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A Random Walk Down Wall Street

3.91 of 5 stars 3.91 · rating details · 4,029 ratings · 214 reviews

Using the dot-com crash as an object lesson in how not to manage your portfolio, here is the best-selling, gimmick-free, irreverent, vastly informative guide to navigating the turbulence of the market and managing investments with confidence.

A Random Walk Down Wall Street is well established as a staple of the business shelf, the first book any investor should read before...more

Paperback, Revised, 464 pages

Published January 17th 2004 by W. W. Norton & Company (first published 1973)

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Apr 02, 2009 Scott rated it 5 of 5 stars · review of another edition

Shelves: 2000s, money

Malkiel's been writing and rewriting this classic tome on investing for the last thirty-five years. I gave him 5 stars for being fully engaged in the process of revision. Sometimes I wish all authors would write (and rewrite) just one good book (and that actors would star in only one movie). But that's like asking investors to put their money in just a few low-cost funds and hold it there for decades ... hey, that's what Malkiel's talking about! So it's not the most exciting approach to investin...more Malkiel's been writing and rewriting this classic tome on investing for the last thirty-five years. I gave him 5 stars for being fully engaged in the process of revision. Sometimes I wish all authors would write (and rewrite) just one good book (and that actors would star in only one movie). But that's like asking investors to put their money in just a few low-cost funds and hold it there for decades ... hey, that's what Malkiel's talking about! So it's not the most exciting approach to investing; but it will, in the long run, turn out to be the most rewarding.

This newly rewritten version of Malkiel's classic Random Walk ... (first published in 1973 but essentially rewritten at least four or five times since) argues that the best way to make money on Wall Street is to build a diversified portfolio of index funds (some small caps, large caps, emerging economies, REITs, and bonds) and hold on to them for a long, long time in a tax advantaged account. He advises you how to adjust your asset allocation according to your age or point in life, and he even allows you to pick a few stocks for minor investments just for fun and to help you stay interested in the market.

Preliminary chapters recount bubbles past (where would historical economics be without 17th-century Holland's fascination with tulips?). The middle sections debunk dubious investment strategies based in everything from hemlines to super bowls and stresses the importance of sheer, random luck in choosing profitable stocks. Part Three looks at modern investment theories (if you don't have a background in economics, you might want to skim some of this part). The final section details Malkiel's guide to personal finance and investing.

If you are curious about how men and women have invested their money over the past 500 years, or how common investment strategies work (and don't work in the long run), or how to make the most of your investments over decades, Malkiel's Random Walk ... will prove to be an engaging, even entertaining read that like most classics can hold up to many re-readings. You certainly won't get rich quick following Malkiel's advice, but you probably will find yourself in a fairly stable financial state in twenty or thirty years.(less)

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Jan 21, 2008 Todd rated it 5 of 5 stars · review of another edition

Shelves: finance

From talking to friends and reading an internal financial mailing list at work I got the vague impression that this book was somehow too esoteric or controversial to bother with. I am very glad that I decided to read this book.

It's hard to work in Silicon Valley without being affected by Wall Street. When I started working I was interested in technology, not business and finance. Business and finance seemed a bit beneath me. (Actually, technology seemed a bit beneath me too. I was kind of a snot...more

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Jan 07, 2009 Tom rated it 5 of 5 stars · review of another edition

This review has been hidden because it contains spoilers. To view it, click here.

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Jan 08, 2013 Lynn rated it 4 of 5 stars

Probably the most useful book about money that I have read. One of those things you think you know about (yeah yeah the random walk blah blah. . . ) And more amusing than most also.

Scanning some of the reviews I deduce that people like this book if they believe in index investing and don't if they don't. I feel Malkiel's argument is very convincing partly because he demystifies a lot of what financial professionals do. For example, I have always wondered, when they tell you "if you do this you c...more

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Nov 02, 2012 Cory rated it 4 of 5 stars

Picked this up along with a few other books in order to develop a roadmap for personal finances.

It's definitely comprehensive and interesting but reads a lot like "Stocks for Dummies." Still, I learned a ton and Malkiel's writing style keeps things relatively fresh. I hate skipping chapters so I bit the bullet and read the whole thing, but to really get the full value out of this book and not waste any time you can easily pick and choose which chapters you think apply to you. It's worth buying f...more

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Apr 15, 2012 Jack rated it 1 of 5 stars

Many years ago I bought this book about the stock market. In retrospect, it is the worst book I've ever bought because it made me believe in efficient capital markets. The author made his point with a lot of arrogance - just like finance professors did 15-20 years ago. At the time the markets very certainly not as efficient as the author believed. There have been several updates to the book, but the condescending voice of the author remains.

