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A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Ninth Edition) Hardcover – January 17, 2007
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Chapter 1: Firm Foundations and Castles in the Air
The book starts off by defining two basic investment ideologies, the firm foundation theory and the "castle in the air" theory. The firm foundation theory basically says that you should invest based on the actual real value of what you're investing in; for example, if you buy a stock of Coke, it should be based on what the value of the Coca-Cola Corporation is. The "castle in the air" theory basically says that you should invest in response to what the crowds are doing and that you can make more money by riding the waves of people who are either following trends or trying to invest based on a firm foundation. Which one is right? The truth is that they both are, but at different times.
Chapter 2: The Madness of Crowds
This chapter is quite entertaining: it discusses financial "crazes" throughout history, including my personal favorite craze of all, tulipomania. In all three examples (tulipomania, the South Sea bubble, and the Wall Street crash of 1929), a market grew like gangbusters until everything was overvalued, then the values rapidly returned to normal.Read more ›
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.
* "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).Read more ›
Most Recent Customer Reviews
A great beginner book for any investor. This and "the four pillars of investing" are two books to get.Published 9 days ago by Vincent
Well written and easy to read. Very informative for someone with little background in personal financial management.Published 19 days ago by Dan P.
Really good read. Something to hold on for life and read multiple times.Published 1 month ago by PK
Offers a quick study for a confident investing for a neophyte. The investment vocabulary is at my level of comprehension.Published 1 month ago by Sharron Sorensen
Every promise was delivered. .. Truly Satisfied! Thank you!Published 2 months ago by Amazon Customer
It was meant to be pristine, but it was not. Still, an OK quality. Approved!Published 2 months ago by alessandro vaglio pret