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A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing Hardcover – Illustrated, January 1, 2019
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― Los Angeles Times
"Imagine getting a week-long lesson on investing from someone with the common sense of Benjamin Franklin, the academic and institutional knowledge of Milton Friedman and the practical experience of Warren Buffett. That’s about what awaits you in the latest edition of this must-read by Burton Malkiel."
"Not more than half a dozen really good books about investing have been written in the past fifty years. This one may well belong in the classics category."
"If one of your New Year’s resolutions is to improve your personal finances, here’s a suggestion: Instead of picking up one of the scores of new works flooding into bookstores, reread an old one: A Random Walk Down Wall Street."
― New York Times
"An engagingly written and wonderfully argued tome."
"A useful introduction to investing with lots of common-sense advice."
― Wall Street Journal
About the Author
- Publisher : W. W. Norton & Company; Twelfth edition (January 1, 2019)
- Language : English
- Hardcover : 432 pages
- ISBN-10 : 1324002182
- ISBN-13 : 978-1324002185
- Item Weight : 1.48 pounds
- Dimensions : 6.4 x 1.5 x 9.6 inches
- Best Sellers Rank: #26,620 in Books (See Top 100 in Books)
- Customer Reviews:
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Burton Malkiel gives a very broad overview of how our securities markets are structured, how they operates, and how we interact with them. This includes a history lesson in bubbles, booms, busts, depressions, recessions, and rallies from the Tulip craze to today's time. Malkiel covers everything from stocks to bonds to mutual funds and more. There's chapters on charting, modern portfolio theory, and CAPM. Although this book is meant to be an overview, there is a lot ... and, I mean ~a lot~ ... of information here. The text reads like a professor at a university trying to give an interesting lecture or presentation. Some of the chapters, like the history of market swings, I found interesting to read because I like history in general - the whole how and why of events and their influence on how we got to day.I also enjoyed the chapters on investing behavior and psychology. Other chapters, like on charting, beta, and government backed bonds did not captivate me much. The information was sometimes too technical in nature and sounded like a bunch of hooey to me or just didn't apply to my personal investing strategy.
The whole text can be boiled down to a few key concepts.
First, the market is irrational and unpredictable. Don't try too hard to outsmart it or time it just right. The blips and dips in security prices, random world events like terrorist attacks or government scandals, and unjustified exuberance or pessimism are too much for anyone or anything to take on. You won't win. You may get lucky and think you won but you could have just as easily lost. Hence, the random walk.
Two, despite all that dreck in #1 above, investing in the stock market still beats out any other investment in the long run. Buy, *hold*, **add**, and repeat. Don't fall prey to jittery emotions or the whims and wiles of "professional" investors with messages of doom and gloom. Like Warren Buffett said, the best holding time is forever.
Three, picking a winning stock is not easy. Suppose you are a young investor with a small sum of money like $5k. How will you invest it? Do you feel confident in picking a stock or two? Will your picks beat the market average? Maybe, if you pick right under the right conditions. However, the best way to invest in the market would be through an index fund that reflects the very market you want to invest in. The index fund, either as an ETF or Mutual Fund, will contain a little of everything that reflects the index it is benchmarked against. The SPY will follow the S&P, DIA will follow the Dow Jones, QQQ will track the Nasdaq 100. So, why risk picking one or two stocks when you can kind of have them all?
Four, diversify your diversification. The index funds diversify your money among many securities. You can go further and diversify by investing in international funds. The idea is some international funds can outperform US funds. They can also "zig" when the US funds "zag".
Five, and lastly, skip the services of a professional advisor. He's no genie or wizard. You can do just as well as he can if not better.
I agree with 1, 2, and 5 above but I disagree somewhat with 3 and 4.
Regarding 3, you ought to be able to open up any index fund and see exactly what it is holding and how much. For example, if you want to know what SOXX is holding then go to the iShares website and look at it. It's all there. Rather than buying SOXX I can skip the middleman and his approximately 0.5% fee and just buy those securities ... or, at least the top 10. Many brokerage firms, like Fidelity, offer fractional trading down to 0.001 shares as long as the resulting purchase price is at least $0.01. Now, that means you ought to put in some work and learn how to follow a stock. At least you have a starting point.
Going further, assume you rolled over a pension or 401(k) into a traditional and/or a Roth IRA. You may find yourself with a large sum of money, like $100k or more. With money like that you can build up a serious version of your own equivalent of an index fund with anywhere from 20 to 80 securities.
Now, I will counter myself and repeat what I said above. This will involve quite a bit of work over a long period of time. You have companies to keep track of and all that. It can become like a second job, In that case, maybe a simple all-in-one index fund is all you need.
Regarding 4, I think you ought to use some of the advanced charting tools or total returns calculators available from your broker or somewhere else online to compare how US securities performed compared to international securities. Compare some of the US best like QQQ, SPY, SOXX, and IGV to country specific funds that focus on New Zealand, China, and Russia. If you see these international funds outperformed their US counterparts then you have a starting point for a case for international diversification. Personally, I didn't see it. I saw the US centric ETFs and securities far outperform a majority of international funds. Diversification here wouldn't make sense. Why would I split money between two markets, one that can grow >8% per year over 10 years and one that can grow ~4% per year over 10 years? I'd rather pour everything that I can into the highest performing instrument available. If something better comes around after a couple of years then I divest one and buy the other. Or, even better, buy more of the depressed security knowing that it will rebound.
So, while I don't agree with everything Malkiel says it did provoke a lot of thought in my mind and for that I give it 5 stars.
I work in education, not finance, and I believe it was David Ausubel who wrote that the single most important thing you can do when teaching someone is to anchor new content on the learner's existing knowledge/framework. This book is pretty helpful in that regard. It's more of an introduction to financial markets, but not so basic as to be something you could easily learn from online articles like those on Investopedia (which a great site, but this book is better organized and more cohesive).
So, in short: maybe start with this book, then take Shiller's course, and move on to actual finance textbooks if you're inclined to go deeper. Or, if you just want a casual, future retiree's introduction to financial markets and investing, this book will help plenty.
I highly recommend this book to anyone interested in saving and investing for a comfortable retirement.
By Jay M on July 14, 2020