics at Princeton University. His books include "From Wall Street to the Great Wall," "Naked Economics," "The Random Walk Guide to Investing," and the mega-bestseller "A Random Walk Down Wall Street."

Customer Reviews

Most Helpful Customer Reviews

118 of 124 people found the following review helpful:

5.0 out of 5 stars Solid advice for funding your life, July 14, 2004

By 

Vincent Poirier (Tokyo, Japan) - See all my reviews
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Amazon Verified Purchase

This review is from: A Random Walk Down Wall Street: Completely Revised and Updated Edition (Paperback)

In a nutshell Malkiel's advice is to own your own home, buy no-load index funds (equities and bonds), buy international index funds, and mix your investments according to your age. You should also have medical and plain term life insurance, and cash on hand for a few months in case of an emergency. This book is a complete course in how to manage your money effectively, whether you're a millionaire or a low-income earner. It also gently but firmly chastises proponents of get-rich-quick schemes such as day traders.

First, the book explains what is financial risk, and points out that everything is risky, even insured savings accounts since inflation can destroy the value of cash. Malkiel describes just how risky various investments are, and how the risk is one investment is often offset by the risk in another. Second, Malkiel describes a variety of specific investments (e.g. no load index funds, your own home, individual stocks) and suggests how individual investors should mix them, depending on their personal circumstances. For instance, an ambitious young woman in her twenties can consider aggressive high-risk high-growth funds. If they boom, she's rich, if they bust she's young enough to recover her losses through income. This would not be true of a middle-aged couple about to pay for their children's college years.

"A Random Walk Down Wall Street" should be in every family's library.

49 of 52 people found the following review helpful:

5.0 out of 5 stars All-around sound advice, January 31, 2005

By 

Hinkle Goldfarb (R.R. 1 Highway 162, Butte City, California) - See all my reviews

This review is from: A Random Walk Down Wall Street: Completely Revised and Updated Edition (Paperback)

Mr. Malkiel provides an outstanding all-in-one stock book for the educated but non-technical investor. He includes overviews of the financial, economic and psychological foundations for stock markets, as well as entertaining summaries of the history of stock markets in the world and in the U.S. Mr. Malkiel takes a sensible, long-term approach to investing with stocks and bonds, at the same time pouring cold water on various market theories. He approvingly quotes the phrase "the stock market is like a casino in which the odds are rigged in favor of the player" which is probably the best summing-up I've ever encountered when thinking about stocks. Some of his more salient and direct advice includes these gems:

* "A simple 'buy-and-hold' strategy typically makes as much or more money than technical strategies" (p 151).

* "No technical scheme whatever could work for any length of time and ...even if they did work, the schemes would be bound to destroy themselves" (p 167).

* Regularities in stock market movements are arbitraged away over time; whoever spots such a regularity would not tell everyone else, but instead would keep it to him- or herself to get rich (p 168).

* Many analysts are incompetent or are compromised by institutional conflicts of interest (pp 181, 183).

* "The evidence from several studies is remarkably uniform. Investors have done no better with the average mutual fund than they could have done by purchasing and holding an unmanaged broad stock index" (p 187).

* Don't ignore small cap companies: "smaller firms tend to have higher rates of return" (p 239).

* Investors should look for stocks with relatively low P/E ratios and low values relative to their book values (pp 239, 261).

* The only market-timing strategy that makes any empirical sense is to purchase stocks that have had relatively poor recent performance (p 257).

* The stock market goes through manias but is fundamentally logical (p 258).

* Your tolerance for risk should be judged by how well you can sleep at night with your portfolio (p 280).

* Zero coupon bonds can be a good investment if the tax aspects are adequately addressed (p 299).

* "I recommend low-expense bond index funds" (p 300).

* "I now believe that if an investor is to buy one U.S. index fund, the best general U.S. index to emulate is the broader Wilshire 5,000-Stock Index, not the S&P 500" (p 360).

120 of 138 people found the following review helpful:

4.0 out of 5 stars An academic's view of Wall Street, May 1, 2003

By 

Mark D. Wolfinger (Evanston, IL United States) - See all my reviews

This review is from: A Random Walk Down Wall Street, Completely Revised and Updated Edition (Hardcover)

A Random Walk takes the reader on a path from the point of view of an academic, rather than that of a trader. That is sufficient to make this book different from most other stock market tomes. Malkiel's premise is that neither the the average investor nor the professional trader can expect to perform better that the "market" over any significant period of time. He considers market events to be random, and thus unpredictable. He offers piles of data to support his contentions, and his arguments are compelling.

Yet, those who trade using technical analysis scoff at books such at this, claiming their systems consistently beat the averages. The author points to the fact that most managers of mutual funds, pensions etc. fail to perform better than index funds and Malkiel recommends that public investors place their investment money into broad based index funds. The S&P 500 Index fund is recommended, as it is unrealistic to expect fund managers to perform better.

This classic has been around for 30 years and this revised edition is worth your time, especially if you have never read an earlier edition. Just be aware that many technical traders consider this to be a work of fiction.