- Paperback: 464 pages
- Publisher: W. W. Norton & Company; 8 edition (January 1, 2003)
- Language: English
- ISBN-10: 0393325350
- ISBN-13: 978-0393325355
- Product Dimensions: 5.5 x 1.2 x 8.2 inches
- Shipping Weight: 1 pounds
- Average Customer Review: 795 customer reviews
- Amazon Best Sellers Rank: #578,012 in Books (See Top 100 in Books)
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A Random Walk Down Wall Street: Completely Revised and Updated Edition Paperback – January 1, 2003
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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.
From Library Journal
This revision of a classic takes the dot-com implosion into account.
Copyright 2002 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.
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Top customer reviews
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I have long ago realized that though I am interested in the workings of the market, I am not going to delve to the minutiae of companies and different trades and try to be smarter than someone else on the other side who thinks he’s doing the same thing. Nope. Malkiel and Bogle figured out a way I could get away with making the most return possible with the least effort possible - indexing.
Basically this book is a defense of the efficient market hypotheses, or at least part of it. As I understand it, there are two parts to the EMF. One is that the price is always right. So that there’s no such thing as a bubble ever because all the valuations of the market price of securities are representative of their underlying value. The other part is that there’s no free lunch. Or basically arbitrage opportunities may exist, but they are not predictable nor do they persist. I think that the second part is more true than the first, and that’s what this book really digs into, showing you that there are no persistent ways to beat the market. If that’s true, then the best way to consistently make money is to just buy the market. Thankfully there are financial instruments that make that possible - and they’re where I have my money. Cards on the table, this book is just a giant exercise in confirmation bias for me, but it is confirmation bias well done in clear writing with a well-organized structure. I read this burning through the pages on a long holiday weekend, and I wanted to send it to my parents. I thought again about that. It might be too late for them since I don’t know their financial positions. Maybe I’ll send it to my siblings.
A final note, though. Even though Malkiel shows convincingly that there is no way to beat the the market, there is an odd paradox. For the market to work, it needs people out there who think that they can beat the market. Even if the best strategy is to buy and hold a low cost index fund, if everyone did that liquidity and price discovery would drop. What someone following Malkiel needs is people who think he is wrong and that they can generate “alpha” (returns above the market). This goes against the second part of the EMF, where arbitrage opportunities can’t exist because if you have a way to beat the market, then everyone has a way to beat the market and then once everyone is in, no one has a way to beat the market.
I do have one major area of disagreement. In my experience, most investors need the advice and counsel of an investment professional. We all need someone to check our egos, challenge our assumptions, and to be a voice of reason that fights the emotions of fear and greed that can consume us at market tops and market bottoms and cause us to make bad decisions. Maybe it is a fee only adviser, maybe it is a low fee money manager that uses an index fund, MPT, random walk approach. I understand that several of the discounters are testing such services.
So, read this book, then take notes and apply its lessons to your portfolio. If you don't understand parts of it, then educate yourself.
Also a must: Swedroe and Bernstein. Get them. Then get online to the "Bogleheads forum".
A must for personal investment finance for retirees and those working toward a healthy retirement.
Most recent customer reviews
Will bring your head out of the clouds.