Most Helpful Customer Reviews
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124 of 129 people found the following review helpful:
5.0 out of 5 stars
Excellent, must read for every investor, February 14, 2007
This is a classic book, first published in 1973. The 9th edition just came out this year. Every investor, whether you believe in market efficiency or not, should read this book at least once. This book does a very good job reconciling between market efficiency and perceived inefficiencies such as bubbles at different times. The author believes in a weak form of efficient market theory. Simply put, the market may not be perfectly efficient at all times, but it's efficient enough to make it very difficult and costly trying to beat it. In the end, an investor is better off holding a market index fund that invests in everything under the sun. It's not worth the cost and effort trying to find the undervalued stocks or high-growth mutual funds.
The book begins with two basic stock valuation models -- Firm Foundations and Castles in the Air. It goes on with a review of bubbles and manias throughout history, from more ancient history -- tulip craze in the Netherlands, the South Sea bubble in England, the 1929 Great Crash in the U.S. -- to the stock market anomalies from the 1960s, 1970s, all the way to the late 1990s dot com bubble. The book then introduces two basic camps of stock valuation analysis: Technical Analysis and Fundamental Analysis. It shows how both Technical Analysis and Fundamental Analysis fail to identify outstanding investment opportunities more than what an efficient market already provides. Not that you can't make money with Technical Analysis and/or Fundamental Analysis, but you can't make more money than what you already can with investing in a market index fund.
The chapter on behavioral finance is new for the 9th edition. It reviews how investors often become their own worst enemy when it comes to investing. The book "Why Smart People Make Big Money Mistakes And How To Correct Them" (ISBN 0684859386) covers this area in more details.
The final section of this book is the practical part. It gives practical advice on insurance, tax deferred accounts, saving for college, different vehicles for cash reserves, bonds, real estate, and stock mutual funds. Finally the book lists specific portfolio and fund recommendations for people in different stages of their lives.
Overall, this is a great book, a must read for every investor. It is however a little long and it requires some patience because it explains everything in details. If you want to cut to the chase and prefer a cookbook approach, I recommend the shorter book "The Random Walk Guide to Investing" (ISBN 039332639X) by the same author. The basic premise is the same in both books. The shorter "The Random Walk Guide to Investing" condenses everything into 3 basic points and 10 rules. It is about 200 pages long. The full book "A Random Walk Down Wall Street" is over 400 pages.
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29 of 30 people found the following review helpful:
5.0 out of 5 stars
Learn why investors do crazy stuff over and over again - and how to avoid those mistakes., August 6, 2007
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, 9th ed., by Burton G. Malkiel, is a classic and brilliant explanation of how investors make the same mistakes over and over again, and how you can avoid those mistakes. If you want to understand how the stock market works, and decide for yourself if you should be investing in index mutual funds or picking stocks, this book is a must-read.
This book is not short, but that's because it goes through the history of investing (starting in 1592! through the dot-com era), explains how professionals invest and modern portfolio theory, and how you can apply all that to your investment portfolio.
I read this book before I was an investment advisor, have re-read it since, and recommend it to my clients who want to understand how the stock market, and how investors, work.
Pros: Love the stories of early investment bubbles, like the tulip bulb bubble (yes, actual tulip bulbs) and how the dot-com bubble was just history repeating itself. Great explaination of modern portfolio theory, that a non-financial-geek can understand.
Cons: Still is pretty technical for some people, and no one could say the book is short or quick reading. Modern portfolio theory may not work in all asset classes (like international investments, though that may be changing).
What I have learned: I love sharing stories of all of the bubbles throughout history, when I'm at a cocktail party or networking event. Helps me explain to clients and press why the dot-com bubble happened, why indexing works (in some asset classes), and how someone should evaluate the fundamentals of a stock.
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19 of 20 people found the following review helpful:
5.0 out of 5 stars
The Only Investment Book You Will Ever Need, July 18, 2007
This book is excellent. It advocates maintaining an asset allocation of stocks, bonds, cash etc., that is appropriate for your age and risk tolerance. The stocks should be in a low fee total market stock index fund or in an exchange traded fund ETF. Read the book for the proper mix of stocks and bonds to maintain in your portfolio for your age.
I read a copy of this book about 23 years ago and did not follow its advice because I thought I could outsmart the market. I subscribed to many financial magazines and newspapers, thinking that knowledge is power. I found that you can get as many bad tips as good tips. It's basically a flip of the coin. With the advent of the internet, I searched the internet for the latest recommendations from the famous gurus of the day.
During the recent bear market of 2001, a very famous bond guru predicted that the Dow with go to 5000. It wasn't until the Dow turned up substantially before the bond guru admitted his mistake. There is also a famous Dow Theory interpreter, who writes a monthly newsletter. He hinted that the Dow would go to 3000 and the total stock market index of 5000 stocks would lose about half its value to 6000. He was very bearish when the market turned upwards in 2003 and stayed bearish until recently, as the Dow is at an all time high. Many of his subscribers are very angry at him because his bad call kept them out of the market for the bulk of the recovery. It appears that it is more profitable to sell advice than to take it.
Following the advice of gurus can be detrimental to your financial health.
I've learn that recommendations from gurus and financial publications have an equal chance of being a good or an asinine idea. Financial magazines and gurus have ZERO predictive value and they want to get you into a dependent relationship in which you are waiting for the latest hot tip month after month.
This book recommends that you cancel all subscriptions to financial publications and newsletters and just maintain the appropriate asset allocation. This is very good advice. It will save you countless hours of useless research. After 23 years, I'm back to square one and I will now follow the advice in this book.
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