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Excellent Introduction to Personal Investment, but not Perfect,
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This review is from: A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Ninth Edition) (Paperback)
Much has already been said about "A Random Walk Down Wall Street," a classic tome that is now in it's tenth edition. I picked up this book because it was featured on the reading list of New York University Stern, and because it is viewed as one of the most definitive guides for non-professional investors.
As a "crash course" or primer on the world of finance and "Wall Street," I would say that it does a fair job. Malkiel definitely covers most of his bases by running through a short but substantive history of the stock market, outlining different investment strategies and schools of thought, and providing explicit, detailed advice to investors of different ages and risk-capacities. Someone who knows absolutely nothing about finance would easily be able to pick this book up and immediately access some of the most predominant and consequential aspects of the markets.
I have to say, however, that I find Malkiel's writing to be rife with a bit too much subjectivity and critique. Even in the early chapters, it is abundantly clear that he is a staunch proponent of the "buy-and-hold" method and that he believes active trading is a pastime suited best for those with a penchant for gambling. He consistently disparages both fundamental and technical analyses (in essence, he derides non-efficient market theorists) as well as the idea of taking an active and responsive approach to investment. The reason I cannot give this book five stars is because I find his dismissal of investment as a legitimate hobby as opposed to a vehicle for growing a retirement fund somewhat repelling.
Many of the business and finance books that were released after the 2008-2009 crash have a similar thesis underlying their publication: that the rules of "Wall Street" and the stock market have changed; that there is a new normal. It is argued that average volatility in securities has spiked, and that the tenuous state of the market demands further research and attention, even by investors with simple 401(k)s or IRAs. Regardless of whether this is really the case, you will hear pundits on CNBC often talk about the importance of setting aside time to do homework so that one is not caught off-guard when an earnings miss takes a stock down 20%.
To me, it seems that Malkiel's suggestions are much too laissez-faire to inspire immediate credence and adoption by many investors. As more and more information becomes publicly available and discount brokerage firms abound, the trend is moving distinctively towards active investment. Why would someone want to hold a portfolio made up of mainly SPY shares, REITs, and maybe a couple corporate bonds and break even for the year 2011? There is far too much promise in tech, emerging markets, China, and niche industries to want to sit on the sidelines and occasionally watch one's portfolio fluctuate madly but remain more-or-less unchanged. This book is absolutely well-suited to the older, not-so-reckless individual with a retirement to plan for, but younger, hipper types who buy this book because they're interested in learning AND making money should heavily supplement (if not outright avoid) this title.
Note: This is a review of the 2007 edition of this book and was written at the time I was reading Joe Terranova's "Buy High Sell Higher."