A Random Walk Down Wall Street

Preview

Most people come to the stock market hoping there is a secret map. They want the hidden signal, the clever formula, the sure thing that will let them beat everyone else and retire smiling. What this book tries to do is both friendlier and tougher than that. It takes you by the arm, walks you through the long history of speculation, excitement, disappointment, and invention on Wall Street, and then asks a simple question. What if the smartest way to invest is not to chase brilliance at all, but to accept how hard prediction really is and build a plan around that fact? That is the heart of A Random Walk Down Wall Street. The title itself contains the provocation. A random walk means that short term movements in stock prices are largely unpredictable. Prices jiggle and jump because new information arrives constantly, and when markets are doing their job reasonably well, that information gets reflected in prices very quickly. If that is true, then yesterday's chart cannot tell you much about tomorrow, and the average investor who spends life searching for underpriced gems is playing a very difficult game. But this is not a gloomy book. Quite the opposite. It is meant to be liberating. Burton G. Malkiel does not say investing is hopeless. He says that the ordinary saver has been sold too many fantasies. The dream of easy market beating has enriched brokers, newsletter writers, chartists, television experts, and performance magicians far more reliably than it has enriched investors. Once you stop believing in magic, you can begin to build wealth in a calmer, more practical way. The book moves in a broad arc. First it shows you how recurring waves of speculation have swept through markets for centuries, from tulips to glamorous growth stocks to modern...