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A Random Walk Down Wall Street

Burton G. Malkiel

Why even professionals rarely beat the market, from tulip mania to the Internet bubble, and a practical plan of cheap index funds for every stage of life.

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16 parts, about 34 minutes to read.

Why read it

  • Test whether technical analysts, fundamental analysts or professional fund managers can beat the market, using decades of forecasts and fund results
  • Trace the tulip, South Sea, Internet and housing bubbles to see what crowd psychology does to prices
  • Follow a practical plan: index funds at the core, broad diversification, annual rebalancing and an asset mix that shifts with your age

Who it is for

  • Savers choosing between index funds and actively managed funds
  • Stock pickers who suspect their own trading costs them returns
  • People saving for retirement who need an asset mix for their age

What the summary covers

  1. Preface2 min
  2. Firm Foundations and Castles in the Air2 min
  3. The Madness of Crowds2 min
  4. Speculative Bubbles from the Sixties into the Nineties2 min
  5. The Explosive Bubbles of the Early 2000s2 min
  6. Technical and Fundamental Analysis3 min
  7. Technical Analysis and the Random Walk Theory2 min
  8. How Good Is Fundamental Analysis? The Efficient Market Hypothesis3 min
  9. A New Walking Shoe: Modern Portfolio Theory2 min
  10. Reaping Reward by Increasing Risk2 min
  11. Behavioral Finance2 min
  12. Is "Smart Beta" Really Smart?2 min
  13. A Fitness Manual for Random Walkers and Other Investors2 min
  14. Handicapping the Financial Race2 min
  15. A Life Cycle Guide to Investing2 min
  16. Three Giant Steps Down Wall Street2 min

Recommended by

  • Andrew TobiasFinancial writer and author
  • Andrew W. LoFinance professor at MIT
  • John KayEconomist

About the author

  • Burton G. MalkielPrinceton economist and former dean of the Yale School of Management
    • He was born in Boston, Massachusetts, on August 28, 1932.
    • He earned his bachelor's degree in 1953 and his MBA in 1955, both at Harvard.
    • He served as a first lieutenant in the United States Army from 1955 to 1958.
    • After a start in business he took a Princeton PhD in economics in 1964, with a dissertation on the structure of financial markets.
    • He is the Chemical Bank Chairman's Professor of Economics at Princeton and twice chaired its economics department.
    • He served on the Council of Economic Advisers from 1975 to 1977, led the American Finance Association in 1978, and was dean of the Yale School of Management from 1981 to 1988.
    • He spent 28 years as a director of the Vanguard Group, the index fund pioneer.
    • He is a leading proponent of the efficient market hypothesis and generally supports buying and holding index funds, the thesis of this book.

Read it alongside

  • Pushes backThe Intelligent Investor

    Burton Malkiel concludes that higher long run returns appear to come only from accepting greater risk, and that analysis is highly unlikely to beat the market. Benjamin Graham holds that return should depend on the intelligent effort an investor brings, and that risk often means paying too much for a stock.

  • Pushes backThe Simple Path to Wealth

    Burton Malkiel advises investing very aggressively in your twenties and shifting with age toward bonds, dividend growth stocks and REITs. JL Collins calls the rule of holding 100 minus your age in stocks nonsense, recommending all stocks while you are still accumulating and adding bonds once you stop working.

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