I was on Amazon.com the other day, and A Random Walk Down Wall Street by Burton Malkiel came up in my recommended readings. I had briefly seen this mentioned on another personal finance site, so I decided to check it out myself.
The fun premise of this book is that it suggests that a “blindfolded monkey” would have as much luck selecting an investment portfolio as a professional trader would.
The Main Argument
The main argument by Malkiel to this point has been made by many before: Since stock prices cannot be predicted in the short term, individual investors are better off buying and holding an index fund instead of “meddling” with individual securities or even active managed funds. It goes on to argue that not only will an index fund outperform a professionally managed portfolio in the long run (10+ years), but individual investors can also avoid expenses and charges associated with actively managed funds.
However, Malkiel reinforces his point very well, presenting it in an easy-to-read, fun way, while still highlighting how it is based on extensive research.
He also looks at current investment theories: money-market accounts, tax-exempt funds, Roth IRAs, and equity REITs, as well as the potential benefits and pitfalls of the emerging global economy; and he is very in tune to risk: A 30-year-old who can depend on wages to offset investment losses has a different risk capacity from a 60-year-old.
Overall, if you are looking for an interesting and easy read on investing, A Random Walk Down Wall Street is a good choice. It is fun and entertaining, and it should provide some direct insight into investing.