For the statistically interested, the problem with a lo...more Many years ago I bought this book about the stock market. In retrospect, it is the worst book I've ever bought because it made me believe in efficient capital markets. The author made his point with a lot of arrogance - just like finance professors did 15-20 years ago. At the time the markets very certainly not as efficient as the author believed. There have been several updates to the book, but the condescending voice of the author remains.

For the statistically interested, the problem with a lot of old finance (and also not so old) research was that it was testing the theory that the market was efficient. That is poor philosophy of science. You should always test the opposite of what your theory stipulates. If you can reject the opposite, your theory is as supported as it can be (standard Popper). The finance profession in their ignorance of philosophy of science tested it the other way around. This means that they could too easily conclude that the markets were efficient. Not a word about such complications in this book. Why is this relevant? I would say that the author is less critical of research that supports his preconceived opinion.

I did not realise this bias when I first read the book. Instead, I believed the author's conclusion that the markets must be so efficient that it is fruitless to try to beat them. That was and is just plain silly. The markets are of course tending towards efficiency, so it is not easy to beat them. This is an important point. However, to state that they are efficient is just plain arrogant. So while there are some very good critical analyses in this book, ultimately it might make you believe in something that is very costly: That you cannot make more money in the stock market unless you are willing to take on a higher level of risk.

Currently a lot of academics are questioning the efficient markets. This research is not taken seriously by the author. I am reminded of Kuhn's comment that the new paradigm only becomes prominent when the old guard dies/retires. Furthermore, a lot of people with a PhD in finance start hedge funds to exploit anomalies in the market place instead of writing academic articles. Wouldn't this be worth serious consideration by the author? Still, there is still room for other inefficiencies. For instance the role of emotions is totally disregarded by academic-finance number-crunchers.

The author also has advice of how to invest. His view is to buy low-cost mutual funds. This is not awful advice, but still why would you buy mutual funds when the average fund doesn't even return average market returns? The only thing you know is that they take 1-3% in management fees every year. Do compound interest on that! In The Financial Times, the author recently argued that stocks in emerging markets are undervalued. It is hard to believe in efficient markets and write an investment column. So he just assumes (contrary to his book) that the markets are inefficient and have not priced those stocks correctly. Check out recent videos from 2011. He says that he believes in efficient markets when it comes to publicly available information. Then he proceeds to state that people in 1999 bought the wrong kind of stocks (Internet, technology), which were overvalued. Yes, I would agree those stocks were in a bubble. But honestly, then you cannot believe in efficient markets. These blaring inconsistencies are remarkable.

If you have read this far and want to give me negative feedback, be my guest. I posted a version of this review on an earlier edition of the book, and the review got trashed be believers. When you get a lot of negative feedback on a negative review on amazon that tells you the author has a lot of worshippers. That should make you worried.

A more rational response would be to read Justin Fox's The Myth of the Rational Market. It tells a much more nuanced narrative about the efficiency of capital markets and prominent academics role in developing ideas and theories. The style of the book is not preachy at all. His stories show academic finance to be a very dogmatic environment in the 80s and 90s. You could be called a communist by the stars in the field and have your chances of employment reduced if you didn't sign up to the belief that markets are efficient. It is all described in Fox's book. Or read Shiller's Irrational Exuberance describing how bubbles have been removed from finance textbooks and PhD syllabi because they doesn't fit with the rational actor model. He has the following to say about the efficient market hypothesis: "one of the most remarkable errors in the history of economic thought". Or read Montier's Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (The Wiley Finance Series) (or his other books) for more evidence of imperfect markets. Or read Dreman's column in Forbes magazine.(less)

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Mar 23, 2011 Farmington Branch marked it as to-read · review of another edition

Booklist Reviews 2011 February #1
In the tenth edition of A Random Walk down Wall Street, Malkiel evaluates and emphatically stands by his original investment thesis, that it is extremely rare for an individual investor to consistently beat the stock-market averages. Investors are better off buying and holding an index fund than attempting to buy and sell individual securities or actively managed mutual funds. An index fund which buys and sells all the stocks in a broad stock-market average is l...more

