Resumo de A Random Walk Down Wall Street

A Random Walk Down Wall Street by Burton Malkiel has long been a standard text for those looking to make sense out of investing in the stock market. Malkiel first lays out a foundation for how stocks are valued, focusing on two different theories, the firm-foundation theory and the castle-in-the-air theory. The former assumes that there is an intrinsic value to a company that facilitates investment choice, while the latter, being based more on psychology, is much more speculative. The distinction between the two sets the stage for most investment theory, but ultimately Malkiel himself comes to the conclusion that neither theory is really adequate for basing an investment theory upon.

Having essentially dismissed investment principles based on the concepts of intrinsic value and psychological speculation, Malkiel advances the proposition that the only way for the average investor to make money over the long term is to invest in a broad range of stocks that engage in diversification. Although it is termed modern portfolio theory (MPT), it is basically just putting your trust in diversification as a way of reducing market risk. Malkiel explains how this works by showing there are actually two different types of risk: unsystematic and systematic. Unsystematic risk is that which is specific to the company and can range from a natural disaster destroying a factory to litigation. Systematic risk, on the other hand, affects not just the particular company but the market as a whole, and this can include anything from rising energy costs to political upheavals. By using diversification, the MPT holds that all things even out; a portfolio hurt by one company?s factory being destroyed can be evened out if you also hold stock in the companies that will benefit by that very same problem.

Malkiel engages the criticisms of this theories and offers well-formulated counterarguments that serve to not only heighten his own points, but cast significant doubts on the criticisms as well. His counterarguments are presented in complex but accessible explanations about such standard investment fare as risk and return, the psychology of investing and, and the folly of trying to ?beat the market.? Much of the criticism of the book courtesy of the fact that it essentially advises against high-maintenance management; Malkiel suggests that a diversified no-load index fund that is allowed to fluctuate through market highs and lows with little interference from advisors will provide the best long term return.

Finally, Malkiel takes all the information he has provided and synthesizes it into real-world guide for investment. For the average reader, it almost the equivalent of having a financial planning playbook.

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