A random walk down Wall street by Burton Malkiel
I heard of this book from some Chinese online forum. Someone said that this book helped him with his retirement finance with his meager postdoc salary. Since I was earning meager postdoc salary in one of the most expensive cities at the time, I got a copy.
This is a great book with a lot of information. It is also very fun to read and I highly recommend it.
The author delivers a clear message as early as in the preface:
the market prices stocks so efficiently that a blindfolded chimpanzee throwing darts at the stock listings can select a portfolio that performs as welll as those managed by the experts
And his suggestion is that
the core of every portfolio should consist of low-cost, tax-efficient, broad-based index funds.
To be more specific, there are four guidelines
- broad diversification
- annual rebalancing
- using index funds
- staying the course
The fun part of the book is that the author reviews investment theories, market analysis methods, and the financial bubbles in history.
- theories
- firm-foundation theory
- castle-in-the-air theory
- methods
- fundamental analysis
- technical analysis
- modern portfolio theory
- bubbles
- the tulip-bulb bubble (1634-37)
- the south sea bubble (1720-22)
- Wall-street lays an egg (1928-30)
- the tronics boom (1959-62)
- the biotechnology bubble (1980s)
- the Japanese real estate and stock bubble (1986-92)
- the internet bubble (1998-2001)
- the US housing bubble (2000-2012)