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Jun 06, 2010 Anthony rated it 5 of 5 stars · review of another edition Recommends it for: anyone interested in controlling their own financial future

Recommended to Anthony by: internet

This book was excellent because it made me look at investing much differently than before. The books mantra is basically to be an average investor and that by being average you will beat the majority of the professional investors over the long term. This seemingly contradictory statement is true because the financial industry essentially acts like a middle man, taking a small percentage of customer assests, that in the long term add up significantly. I enjoyed this book because it is relatively...more This book was excellent because it made me look at investing much differently than before. The books mantra is basically to be an average investor and that by being average you will beat the majority of the professional investors over the long term. This seemingly contradictory statement is true because the financial industry essentially acts like a middle man, taking a small percentage of customer assests, that in the long term add up significantly. I enjoyed this book because it is relatively straight forward and full of common sense ideas most individual investors don't think about.

The author gives plenty of statistical evidence that over the long term indexes will outperform actively managed mutual funds by a percentage equal to that of the mutual fund's expense ratio. One and a half percent may not seem like a lot but when compound interest is brought into the equation this will reduce earnings significantly over long periods of time. Over the longer term the stock market has gone up and an index fund will often be one of the easiest, safest, and cheapest ways to participate.

The book is based on the premise that markets are always efficient. I do not necessarily agree with that since markets are controlled by people and people are emotional beings. Behavioral finance is an interesting topic to do some research about, but I do think the majority of time large markets with instantaneous access to information will be efficient. This book gave me my first introduction to Efficient Market Theory and is the foundation for the arguments made in this book.

The section that explains the number of professional investors in the early half of the century compared to the second half is interesting because it leads to the conclusion that it is more difficult today to outsmart the market because over 80% of the market is controlled by professional investors. These professional investors are typically smart, well educated, driven individuals. They as a whole can not outperform themselves over the long term and the costs they charge the individuals whom they represent will be subtracted from any gains.

Other worth while sections explain the pitfalls of inflation and the reason investing in stocks in necessary to maintain and grow wealth, stock valuations during different time periods, the benefits of diversification, and benefits of low expense ratio investment vehicles.

After reading this book it sparked my interst in learning more about index fund benefits and after reading several other books and articles I am going to try to make indexing the core of my portfolio. It will be difficult and seemingly un-American to strive to be slightly less than average, but the statistics and common sense arguements have convinced me. Investing is a long term endevor and simply being average will hopefully provide my family and I financial freedom in the coming years.(less)

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Jun 13, 2011 Chad Warner rated it 3 of 5 stars Recommends it for: investors

Shelves: finance, non-fiction

Investors are bound to have heard about this classic and it’s author, economist Burton Malkiel. In this book, he explains that the market is highly efficient, and no one can accurately predict its ups and downs; it’s a “random walk”. So, the best approach is passive, “buy and hold” investing using diversified index funds held long term. I recommend this book to investors of any level, especially those attracted to active, speculative investing.

The book begins with a fairly boring recount of seve...more

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Jan 02, 2012 Paul DeBusschere rated it 1 of 5 stars

Malkiel's book is just a repackaged version of the same garbage investment firms have fed to the public for years. If the last decade-plus has proved anything, it's that one cannot expect to succeed as an investor by placing your investments on auto-pilot. Following Malkiel's strategy of buying and holding index funds (and not reacting to market conditions), an investor would have reaped negative returns when inflation is factored in.

I've read more than a few books on investing and trading. Malk...more

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Dec 10, 2011 Nick rated it 3 of 5 stars

Shelves: 2011-reads

A classic book on investing, I really enjoyed the first part of the book. Here are a few of the "morals" of this book:
-The "Firm Foundation Theory" or fundamentals of stock picking are based on the following:
1.)the expected growth rate
2.)the expected dividend payout
3.)the degree of risk
4.)the level of market interest rates

BUT, the two caveats are 1)expectations about the future cannot be proven in the present (hence the title of this book) and, 2.) precise figures cannot be calculated from under...more

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Aug 24, 2012 Marks54 rated it 4 of 5 stars · review of another edition

This is a classic statement of a key position in modern financial theory -- namely that financial markets are fairly effective and that it is not really possible to systematically make money trading in these markets on some supposed informational advantage, since the market will adjust to such information quickly and any advantage gained will be fleeting. As a result, the value of supposed patterns in stock returns (or the returns of other investments) is dubious and the "pattern" produced by th...more

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May 31, 2011 Yosep rated it 5 of 5 stars · review of another edition

I'm about 7/8 through this book.
I gotta say I was going to read this after reading Bogle's "Little Book of Common Sense Investing", but I was reluctant because I thought it was going to be another index fund jerk-off fest which would put me to sleep after reading Bogle's book.

