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

by Burton G. Malkiel

Rule 1: A rational investor should be willing to pay a higher price for a share the larger the growth rate of dividends and earnings.

The Dogs of the Dow consistently underperformed the overall market.

A strategy far more likely to be optimal is to buy the haystack itself: that is, buy an index fund—a fund that simply buys and holds all the stocks in a broad stock-market index.

DO NOT TRY TO TIME THE MARKET: FLOWS TO EQUITY FUNDS RELATED TO STOCK-PRICE PERFORMANCE

You should be an avid reader of the financial pages of daily newspapers, particularly the New York Times and the Wall Street Journal. Weeklies such as Barron’s should be on your “must-read” list as well. Business magazines such as Bloomberg Businessweek, Fortune, and Forbes are also valuable for gaining exposure to investment ideas.

You should, for example, try to have access to Standard & Poor’s Outlook, the Value Line Investment Survey, and Morningstar.

And if the investor also used dollar-cost averaging to add small amounts to the portfolio consistently over time, the results were even better. If you will follow the simple rules and timeless lessons espoused in this book, you are likely to do just fine, even during the toughest of times.