A Random Walk Down Wall Street: The Best Investment Guide That Money Can BuyPaperback (2024)

A Random Walk Down Wall Street: The Best Investment Guide That Money Can BuyPaperback (1)

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Description

“A must-read for any investor.”—Browser

One of the “few great investment books” (Andrew Tobias) ever written, with 2 million copies in print.

In a time of rampant misinformation about ways of growing your money, Burton G. Malkiel’s gimmick-free investment guide is more necessary than ever. Whether you’re considering your first 401k contribution or contemplating retirement, the fully updated, fiftieth anniversary edition of A Random Walk Down Wall Street remains the best investment guide money can buy.

Drawing on his experience as an economist, financial adviser, and successful investor, Malkiel shows why an individual who saves consistently over time and buys a diversified set of index funds can achieve above-average investment results. He addresses current investment fads and critically analyzes cryptocurrencies, NFTs, and meme stocks. Malkiel reveals how to be a tax smart investor and how to make sense of recently popular investment management techniques, including factor investing, risk parity, and ESG portfolios.

Investors of every age, experience level, and risk tolerance will find the step-by-step guidance they need to protect and grow their dollars.

Product Details

ISBN-13: 9781324035435

Media Type: Paperback

Publisher: W. W. Norton & Company

Publication Date: 01-02-2024

Pages: 480

About the Author

Burton G. Malkiel is the Chemical Bank Chairman’s Professor of Economics Emeritus at Princeton University. He is a former member of the president’s Council of Economic Advisers and dean of the Yale School of Management. He resides in New Jersey.

