Random Walk

The book A Random Walk Down Wall Street has a major theme centering around that personal investment is a very important component for successful businessperson. Each chapter throughout this book focuses on key points which go into depth on how investing has changed over time and how to beat the stock market by being smart and patient. Malkiel, the book’s author, has released updated editions of this book over the years, adding relevant information for investors to use. He believes that the investor who buys and holds bonds and wisely invests in the stock market, will ultimately do better in the long run and get a good return. History does show however that there are times the market is affected due to manias, panics, and consumers making wrong decisions which are not going to help the market at all. A key point Malkiel focuses on is the random walk hypothesis. This hypothesis explains that stock price changes have no correlation to past movements or trends of a stock price. This ultimately means a stock cannot be predicted to rise or fall based solely on past performances.

Trying to beat the market and receive good returns by constructing the best diversified portfolio does not always work out, and is really a game of chance in the long run. You have just as good of a chance of getting the best out of your portfolio as the guy next to you. It just depends on how the market is responding to the economy and that typical day. Choosing the best portfolio is not a skill but a gamble, and Malkiel does an excellent job at showing us this. The fact Malkiel believes you cannot predict the market was not new to me, as I have always been told this throughout my courses in college. I was surprised however to be told researching specific stocks to predict growth and potential returns is pretty much useless. Even after reading this book, I still think research is beneficial if put to proper use.

Malkiel goes on throughout the book explaining how the market can...