I was very wrong.

Even if you don't give a flip about the stock market, you should read this book. It is that good. The information found within might astonish or surprise you as it covers history, sociology, and psychology...more

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Mar 29, 2011 Charles Rotblut rated it 5 of 5 stars · review of another edition

A Random Walk Down Wall Street has long been one of my favorite investing books and this is worthy update. Burton Malkiel strongly believes in passive investing (buying mutual funds or ETFs that track an index, such as the S&P 500) and he reinforces his argument is this book. Malkiel believes that over the long-term, beating the market is not possible. He provides data to back up his claims.

If you are new to investing, this book is a great way to start learning. If you have been investing fo...more

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Sep 05, 2008 Derrick rated it 5 of 5 stars

Shelves: finance-personal-investing

Indexing - a strategy I learned initially from other sources - is best described in this book and other books by John Bogle. The last decade has not been kind to indexers, but, if Warren Buffett is right (and he is mostly on finanical matters), indexing is the most sensible financial strategy for most investors, hands down.

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Dec 08, 2011 Brady Hunsaker rated it 5 of 5 stars

I found Malkiel's arguments convincing and often entertaining. They were convincing in large part because he takes time to consider opposing arguments and even gives them credit in a few cases. In addition, it helped that he examines how some of the attitudes and counter-arguments to his long-consistent suggestions have changed over time.

The original book was published decades ago, but there is so much about recent events woven throughout the 2011 edition that you wouldn't guess it from the text...more

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Apr 23, 2009 Thomas rated it 5 of 5 stars · review of another edition

Shelves: audiobook

If you only read one book on investing, let it be this one. The self-help elements of this guide will seem quite familiar to the educated investor. Nevertheless, the advice is solid, which is more than you can say for the horde of financial gurus ravaging print. Although Malkiel spends a lot of time justifying his theories of investment, you can skip much of the technical detail by only reading the chapters that give advice, rather than theory. To do so would be to miss the beauty of this compre...more

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May 06, 2013 Rob T rated it 2 of 5 stars · review of another edition

First, let me say that I agree with Malkiel's thesis, that the stock market is efficient and no public information can be used to predict the behavior of stocks. Therefore you should buy a mixed bundle of the entire market and minimize fees incurred by trading and active management.

However, I didn't enjoy this read as much as I expected to. The first half is interesting, but isn't as academic as I'd hoped. I was hoping the anecdotes would be peppered with specific academic studies. The second ha...more

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Feb 15, 2011 Clem rated it 4 of 5 stars · review of another edition Recommends it for: anyone who's serious about learning how to invest

I've always thought reviews that contain lines such as "This book has changed my life completely" is nothing more than a silly exaggeration until reading this book - I wouldn't say it has changed my life entirely, but it has definitely changed my perspective and outlook of the thorny investing world where you often have to trim the weeds and learn how to sow the seeds.

The writing is simple enough to understand for most budding investors, yet at the same time it appealed to the inner nerd from my...more

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Dec 30, 2009 Ethan rated it 2 of 5 stars

Shelves: nonfiction

This was a mediocre book. Malkiel mealy-mouths his way around most topics, offering his readers a lot of qualifiers and very little factual information. There are no footnotes (WTF? this guy claims to be an academic?) despite many references to nebulous studies that "prove" this or that. Altogether, it's a pretty shoddy piece of work. I agree with much of what he says, and it is sound advice, but it's all very basic common-sense kind of stuff with not a whole lot of meat behind it.

Now for my own...more

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Nov 19, 2008 Andrew rated it 3 of 5 stars

Shelves: investing

This book is about investing. The main premise is that actively managed mutual funds are a waste of money and it is preferable to use a low-fee index fund. Extensive data is provided to support this argument. At the end there is a good section on diversifying into other types of investments (e.g. bonds) in addition to stocks.

