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A Random Walk Down Wall Street The Time-Tested Strategy for Successful Investing by Burton G. Malkiel - Book Review


Summary

Today's stock exchange isn't for the faint of heart. At a time of frightening volatility, what does a typical investor do?

The answer is Burton G. Malkiel's advice in his encouraging, authoritative, gimmick-free, and undying best-selling guide to investing. Long-established because the first book to get before starting a portfolio or 401(k), A stochastic process Down Wall Street now features new material on "tax-loss harvesting," the assets of tax management; the present bitcoin bubble; and automatic investment advisers; also as a brand-new chapter on factor investing and risk parity. And as expected, Malkiel's insights on stocks and bonds, real estates, homeownership, and tangible assets like gold, will help restore confidence and composure to anyone who seeks a relaxed route to financial markets. 

Updated with a replacement chapter that pulls on behavioral finance, the sector that studies investment decisions' psychology, here is the best-selling, authoritative, and gimmick-free guide to investing. This edition includes new techniques to rearrange your portfolio for retirement, alongside the book's classic life-cycle guide to investing, which matches any age group of investors. A Random Walk Down Wall Street established itself as a must-read, the introductory book to read before starting an investment portfolio. So whether you like to study the market before seeing a broker or following Malkiel's easy steps to managing your portfolio, this book is the best investing guide you can purchase.

Commentary

A book that gives a good impression and changes your mindset forever about how you should invest in the long run.

The first half of the book goes through the essence of index funds, then moves onto the current views of how people attempt to make money within the market, from the simple approaches to some bizarre ideas that other folks have. Malkiel goes through each of them, using mathematics and psychology to elucidate which does and which doesn't hold any water - and what probabilities are consistently producing returns that beat the market average.

The only downside (from my perspective) is that the book is aimed toward a US-centric audience, which suggests that it automatically rules out the larger part of the reading audience. However, I firmly believe there are enough useful chunks of well-worth buying data, even from the ECU and Aussie markets.

Much has already been saying about A Random Walk Down Wall Street, a classic tome that's now in its tenth edition. I picked up this book because it featured on the New York University Stern reading list and because it's the only definitive guide for non-professional investors.

As a crash course or primer on the world of finance and Wall Street, I might say that it does a good job. Malkiel covers most of his bases by running through a brief but substantive history of the stock exchange, outlining different investment strategies and schools of thought, and providing explicit, detailed advice to investors of various ages and risk-capacities. Someone who knows absolutely nothing about finance would easily be ready to pick this reserve and immediately access many of the most predominant and consequential aspects of the markets.

However, I have to mention that I find Malkiel's writing to be rife with an excessive amount of subjectivity and critique. Even within the early chapters, it's abundantly clear that he's a staunch proponent of the buy-and-hold method, which he believes active trading is a pastime best for those with a penchant for gambling. He consistently disparages both fundamental and technical analyses, also because of the idea of taking a positive and responsive approach to investment.

Many of the business and finance books released after the 2008-2009 crash have an identical thesis underlying their publication. The principles of Wall Street and the stock exchange have changed, and that there's a new normal. It's argued that average volatility in securities has spiked. The market's tenuous state demands further research and a spotlight, even by investors with simple 401(k)s or IRAs.

To me, it seems that Malkiel's suggestions are too laissez-faire to inspire prompt acceptance and adoption by many investors. As public information becomes widely available and discount brokerage firms abound, the trend is moving significantly towards active investment. Why would someone want to carry a portfolio made from mainly SPY shares, REITs, and perhaps a few corporate bonds and reach for 2011? There's far an excessive amount of promise in tech, emerging markets, China, and niche industries to take a seat on the sidelines and infrequently watch one's portfolio fluctuate madly but remain more-or-less unchanged.

I never thought I'd have the time and knowledge to be ready to beat the typical broker at the market, but I'd always thought there was more room to maneuver than this.

Index funds for me from now on!

Buy Now!

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