A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

Excellent book on stock market investing

<i>A Random Walk Down Wall Street</i> centres around the Efficient Market Hypothesis (EMH) which states that individual investors can not use past information (e.g. SEC reports, CEO interviews, and economic forecasts) to profit from trading stocks since these facts (and perhaps opinions) have already impacted the stocks' prices.Based on economic theories on the EMH, the author argues that individual investors should invest in balanced index funds to try to replicate the market return -- the best scenario for any investor with an average amount of luck. He denounces active mutual funds as a waste of money since their high management expense ratios (MER) are not compensated by superior returns when compared to the index funds. He also provides other useful ideas to investors including introducing the idea that one's willingness to take risks should depend on one's future earnings potential.This book is one of my favourite books on investing because of its highly practical advice backed by strong economic foundations. Fortunately, it has become extremely easy to follow his strategy given the wide availability of ETFs and relatively low trading fees for the average retail investor.

I am fairly scientific but this book shows me how anyone (myself included) sees trends where in fact there are none.Some of the stuff is US specific but this book is highly worthwhile for any investor.THIS BOOK WILL COST YOU MUCH LESS THAN YOUR FINANCIAL ADVISER!

This is the updated and expanded 9th edition of a classic investment book that everyone should read once. Although the topics visited are rather extensive, Dr. Malkiel has a very fluid writing style and reading is easy.Dr. Malkiel believes in a weak form of efficient market hypothesis in that although there might be inefficiencies at times, consistently finding and taking advantage of these are rather difficult after expenses and taxes even for professional money managers and many fail and ruin their investment in the pursuit of beating the market on the long term. Dr. Malkiel suggested investing in broad market (i.e. index fund) in the first edition before first "retail" index fund became available from Vanguard.The book begins with a brief review of two valuation models: firm foundation valuation and castles in the air valuation. The next couple of chapters are about market manias and bubbles from ancient times to most recent dot com bubble and points to valuation changes and irrational investor behavior. I think every investor could take home something from this review. Those that do not know the history is bound to make the same costly mistakes.Dr. Malkiel than examines technical analysis and fundemental analysis and market timing strategies and their shortcomings. He associates the technical analysis to astrology and how different securities analyts/researchers using the same fundemental anaysis end up with completely different valuations.The new chapter on behavioral finance is a must read review of irrational investor behavior and show how investors could be their own worst enemy.Rest of the book is a useful review of how an investor could construct a reliable portfolio considering risk, diversification and investment products such as individual stocks, mutual funds etc. Several model asset allocations are also available. While I found this section useful, for an investor looking for more specific guidance on portfolio construction, I would like to point to another book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio (Hardcover), for futher reading.Other investment books I recommend:The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Hardcover)Capital Ideas: The Improbable Origins of Modern Wall Street (Paperback)

Wer immer noch glaubt, er könne mit Hilfe von Chart-Technik, Analyse von Kursverläufen oder Fundamental-Analyse die Aktien herauspicken, die zuverlässig besser laufen werden als der Index, wird von Malkiel humorvoll eines besseren belehrt. In 50 Jahren Wall-Street Geschichte lässt Malkiel die endlose Abfolge der BörsenHypes Revue passieren - und das mit viel Humor. Sehr leicht lesbar und gut verständlich erklärt er, warum all die Techniken der Analsysten und Börsen-Journalisten nicht zuverlässig funktionieren können. Letztendlich verliert man nur viel Geld, indem man aktive Anlagestrategien verfolgt. Die Lösung laut Malkiel: Passives Investieren. Er beweist, warum das Setzen auf den Index mehr bringt als all die aktiven Strategien, die nicht mehr produzieren als gelegentliche Zufallstreffer. Fazit: Sehr empfehlenswerte Literatur für alle, die auf lange Sicht Geld an der Börse verdienen wollen. Ungeeignet für alle, die ein "get-rich-quick"-Buch suchen.

To clear up what some readers misconceive, I found the author's summary at the end of Ch. 4 helpful: "Probably more so than any other chapter in the book, this review of the Internet [sic] bubble seems inconsistent with the view that the stock market is rational and efficient. The lesson from this chapter, it seems to me, is not that markets occasionally can be irrational and, therefore, that we should abandon the firm-foundation theory. Rather, . . . in every case, the market did correct itself. The market eventually corrects any irrationality . . . ." So in short, Malkiel acknowledges the market temporarily becomes irrational but eventually corrects such irrationality; thus, the market eventually acts rational.In my view, even if the market eventually acts rational, the market acts inefficiently as Malkiel admits: "markets occasionally can be irrational." As Malkiel points out, the market acted irrationally for years by over valuing internet stocks during the late 1990's. A market that fails to rationally value companies for years acts inefficiently.So far, I like the book and take away its points. However, that does not mean I changed my thinking. As I pointed out in the example above, Malkiel's points strengthen by view: at times, the markets act irrational. Because at times, the markets acts irrationally, the market is inefficient. Because the market is inefficient, investors who understand the inefficiency can consistently produce a return greater than the market. Read the Market Wizard series where Jack Schwager interviews investors who have done so.