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

by Burton G. Malkiel

I recognize, however, that many investors, particularly those with a gambling temperament, will not be satisfied unless they do some picking of individual stocks. If you are one of these people, you might want to commit 95 percent of your funds to index mutual funds and ETFs and speculate with the remaining 5 percent. The options market allows you to buy a few positions for a moderate amount of money and the odds there are certainly better than at either the race track or your state lottery. Be prepared to lose your entire 5 percent stake because that is a real possibility, and take to heart the lessons of the Princeton Students Investment Club. You may well enrich only your broker by undertaking an option-buying strategy. Moreover, your gains, if any, will be taxed at ordinary income tax rates. And never forget, you are gambling and not investing.