Summary of Burton G. Malkiel's A Random Walk Down Wall Street

By IRB Media

Please note: This is a companion version & not the original book.

Book Preview: #1 This book is a guide for the individual investor. It covers everything from insurance to income taxes. It will teach you how to buy life insurance and avoid getting ripped off by banks and brokers. It will also tell you what to do about gold and diamonds.

#2 The stock market is a random walk, meaning that future steps or directions cannot be predicted based on past history. When the term is applied to the stock market, it means that short-run changes in stock prices are unpredictable.

#3 I have been a lifelong investor and have participated in the market. I have a lot of facts and figures to share. Don’t let that scare you. This book is written for the financial layperson and offers practical, tested investment advice.

#4 Investing is the process of purchasing assets to gain profit in the form of reasonably predictable income and/or appreciation over the long term. It is the definition of the time period for the investment return and the predictability of the returns that distinguishes an investment from a speculation.

• Language: English
• Publisher: IRB Media
• Release date: Mar 15, 2022
• ISBN: 9781669359777

IRB Media

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Book preview

Insights on Burton G. Malkiel's A Random Walk Down Wall Street

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 1

#1

This book is a guide for the individual investor. It covers everything from insurance to income taxes. It will teach you how to buy life insurance and avoid getting ripped off by banks and brokers. It will also tell you what to do about gold and diamonds.

#2

The stock market is a random walk, meaning that future steps or directions cannot be predicted based on past history. When the term is applied to the stock market, it means that short-run changes in stock prices are unpredictable.

#3

I have been a lifelong investor and have participated in the market. I have a lot of facts and figures to share. Don’t let that scare you. This book is written for the financial layperson and offers practical, tested investment advice.

#4

Investing is the process of purchasing assets to gain profit in the form of reasonably predictable income and/or appreciation over the long term. It is the definition of the time period for the investment return and the predictability of the returns that distinguishes an investment from a speculation.

#5

Investing is a skill that requires work. It is fun to compete against the investment community and to be rewarded with an increase in assets. It is exciting to review your investment returns and see how they are accumulating faster than your salary.

#6

The three theories of asset valuation are the firm-foundation theory, the castle-in-the-air theory, and the new investment technology. They are mutually exclusive, and it is essential to understand them if you are to make sensible investment decisions.

#7

The firm-foundation theory states that each investment instrument has a firm anchor of intrinsic value, which can be determined by careful analysis of present conditions and future prospects. When market prices fall below this firm anchor of intrinsic value, a buying opportunity arises.

#8

The firm-foundation theory is not limited to economists. It has been embraced by a whole generation of Wall Street security analysts, who believe that sound investment management consists of buying securities whose prices are temporarily below their intrinsic value and selling ones whose prices are temporarily too high.

#9

The castle-in-the-air theory of investing focuses on psychic values. It states that professional investors prefer to devote their efforts to analyzing how the crowd of investors is likely to behave in the future and how they tend to build their hopes into castles in the air.

#10

The castle-in-the-air theory states that a certain price is worth because someone else is willing to pay more. There is no reason other than mass psychology. All you have to do is beat the gun and get in early.

#11

The investment world is full of crazes, both past and present. Some readers may pooh-pooh the public rush to buy tulip bulbs in the seventeenth century Netherlands, or the eighteenth-century South Sea Bubble in England. But no one can disregard the new-issue mania of the early 1960s, or the Nifty Fifty craze of the 1970s.

#12

The psychology of speculation is a theater of the absurd. The buildings that were constructed during these performances were based on Dutch tulip bulbs, English bubbles, and American blue-chip stocks.

#13

The tulip-bulb craze was one of the most spectacular get-rich-quick binges in history. It began in 1593 when a professor from Vienna brought to Leyden a collection of unusual plants that had originated in Turkey. The Dutch were fascinated with these new additions to the garden, and the more bizarre the bulb, the more people valued it.

#14

The history of the tulip market is a tragicomic example of the irrationality of the human mind. The price of a single tulip bulb would fluctuate, but not twentyfold. There was no rational explanation for these prices, and eventually panic reigned.

#15

The South Sea Company was a British company that was formed in 1711 to restore faith in the