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Random Walk Down Wall Street, A MP3 CD – Audiobook, August 4, 2015
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I work in education, not finance, and I believe it was David Ausubel who wrote that the single most important thing you can do when teaching someone is to anchor new content on the learner's existing knowledge/framework. This book is pretty helpful in that regard. It's more of an introduction to financial markets, but not so basic as to be something you could easily learn from online articles like those on Investopedia (which a great site, but this book is better organized and more cohesive).
So, in short: maybe start with this book, then take Shiller's course, and move on to actual finance textbooks if you're inclined to go deeper. Or, if you just want a casual, future retiree's introduction to financial markets and investing, this book will help plenty.
I highly recommend this book to anyone interested in saving and investing for a comfortable retirement.
Now the tenth edition comes upon a changed world and a wiser reader. Reaction: it is even more captivating in some respects, less so in others.
More captivating: The futility of the individual investor trying to gain an information advantage over the market as a whole is even more compelling today. Investment advisors, fund managers, and many academics have a vested interest in debunking the Efficient Market Hypothesis. George Soros, for example, claims that it "has been well and truly discredited by the crash of 2008." "Markets," say the critics, "are not rational."
Of course they are not, and Malkiel never claimed they were. If "rational" means that markets correctly appraise the value of stocks as the discounted present value of future earnings, Malkiel hardly believes such value objectively exists. Valuations are nothing but forecasts ("what will earnings be in three years?") under malleable assumptions ("what is the correct discount rate?"). Just as individuals can be grossly wrong, markets collectively can be grossly wrong. Does Soros think Malkiel takes no account of bubbles? He should read the first edition which, like the tenth, opens with an exposition of the South Sea Bubble.
The Efficient Market Hypothesis simply holds that markets are very quick to gobble up and digest information--so quick that it is nearly hopeless for an individual to gain an information advantage. Moreover, fundamental analysis heavily relies on SEC filings. After a career of drafting, litigating, and teaching S1s, 10Ks, and 10Qs, I can affirm that, while outright fraud is rare, these things are filled with embedded fictions. Any investor who believes that he can apply some kind of exalted wisdom to data that is equally available to all, is deluding himself.
Less captivating: In the first edition, Malikiel pointed out that 67% of managed mutual funds fail to match the return of broad-based indexes such as the Wilshire 5000. At the time, that seemed to me a stunningly astute observation. Today, it seems banal. Begin with the statistically tautological fact that in any year 50% of funds will perform below the market and 50% above. If you subtract the higher fees and taxes that are sucked out of managed funds, that alone accounts for the difference. (Maybe 33% beat the market in Year 1. But over ten or twenty years, the percentage shrinks to a minuscule level--functionally zero.)
So Malkiel's recommended strategy of buying and holding broad-based index funds is based on nothing more than spreading risk and saving costs: the labor of research and the levy of fees and taxes. That is a useful revelation, but not as brilliant as I thought 38 years ago.
So should non-professionals give up on picking stocks? Yes, if they hope to beat the market over the long term. Yet there is nothing irrational in viewing the market as a kind of roulette table. Roulette is a slightly negative-sum game, while the stock market is a positive-sum game--about 9% positive. You can hit a streak in roulette and come out ahead from time to time. Your chances of hitting a streak in the market are even better, and the game of individual stock-picking can be fun. But we shouldn't forget that it is, as Keynes said, "a game of Snap, of Old Maid, of Musical Chairs -- a pastime in which he is victor who says Snap neither too soon nor too late, who passes the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops."
Please let me know if my review helped in your decision making process one way or the other. =)
Top international reviews
Professor Malkiel's argument is, I think, very persuasive. His notably accessible book - clear, humorous and free from mathematical gobbledegook - makes his case very cogently indeed, and adduces a mountain of evidence to support it. If I'd read it as a youngster and followed its advice, by now I'd be a multi-millionaire.
I can think of only two caveats. The first is that the book is aimed primarily at American readers. Its core ideas are as applicable in the UK as in the US, but some of Professor Malkiel's material about taxes and pensions is irrelevant to people in Britain. Secondly, and more importantly, adopting the professor's method entails sharing in the profits of businesses whose activities not everyone is comfortable with - companies involved in tobacco, alcohol, armaments, pornography, environmental degradation... Some people - myself included - would say that this objection to passive investment is insurmountable. If you're not one of them, this book could well be one of the most useful that you'll ever read.
Money well spent.
Malkiel se decanta por la inversión pasiva y recomienda como piedra angular de cualquier portafolio a los fondos indexados, así como la diversificación entre distintos mercados, clases de activos e inclusos factores de inversión (factor investing). Para aquellos que busquemos invertir en acciones individuales también delinea algunos puntos importantes a seguir, recalcando nuevamente que la base del portafolio debe de apoyarse en fondos indexados.
El libro también destaca por sus consejos prácticos en el tema de seguros, ahorro para educación y muestra las ventajas y desventajas de distintos intrumentos de ahorro para el retiro, así como el uso de ventajas fiscales para optimizar su uso. Si bien su enfoque es con respecto a las leyes fiscales de los EUA, la idea principal se puede adaptar a las reglas de distintos países. En definitiva, un excelente libro para conocer más del mundo de las inversiones y de cómo uno puede formar parte de ellas.
Besonders fesselnd war für mich die mit zahlreichen Anekdoten garnierte Darstellung der diversen "Blasen" (beginnend mit der berühmten Tulpen Blase im Holland des 17. Jahrhunderts, bei der mit Tulpenzwiebeln spekuliert wurde). Die Betrachtung dieser historischen Ereignisse, die trotz ihrer zeitlichen Distanz frappierende Parallelen zu aktuellen Übertreibungen haben, öffnet den Blick für eine langfristige Betrachtung des Börsengeschehens - für einen Investor lohnenswert und notwendig.
Malkiels Stil ist erzählend mit einem guten Schuß amerikanischen Humors. Sein Englisch ist hervorragend zu lesen, man braucht hier nicht zur deutschen Ausgabe zu greifen.
Ich besitze bereits die vorherige Ausgabe als Taschenbuch und habe mir diese in gebundener Form gekauft, da dieses Buch es verdient. Im Unterschied zur vorherigen Ausgabe hat sich allerdings nicht so wahnsinnig viel getan: die Zahlen sind aktualisiert; eine kurze Bewertung des Nuller-Jahrzehnts aus Sicht des Investors wurde vorgenommen. Es gibt aber keine grundsätzlich neuen Aussagen oder eine Revidierung vorhandener Erkenntnisse. Wer die vorherige Ausgabe kennt, für den ist die Anschaffung der aktuellen Ausgabe aus inhaltlicher Sicht m.E. nicht zwingend.