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

I started with the hardbound version of this book from my local library and finished with the softcover cover version from Amazon.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.

It is written in lay terms and will definitely walk you through investment principles in a clear way. I bought it to complement the books by John Bogle.

One of the best book to read ..once your invested into the stock market…-planning on reading over and over again

This is a great book to start out on learning personal finance but it being that it tries to create itself as a one stop shop for everything personal finance i believe the writing style is good but i hold criticism in that I believe some of the points were stretched out and you had to get to the end of the book to taste the preferable sweet nectar. I liked some of the stories and there anecdotes but not all were 10/10 to me.If I had to summarize the book into chapters or points if i was to read again i would skip to these points.-The tulip bulb craze-The internet bubble-The crash of the Japanese Housing market-The crash of the U.S Housing market-Modern portfolio theory-The Random walk/Efficient Market theory-Risk /Risk Management-Bonds-The ZZZ bubble

A fairly long (and technical) read - but worth it. Primarily, the message is that individual stock picking and actively managed funds can not beat the market; regardless of whether one uses technical analysis or fundamental analysis. This message might be hard to accept; however, many of the principles covered can still be applied to one’s unique perspective. I was really impressed with the detailed evaluation of all of the competing investment models and strategies; developed over several decades. In addition, the book does a great job of exploring tax strategies, risk models, market psychology, diversification, portfolio rebalancing and the benefits of dollar cost averaging. This book packs in an amazing amount of detail that is extremely informative. Burton’s main advice is to buy ETFs and broad-based Market Index Funds and hold them for the long term. I recommend this book to well read, young adults, who have time on their side.

The reputation of this being one of the "classics" in investment "how to" books is well deserved. This is a great premise for D.I.Y. investors (and it's safe to assume that the "has it done" crowd will not be reading this book anyway and is not concerned with fees eating into their returns). Most importantly, Malkiel is an engaging, articulate writer. If this was difficult to read, very few would get through it, and what good would that be?The chapter on the history of market bubbles is a joy to read. Granted, there is some very technical analysis in Part II but it's worth it (do your homework!). Part III picks up the pace with modern portfolio theory, risk and behavioral finance. Part Four is about execution and easy to follow. The chapter on asset allocation is illuminating. An often overlooked factor in a lot of the financial press.If you are an active trader, or saddled with a mutual funds that generate taxes and eat returns via fees, I highly recommend this book. If you are already in the index & asset allocation camp I think there's still a lot to get out of this book.