Table of Contents

Preface15
Acknowledgments from Earlier Editions19
Stocks and Their Value
Firm Foundations and Castles in the Air23
What Is a Random Walk?24
Investing as a Way of Life Today26
Investing in Theory28
The Firm-Foundation Theory28
The Castle-in-the-Air Theory30
How the Random Walk Is to Be Conducted33
The Madness of Crowds34
The Tulip-Bulb Craze35
The South Sea Bubble38
Wall Street Lays an Egg44
An Afterword51
Stock Valuation from the Sixties through the Nineties52
The Sanity of Institutions52
The Soaring Sixties53
The New "New Era": The Growth-Stock/New-Issue Craze53
Synergy Generates Energy: The Conglomerate Boom56
Performance Comes to the Market: The Bubble in Concept Stocks63
The Sour Seventies66
The Nifty Fifty66
The Roaring Eighties68
The Triumphant Return of New Issues68
Concepts Conquer Again: The Biotechnology Bubble70
ZZZZ Best Bubble of All71
What Does It All Mean?73
The Nervy Nineties74
The Japanese Yen for Land and Stocks74
The Biggest Bubble of All: Surfing on the Internet78
How Bubbles Arise78
A Broad-Scale High-Tech Bubble80
An Unprecedented New-Issue Craze82
TheGlobe.com84
Security Analysts {dollar}peak Up86
New Valuation Metrics87
The Writes of the Media89
Fraud Slithers In and Strangles the Market92
Should We Have Known the Dangers?94
A Final Word96
How the Pros Play the Biggest Game in Town
Technical and Fundamental Analysis99
Technical versus Fundamental Analysis100
What Can Charts Tell You?102
The Rationale for the Charting Method105
Why Might Charting Fail to Work?107
From Chartist to Technician108
The Technique of Fundamental Analysis109
Three Important Caveats117
Why Might Fundamental Analysis Fail to Work?120
Using Fundamental and Technical Analysis Together121
Technical Analysis and the Random-Walk Theory 126
Holes in Their Shoes and Ambiguity in Their Forecasts126
Is There Momentum in the Stock Market?128
Just What Exactly Is a Random Walk?129
Some More Elaborate Technical Systems133
The Filter System133
The Dow Theory134
The Relative-Strength System134
Price-Volume Systems135
Reading Chart Patterns135
Randomness Is Hard to Accept136
A Gaggle of Other Technical Theories to Help You Lose Money138
The Hemline Indicator138
The Super Bowl Indicator140
The Odd-Lot Theory140
A Few More Systems141
Technical Market Gurus142
Why Are Technicians Still Hired?144
Appraising the Counterattack145
Implications for Investors148
How Good Is Fundamental Analysis?150
The Views from Wall Street and Academia151
Are Security Analysts Fundamentally Clairvoyant?152
Why the Crystal Ball Is Clouded155
The Influence of Random Events156
The Production of Dubious Reported Earnings through "Creative" Accounting Procedures 156
The Basic Incompetence of Many of the Analysts Themselves159
The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds160
The Conflicts of Interest between Research and Investment Banking Departments161
Do Security Analysts Pick Winners?-The Performance of the Mutual Funds164
Can Any Fundamental System Pick Winners?170
The Verdict on Market Timing171
The Semi-strong and Strong Forms of the Efficient-Market Theory172
The Middle of the Road: A Personal Viewpoint174
The New Investment Technology
A New Walking Shoe: Modern Portfolio Theory179
The Role of Risk180
Defining Risk: The Dispersion of Returns181
Illustration: Expected Return and Variance Measures of Reward and Risk181
Documenting Risk: A Long-Run Study184
Reducing Risk: Modern Portfolio Theory (MPT)186
Diversification in Practice190
Reaping Reward by Increasing Risk197
Beta and Systematic Risk198
The Capital-Asset Pricing Model (CAPM)201
Let's Look at the Record206
An Appraisal of the Evidence209
The Quant Quest for Better Measures of Risk: Arbitrage Pricing Theory211
A Summing Up214
Behavioral Finance216
The Irrational Behavior of Individual Investors219
Overconfidence219
Biased Judgments222
Herding225
Loss Aversion229
The Limits to Arbitrage233
What Are the Lessons for Investors from Behavioral Finance?237
Avoid Herd Behavior238
Avoid Overtrading240
If You Do Trade: Sell Losers, Not Winners241
Other Stupid Investor Tricks242
Does Behavioral Finance Teach Ways to Beat the Market?243
Potshots at the Efficient-Market Theory and Why They Miss244
What Do We Mean by Saying Markets Are Efficient?246
Potshots That Completely Miss the Target247
Dogs of the Dow247
January Effect248
"Thank God It's Monday Afternoon" Pattern249
Hot News Response249
Why the Aim Is So Bad250
Potshots That Get Close but Still Miss the Target251
The Trend Is Your Mend (Otherwise Known as Short-Term Momentum) 251 The Dividend Jackpot Approach253
The Initial P/E Predictor255
The "Back We Go Again" Strategy (Otherwise Known as Long-Run Return Reversals)256
The "Smaller Is Better" Effect259
The "Value Will Win" Record261
Stacks with Low Price-Earnings Multiples Outperform Those with High Multiples262
Stocks That Sell at Low Multiples of Their Book Values Tend to Produce Higher Subsequent Returns263
But Does "Value" Really Trump Growth on a Consistent Basis?264
Why Even Close Shots Miss265
And the Winner Is...267
The Performance of Professional Investors267
A Summing Up271
A Practical Guide for Random Walkers and Other Investors
A Fitness Manual for Random Walkers277
Gather the Necessary Supplies278
Don't Be Caught Empty-Handed: Cover Yourself with Cash Resources and Insurance280
Cash Reserves280
Insurance280
Deferred Variable Annuities282
Be Competitive-Let the Yield on Your Cash
Reserve Keep Pace with Inflation283
Money-Market Mutual Funds283
Bank Certificates of Deposit (CDs)283
Internet Banks284
Treasury Bills285
Tax-Exempt Money-Market Funds285
Learn How to Dodge the Tax Collector286
Individual Retirement Accounts286
Roth IRAs288
Pension Plans289
Saving for College: As Easy as 529290
Make Sure the Shoe Fits: Understand Your Investment Objectives291
Begin Your Walk at Your Own Home-Renting Leads to Flabby Investment Muscles298
Investigate a Promenade through Bond Country300
Zero-Coupon Bonds Can Generate Large Future Returns301
No-Load Bond Funds Are Appropriate Vehicles for Individual Investors302
Tax-Exempt Bonds Are Useful for High-Bracket Investors302
Hot Tips: Inflation-Indexed Bonds304
Should You Be a Bond-Market Junkie?305
Tiptoe through the Fields of Gold, Collectibles, and Other Investments306
Remember That Commission Costs Are Not Random; Some Are Cheaper than Others308
Avoid Sinkholes and Stumbling Blocks: Diversify Your Investment Steps309
A Final Checkup310
Handicapping the Financial Race: A Primer in Understanding and Projecting Returns from Stocks and Bonds312
What Determines the Returns from Stocks and Bonds?312
Three Eras of Financial Market Returns 316
The Age of Comfort317
The Age of Angst319
The Age of Exuberance323
The Age of the Millennium325
A Life-Cycle Guide to Investing329
Five Asset-Allocation Principles330
Risk and Reward Are Related330
Your Actual Risk in Stock and Bond Investing Depends on the Length of Time You Hold Your Investment331
Dollar-Cost Averaging Can Reduce the Risks of Investing in Stocks and Bonds334
Rebalancing Can Reduce Investment Risk and Possibly Increase Returns338
Distinguishing between Your Attitude toward and Your Capacity for Risk340
Three Guidelines to Tailoring a Life-Cycle Investment Plan342
Specific Needs Require Dedicated Specific Assets342
Recognize Your Tolerance for Risk343
Persistent Saving in Regular Amounts, No Matter How Small, Pays Off343
The Life-Cycle Investment Guide345
Life-Cycle Funds348
Investment Management Once You Have Retired349
Inadequate Preparation for Retirement349
Investing a Retirement Nest Egg350
Annuities351
The Do-It-Yourself Method 354
Three Giant Steps Down Wall Street357
The No-Brainer Step: Investing in Index Funds358
The Index-Fund Solution: A Summary360
A Broader Definition of Indexing363
A Specific Index-Fund Portfolio366
ETFs and the Tax-Managed Index Fund367
The Do-It-Yourself Step: Potentially Useful Stock-Picking Rules369
Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years370
Never pay more for a stock than can reasonably be justified by a firm foundation of value370
It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air371
Trade as little as possible372
The Substitute-Player Step: Hiring a Professional Wall Street Walker373
The Morningstar Mutual-Fund Information Service375
A Primer on Mutual-Fund Costs376
Loading Fees377
Expense Charges377
Turnover Costs378
The 50-50 Rule379
The Malkiel Step379
A Paradox383
Some Last Reflections on Our Walk384
Supplement: How Pork Bellies Acquired an Ivy League Suit: A Primer on Derivatives387
Appendix to Supplement: What Determines Prices in the Futures and Options Markets?420
A Random Walker's Address Book and Reference Guide to Mutual Funds427
Index437Show More

