“Random Walk Down Wall Street” is one of the most influential investing books, especially in the wake of the financial meltdown. Written by one of the greatest Princeton economists and professional investors - Burton Gordon Malkiel - this book remains the best investing manual money can buy. It tells you how to put together a broad portfolio of stocks and how to rate the potential of a stock, bond, money market fund, or other investment through sidestepping the experts.
The book not only provides helpful tips on stock market investments but also offers a step by step investment guide on how to best approach difficult financial scenarios. Throughout this book, Malkiel illustrates how to examine the potential returns, not only for bonds and stocks, but also for the full range of investment opportunities, from real estate investment trusts and money market accounts to homeownership, insurance, and tangible assets like gold and collectibles.
Key Take-Aways from "A Random Walk Down Wall Street"
- Making money in the stock markets is as not as difficult as they say.
- Emotions impact our investment decisions.
- Every stock has a certain value. Never pay more than it’s worth.
- Ultimately, the market finds true value.
- Investors often forget that history repeats itself.
- Investors should take advantage of tax-favored savings and investment plans.
Malkiel's core insights-on stocks, bonds and money markets, as well as property investment trusts and tangible assets – along with the book's life-cycle guide to investing, aims to restore confidence and composure to anyone seeking a calm route through today's financial markets. In short, the financial theory of “A Random Walk Down Wall Street,” concerns market status and fluctuation in prices.
Some Great Quotes from the Book:
- “Trust in time rather than timing.”
- “Never buy anything from someone who is out of breath.”
- “Put time on your side. Start saving early and save regularly. Live modestly and don't touch the money that's been set aside.”
- “It is not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored.”
- “The greatest of all gifts is the power to estimate
things at their true worth.”
- “Forecasts are difficult to make—particularly those about the future.”
- “I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and /or appreciation over the long term.”
- “There are four factors that create irrational market behavior: overconfidence, biased judgments, herd mentality, and loss aversion.”
- “Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one period are not likely to do so in the next. The record of professionals does not suggest that sufficient predictability exists in the stock market to produce exploitable arbitrage opportunities.”
Throughout the book, Burton G. Malkiel captivates the reader’s attention through various theories, gentle humor and an abundance of tables, statistics and charts. Also, with respect to use of jargons, the book is not too dense and microscopic; hence it can be enjoyed by investors of any age. Well-informed and brilliantly written – this quintessential book should be added to your must-read list today.