Bridging The Gaap

About the Author:

Burton Malkiel is a Harvard (MBA)/Princeton (Ph.D) trained economist who has been both a professor of economics at Princeton (and chairman of the department thereof). His accomplishments are many, and he has written and published extensively on various topics in the realm of finance, investing, economics, and so on. You can find a concise biography here and his Curriculum Vitae here.

Basically, you can rest assured Mr. Malkiel knows what he’s doing.

What’s it all about?

For anyone who has ever wished for a concise, entertaining discussion of pretty much all things financial look no further than Burton Malkiel`s A Random Walk Down Wall Street.

The astute Btgnow.net reader will already be aware of my penchant for learning from other people’s mistakes, and Malkiel skilfully points out some of the worst in the fist few chapters., as the author discusses a history of some of the weirdest and worse stock market bubbles in history. Throw in that the writing is entertaining to boot and you’ve got a financial book which, in just three chapters, has already justified its place on your reading list.

The second part of the book is much more dense, though still extremely useful. It is at this point that “A Random Walk” turns into a sort of textbook/reference book, albeit probably one of the best you’ve ever read. Some topics in the second part are actually topics I’m currently studying in my Finance classes, like modern portfolio theory, and I have found that some of these topics are better explained by Malkiel. Therefore “A Random Walk” would make an excellent supplemental resource come exam time or just to improve your general overall knowledge of finance.

Subjects covered in Part 2 are numerous, and include:

• Efficient market hypothesis
• Modern portfolio theory (Malkiel explains EMH and MPT REALLY WELL!)
• Weak vs. Strong Vs. Semi Strong market theory
• Technical vs. Fundamental analysis (stock evaluation)
• Index investing vs. individual stocks vs. mutual funds

 

Some recurrent themes of the book include:

• Impact of fees, commissions, and taxes on an investor’s return
• How unlikely it is for either individuals or professionals to beat the market

 

 

The third part is a little bit lighter and deals mainly with Malkiel`s recommendations for individual investors, at many different stages of life. This is what makes the book invaluable to investors young and old – there really is something for everyone to learn in this book.

So, should you read it?

Yes, and you can read it at any stage in life and still find something of value in it. For those without much experience in finance, it can get a bit dense around the second part (if you’re conscientious in your reading though you`ll come out with a huge amount of knowledge you didn’t have before!), and for more established folks the recurring themes of index investing and life-cycle investing are invaluable.

Rent or Buy?

Buy it. This is a book you`ll want to have around. “A Random Walk” is a great all around “something for everyone” everything-you-wanted-to-know-in-one-place kind of finance book. Youll likely want to refer to it at a moment`s notice, so keep it around!

If you like this you should like:

The Millionaire Next Door by Stanley and Danko: also a little technical but a nice companion to Malkiel`s ideas.

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