The Random Walk Guide To Investing

Based on the million-copy seller A Random Walk Down Wall Street, this concise new guide by influential and irreverent author Burton G. Malkiel takes the mystery out of personal finance by outlining Malkiel's own ten-point plan for success. Easy to read and easy to follow, this practical book aimed at the investment novice cuts through the jargon to give readers the confidence and knowledge to make wise investment decisions that will provide consistent returns.

Beginning with the basics—"Fire your investment advisor" and "Start now"—Malkiel carefully and with good-humored authority lays out the rest of his "blessedly brief bare-bones guide to investing" (Business Bookpage).

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All Customer Reviews
Average Customer Review:
4 of 8 people found the following review helpful:

I hold academics to high standards of balanced education, 2008-04-13
Although the content of Malkiel's advice (which is of a rather non-specific nature) is essentially the same approach I apply professionally, I take offense at his generalization that all financial advisors have nothing but their own best interest in mind and should therefore be "fired."

Having never evaluated my performance, Malkiel cannot logically make such a generalization. Sadly, however, we have all been conditioned from a very young age that the learnings we receive from educators carry a high degree of credibility (otherwise their oversight committees would remove them, right?). This is why it is inexcusable to me that an educator would lay out what is packaged to be an objective, do-it-yourself approach but in reality is based on an opinionated premise.

...But we live in the days of pop icons and savvy publishers who have learned that they need a "hook" to get the masses to buy and read their books. It's hard to become a popular author and highly sought-after member of an investment committee managing hundreds of billions of dollars if your publications are limited to such dry subjects as monitoring the changes in covariances between asset classes.

While we are on the subject of generalizations, I'd like to offer a few of my own. We all know that academics have nothing but their own best interest in mind. All professors teach as a means to increase sales of the textbooks they have written and require their students to purchase. All colleges and universities are out after your money; otherwise, what else can explain the fact that educational costs are rising at roughly twice the rate of inflation? Everything you need to learn in this day and age can be found on the Internet, so why pay exorbitant fees and tuition costs to educational institutions that do nothing more than repackage this publicly available information and charge outrageous fees so that you can have a shiny diploma to attach to your resume?

Are you starting to feel a little bit like I did when I read your diatribe on financial advisors, Burt?

Like a 5-year old who repeats a joke over and over again in front of adults thinking that it is just as funny with each telling, Malkiel has been playing the "financial advisors are crooks" card over and over again with each edition of his books. This is despite the fact that the major financial service firms have overhauled their business models dramatically over the last 35 years.

Today's financial advisors are increasingly educated on the concepts of risk and reward, investment time horizons, asset allocation, and portfolio rebalancing.

I typically spend about 20 hours per client getting to know their financial situation and designing an investment approach that is flexible enough to accomodate their changing requirements over time. Assuming a $100,000 portfolio and a 1% advisory fee, my firm collects $1,000 a year for these services. Divided by the 20 hours I spend, this amounts to an "outrageous" $50/hr I have collected for my time.

Could you do all of this on your own? Of course. But Malkiel fails to mention the opportunity cost of your having to go up a learning curve to do this. The book contains weblinks and phone numbers that make it sound easy to contact various providers of low-cost investment products, with suitable admonishments that you make sure that you tailor everything to your own situation (just how do you do that, exactly, Burt?).

If you end up spending 40, 50 (or even more) hours doing this on your own, have you really saved what you would have spent on a 1% advisory fee using a trained, knowledgable financial advisor?

I would suggest that you start your investment process by first talking to a few financial advisors and then decide for yourself if Malkiel's assertion is correct. For starters on finding and evaluating advisors, check the SEC and FINRA websites for ideas.

If you then decide that you want to manage your investments entirely on your own, I suggest that a much more balanced (and detailed) approach to asset allocation can be found in "All About Asset Allocation" by Richard A. Ferri.

In summary, Malkiel's book gets 2 stars from me not because of its basic message, but because of its shameless self promotion based on an unproven premise that anything you pay a professional to do you can always do better yourself.

Considering that Malkiel has demigod status by now, if anyone wants to metaphorically take me out to the parking lot and beat me up for having criticized him, you can reach me at ROliverira@hotmail.com


0 of 0 people found the following review helpful:

Great Intro to Investing, 2008-01-18
I've never had much interest in investing. Like a lot of people, the older I get, the more I think about it. This book is a great introduction to the investment world. Easy to understand and great advice for both young and old.

It gives you a variety of step by step plans to start your portfolio. It shows young people how a few dollars here and there can turn out to be a life saver down the line. It shows older people who may think it's too late where to start.

I'm 47 and this book showed me that it's never too late to get started.


0 of 2 people found the following review helpful:

Basic investment guide for those who believe in the Random Walk theory, 2007-09-06
Very basic advice for those who believe in random walk theory. Unfortunatley not of much use to anyone over and above a novice.


8 of 13 people found the following review helpful:

not much new idea, 2007-05-19
i spent $10 on this book and finished reading it in half an hour. To my disappointment I did not find anything special about it. Most of the ideas he talks about are fairly common for investors, such as investing earlier than later, keeping a constant flow of investment, balancing risk and return, etc. I think these are common sense to most investors. The only thing special about this book is the discussion on efficient market theory. The author is a strong believer of this theory and spends three chapters on it. The takeaway is to invest only in index funds. That's all I got from this book.

I think for a person with no investment knowledge at all, this is a fun book easy to read. But not that useful for more experienced readers.


14 of 16 people found the following review helpful:

Expert Advice, Written for Laymen, 2007-05-19
Malkiel's book is perfect for anyone interested in learning the basics of investing. It is simple, direct, and easy to understand. Even a complete novice could build a fairly sophisticated, diversified investment portfolio by following its simple recommendations.

One of the biggest problems facing novice investors is that there are so many products available that it is impossible to know where to begin. Malkiel solves that problem by identifying:

1. the four major asset classes that investors should consider (cash, bonds, stocks and real estate);

2. the specific percentages of one's portfolio to invest in each asset class; and

3. the best mutual funds in each asset class to invest in.

In addition to that specific guidance, Malkiel also gives 10 rules as a general framework. Specifically:

Rule 1: Start Saving Now! (Time is money; the miracle of compounding)

Rule 2: Save Regularly!

Rule 3: Be Prepared for Emergencies. (term insurance; emergency funds)

Rule 4: Pay Attention to Tax Benefits. (401(k) plans; IRAs)

Rule 5: Match Your Asset Mix to Your Temperament.

Rule 6: Diversify!

Rule 7: Pay Attention to Costs!

Rule 8: Nobody Can Beat the Market Consistently . . .

Rule 9: But Low-Cost Index Funds Can at Least Tie the Market.

Rule 10: Avoid Some Common Mistakes.

With traditional pension plans on the way out and Social Security under increasing financial pressure, it is now more important than ever for individuals to be knowledgeable about the basics of investing. Malkiel's book is a great way to get started.

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