A Random Walk Down Wall Street
By Burton Malkiel
Published in 1973, Revised in 2014
Thibault’s Score: 5/5
A Random Walk Down Wall Street is by far the best personal finance book that I have read so far.
This book lays out the strategy of stock market indexing.
When originally published in 1973, there were no Index Funds available on the stock market. Three years after this book was published, the first Index Funds were launched. Now, they are widely available and play a major role in many portfolios.
The basic premise of the Index Fund strategy is that markets are efficient, random, and hard to predict. Furthermore, markets tend to grow over time. As a result, one is almost always better off betting on the market as whole as opposed to betting on specific companies.
The best way to do this is to invest a small amount in every company in the S&P 500, or an Index Fund. This doesn’t mean that there is no nuance - you can invest in top quartile companies, and weed out the bad ones. You just don’t choose the winners. You can also skew somewhat more heavily towards one industry / geography or another.
This strategy can be used by small time retail investors as well as institutional investment funds; it scales really well.
I personally really like the “random walk” approach. I agree with the assumptions, like the fact that it doesn’t require much work / effort, and like how it balances risk with reward. I personally plan on using this strategy.
The book itself is written in a witty and easily understandable way. I recommend it highly to anyone who wants to learn more about finance.
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