The first half is a short summary of investment history for the past few hundred years. I feel like a good analyst can make history prove whatever point he wants, so while I...more

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Jan 09, 2012 Bill Eger rated it 5 of 5 stars · review of another edition

Shelves: finance

This book is a sturdy MUST READ for anyone interested in investing in stocks, bonds or other financial instruments. Though I stopped investing about 25 years ago, it has become necessary to take it up again and this book is bringing me up to date in a deeply changed environment. After finishing the book taken as a loan from our Hilo Hawai`i Public Library, I bought my own 2011 edition, the tenth or so since the first edition of 1973.

The author is the most stalwart realist I've ever encountered i...more

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Jun 06, 2009 Tyler rated it 3 of 5 stars

I'd rate this book higher if it could figure out what it wants to be and focus on that. I don't disagree with Malkiel's take on efficient markets for the most part, and I enjoyed the different parts to this book, but it just isn't cohesive. The first part is genuinely fun, with a lot of great stories on the history of stock investments and the difference between investing on fundamentals vs. the "greater fool theory." But then the book turns into a textbook, like Investments 101 but with an effi...more

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Feb 24, 2013 Colin rated it 4 of 5 stars · review of another edition

Good solid feet-on-the-ground stuff about how to save money without getting seduced by the lure of easy money. I'm not totally convinced by everything but it's good advice in an eat-your-greens kind of way. It includes a section on retirement planning which is very american-oriented but still useful in outline for us limeys.
There's also an amusing supplement at the end dealing with derivatives: having spent so much time scoffing at those who allowed the south sea bubble and the tulip craze to d...more

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Apr 01, 2011 Ryan Melena rated it 2 of 5 stars · review of another edition

Shelves: audio-books

I didn't much care for this book. There was some good information here and there but overall the author came off as smug and idealogical. It seemed to me that the book contained a lot of assertions and conclusions without enough evidence to back them up. Additionally, some of the author's proclamations seemed to be in direct conflict with one another. Finally, the author's emphatic statements in the appendix regarding derivatives, specifically how they didn't pose a systemic threat to world mark...more

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May 14, 2012 Greg Talbot rated it 5 of 5 stars

Recently I finished John Bogel's stellar "The Intelligent Investor" and found this to be a much more comprehensive book with that kept me reading from page 1 to the end.

The book starts off very academically. Discussing in detail the differences between chartists and fundamentalists. Also, it explores a myriad of investment topics: behavioral finance, beta and systematic risk, and a detailed look at risk.

As someone starting out, looking for a strategy to augment my savings, this serves as one of...more

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Jan 06, 2012 John rated it 4 of 5 stars · review of another edition

A variety of ways to invest so that an investor can eat well and sleep well. Many advisers recommend a low cost index fund for the long run. Bonds should be tax free where a 4% tax free will bring more return than a 6% bond after taxes. If one can afford it owning a home is recommended due to the write offs of monthly interest and property tax. Re-balancing could boast performance when allocations have gone past specified percentages on a annual basis. He also likes to allocate higher % to china...more

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Aug 03, 2011 Patrick rated it 2 of 5 stars · review of another edition

Reading this one has to wonder if Malkiel has a vendetta of sorts against traders. I gave this book a two-star rating because while Malkiel illustrates his points well and backs them with clear rationale and examples, it kills one's faith that they might be able to utilize their own knowledge and creativity to beat the odds in the stock market. He writes about trading in similar fashion to how an atheist might write about Catholicism.

Personal opinion: if you're considering trading or investing...more

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Sep 30, 2012 William Greig rated it 3 of 5 stars

Not what I expected when I picked up the book cold. That being said, I was already pre-disposed to believe in his position, as I've only heard of one man who beat the market long-term.

Malkiel makes his point well. Which he should, I guess, with thirty years of practice. I might have given him more stars, but I was a little disappointed at the glossing-over some of the arguments against his position received. I would think that after thirty years, his defenses against counterattacks would be more...more

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May 18, 2013 Tam rated it 3 of 5 stars · review of another edition

Shelves: non-fic

Ok, you know that I'm not so interested in this topic. Still, I enjoyed this book immensely. Malkiel is easily the wittiest man on earth I have ever read.

For ones who are interested in the subject, this is absolutely a fun and useful read at the same time. I never know finance can be taught so clearly, straightforward and still so engaging. I thought the book would lose its charm after a while (when the author starts talking some technical things), but it does not. Ok, after finishing it, I adm...more

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