A Random Walk Down Wall Street by Burton G. Malkiel Book Review

A Random Walk on Wall Street Book Review

A Random Walk Down Wall Street by Burton G. Malkiel Book Review

As some of you may know, this is the last book on my goals list to read 5 personal finance books in 2018.  I borrowed A Random Walk Down Wall Street from the library (I haven’t bought a book in years, thanks to our impeccable library service) but didn’t get the newest edition as the wait was too long.  The edition I read was 2007, so it was interesting to read it before the 2008 stock market crash.

Money magazine recommends A Random Walk as one of the two investing books that you’ll ever need to read.  Since it was so highly recommended, I added it to my ‘to read’ list for 2018.

A Random Walk Down Wall Street talks about stocks and their value, stock valuations from the 1960’s to the 1990’s, and how the ‘pros’ invest on wall street with technical and fundamental analysis.  In addition, he talks about behavioural finance and the lessons to learn from this such as avoiding over trading (do the buy and hold approach) and avoid herd behaviour.  Finally, in the last section of the book, Burton Malkiel shares some practical tips for investors, such as adopting the life cycle guide to investing (more fixed income as you get closer to retirement), and why index investing is the way to go, but that it is human nature to want to invest in individual stocks.  This is why I myself adopt an index investing and dividend investing hybrid approach, with the core of the portfolio in index investing, as he recommends.

What I Liked about a Random Walk Down Wall Street

What I really iked about A Random Walk Down Wall Street is that it is very practical.  He starts of talking about why you need to invest (to combat the bite of inflation, where the copound annual rate of inflation is 4.9% for gasoline, where it was $0.31 a gallon on average in 1962 and in 2006, it is $2.56 a gallon).  It’s even higher in Vancouver, in 2018 at a friggin $6.00 per gallon.

Then he goes on to talk about crowd psychology and how people become irrational.  I hadn’t really heard of the tulip-bulb craze, but tulips became infected with this virus called mosaic in 1593 and it caused the tulip petals to evelop ‘flames’.  The Dutch loved these and they becamse very very expensive and became an object of speculation.  Unfortunately, memories are short and history continues to repeat itself with speculation (a current example is Bitcoin and weed stocks).

Another story I liked was the story of ZZZZ Best.  I was too young to hear this story in the news when it happened, but it is definitely an interesting story.  This guy named Barry Minkow in the 1980’s was 10 years old and he was working for his parents’ cleaning company.  He did well even while he was in school.  Five years later when he was 15, he created his own carpet cleaning company named ZZZZ Best Carpet Cleaning and even hired a crew to pick him up to clean carpets and at age 18, he was already a millionaire.  Then his company had an IPO and his stock was selling for 100 times earnings.  But the bubble burst shortly when it was found out that his company was laundering money for organized crime!  He was a master fraudster.  The story doesn’t end there.  He was put in jail for fraud, and he was releated and became a pastor.  He also wrote a few books and was hiried as a special advisor on how to spot fraud.  Then in 2011, he went back to jail according to Wikipedia for another 5 years.  He was frauding his own church!  I think he is out of jail now!!

Basically the moral of the story is, ‘get rich quick‘ is not the way to get rich!  Despite what all the pins on Pinterest seem to say… but it’s human nature to want to get rich quick.  Also, that the entrepreneurial spirit and flame can be fanned too young!  Maybe if he developed his success a little later his morals would have stepped in before he decided it was okay to launder money for organized crime.

I also liked Malkiel’s review on technical analysis.  I personally think it’s for the birds and he thinks so too.  Technical analysis lovers analyze data and candlesticks and and symbols and charts.  They use these symbols to predict when the stock will peak or if it will continue going up.  While there are some trends that happen may occur, the fundamental thing that people who do technical analysis forget is that these are real businesses with profits, debts, and cash flow, not simply charts with candlesticks.

What I Didn’t Like about a Random Walk Down Wall Street

There wasn’t too much that I didn’t like about A Random Walk Down Wall Street.  I found the beginning few chapters a little dry but the rest of the book was really good.

It is an easy read and a great book for a beginning investor to review what exactly happened in investing history (even back to the South Sea days and the 1500’s tulip craze) and why we as humans are unfortunately apt to repeat the same mistakes again.

GYM’s Verdict

I would definitely recommend this book especially for anyone who is interested in dabbling in the stock market.  I really appreciated how he talked about the history of the stock market and even the history of the insane prices of tulip bulbs in Holland (personally I think the tulips with the flames are ugly compared to regular plane coloured tulips haha).

He has a good sense of humour throughout the book.  I enjoyed his sarcasm in reference to the side of technical analysis (which I have tried to do many years back but it led me to way too much trading and the only person profiting from my day trading was the discount brokerage).

I wouldn’t say it is one of the best dividend investing books, but I would recommend it as one of the best personal finance books in Canada.

Have you read A Random Walk Down Wall Street?  What did you think of it?

Have you heard of Barry Minkow?

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13 thoughts on “A Random Walk Down Wall Street by Burton G. Malkiel Book Review”

  1. I use ZZZZ Best as a case study of fraud in one of my auditing classes. There are some great You tube videos interviewing Barry from prison. Students love that stuff.

    What was the other book Money recommended. Did I miss that?

    After reading all 5 books, any fine tuning of your investment strategy or personal financial planning?

    Have a nice weekend GYM….

    • @Tom- That’s so COOL- what a great case study! I should check the Youtube videos of Barry being interviewed in prison. Irrational Exuberance is the other book that Money recommended. I haven’t read that one though. Got to figure out the top 5 for 2019 soon 🙂 Any recommendations?
      After reading the 5 books I don’t think I have changed my investment strategy completely but have been more cognizant of asset allocation and making sure I don’t have home bias. This book was a great review of the history of investing though, and gave me comfort that I am on the right track to not invest in Bitcoin or Weed stocks.

  2. Hi GYM, haven’t read the book. Sounds very interesting:)
    I don’t know how you manage to do it all! where do you find the time to read anything?

  3. Thanks for this review GYM!! This book has been on my list to read for a while now but haven’t gotten to it yet. I believe they will have an updated version sometime next year and that’s when I will get to read it.
    That Barry Minkow story is really something! Never heard of him before, seems like fascinating chain of events especially at an early age where he knew about fraud.

  4. Hey GYM, I must have read about 100 different books on investing, and this one is definitely number 1 on my list – despite being a value focused investor and ‘stock picker’ myself! Have just recently recommended it to a few colleagues who are starting to learn about investing, it’s a relatively easy read and such a broad overview of the world of investing – nice review!

    Cheers, Frankie

    • @Frankie- WOW! That’s a big compliment for the author! It is a very broad overview, I agree. I really liked how it was a journey back in time, when investing land began.


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