A Random Walk Down Wall Street: The Best Investment Guide That Money Can BuyPaperback (2024)

FAQs

Is A Random Walk Down Wall Street worth it? ›

The investment philosophy set out in A Random Walk Down Wall Street, by the Princeton University economist Burton Malkiel, is very much in tune with our own at rockwealth, and if you want to deepen their knowledge of investing and the financial markets, it's a book we highly recommend you read.

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What is the main argument of A Random Walk Down Wall Street? ›

Malkiel argues that asset prices typically exhibit signs of a random walk, and thus one cannot consistently outperform market averages. The book is frequently cited by those in favor of the efficient-market hypothesis.

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What is the random walk down Wall Street theory? ›

Random walk theory argues that since stock prices move at random, there is no way to correctly predict entry and exit points. Attempting to time a specific stock's movement creates risk disproportionate to any given reward, meaning that a market timing strategy will tend to lose money over time.

What is the summary of a random walk through Wall Street? ›

Overall, “A Random Walk Down Wall Street” challenges the conventional wisdom of active stock picking and market timing, advocating for a passive investment approach. Malkiel provides readers with a wealth of information on financial markets, investment instruments, and investment strategies.

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Do people on Wall Street make a lot of money? ›

Entry-level investment banking associates do pretty well for themselves, often receiving salaries of $100,000 or more in their first year. Within four to five years, seasoned investment bankers rising through the ranks can easily earn $175,000 to $225,000.

Find Out More ›

What is the number one rule of Wall Street? ›

Mark Hanna : Number one rule of Wall Street. Nobody - and I don't care if you're Warren Buffet or if you're Jimmy Buffet - nobody knows if a stock is going to go up, down, sideways or in circles.

Tell Me More ›

What are the pros and cons of the random walk theory? ›

The advantages of the random walk model in calculating the effective diffusion coefficient include its ability to model anomalous diffusion and its simplicity. However, a disadvantage is that it may not accurately capture all aspects of the diffusion process.

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What is the Wall Street rule? ›

Wall Street rule is a rule that was passed to ensure that shareholders cannot control activities in corporate organizations. Further, the rule also states that the company's insurance does not protect individual investors and shareholders.

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What is the random walk theory? ›

Random walk theory states that stock prices are random, so that past movement or trend of a stock price or market cannot be used to predict its future movement. Random walk theory implies that it's impossible to beat the market without assuming additional risk.

Are stock prices random walk? ›

The random walk theory maintains that individual stocks do not move in any discernible pattern. Therefore, their short-term future movements cannot be predicted in advance.

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Is the stock market truly random? ›

It depends on whom you ask. There has long been discussion over whether the markets are random or cyclical. Each side claims to have evidence to prove the other wrong. Random walk proponents believe the markets follow an efficient path where no form of analysis can provide a statistical edge.

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Is random walk theory true? ›

So far, empirical data shows strong support for the random walk hypothesis. The random walk hypothesis states that stock price changes are random and are thus cannot be predicted based on past information. The repetitive patterns in the stock market are statistical illusions rather than true patterns.

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What is the point of random walk? ›

random walk, in probability theory, a process for determining the probable location of a point subject to random motions, given the probabilities (the same at each step) of moving some distance in some direction. Random walks are an example of Markov processes, in which future behaviour is independent of past history.

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What is the random walk model for dummies? ›

In each time period, going from left to right, the value of the variable takes an independent random step up or down, a so-called random walk. If up and down movements are equally likely at each intersection, then every possible left-to-right path through the grid is equally likely a priori.

Why is it called the random walk? ›

The random walk theory, as applied to trading, most clearly laid out by Burton Malkiel, an economics professor at Princeton University, posits that the price of securities moves randomly (hence the name of the theory) and that, therefore, any attempt to predict future price movement, either through fundamental or ...