Rating: 
Summary: RANDOM SAYS IT ALL
Review: This book is about a paradox. The paradox is this: if everyone knows about a "good buy" and they all rush in to buy, the price of the "good buy" will rise until it is no longer a good buy.This paradox is the basic idea behind the Efficient Market Theory which says the market is so efficient, no information can be used to predict the market. And since nothing can be used to predict the market, the behavior of the market is that of a random-walk that cannot be predicted. But hold on. You may be asking why you can't be one of those people rushing in to buy while it is still a "good buy"? Well, according to the book, more than two-thirds of professional portfolio managers have tried and got their butts kicked by the S&P 500 over a twenty-five year period. This book definitely leans toward a conservative approach but offers all options, objectively. Malkiel does not fully believe in an efficient market. He believes in somewhere in between just as Warren Buffet. That is, the market does not always behave rationally or efficiently and it is precisely these times an intelligent investor can reap big rewards. He can't fully believe in an efficent market or the Random-Walk Theory. The studies mentioned above made it clear that one-third of the portfolio managers do beat the market. And then there is the legendary Warren Buffet who has consistently beat the market. The only difference between Malkiel and Buffet is attitude. Where as Buffet believes he can find those inefficiencies in the market and profit from them, Malkiel believes it is very rare and not worth the effort. So the former sees the bottle half-full and the latter sees it half-empty. How you invest depends on what type of person you are. Let's look at the choices. Remember, two-thirds of the stock funds cannot beat the index, so that means one-third of them are outperfoming the market. These exceptional funds do exist (Magellan, Templeton), but the original portfolio managers are long gone. Or you can believe you are as smart as Warren Buffet! And pick your own winning stocks. Good luck! But if you can, this is a better way to invest than with mutual funds since there are no annual fees. Or just forget about it, and as the author suggests, buy that index fund. I like it, simple and in the mean between the extremes. The fees for the index fund are very low and the turnover is low so you won't pay too much in taxes. This book is also a great financial planning guide that teaches you how to allocate your assets and plan for your retirement. The other useful hint I got from this book is to not buy any of those get-rich-quick or no-money-down books. The author says those kind of things don't work and the guy writing them gets rich only from your purchases. I always wonder about that. Now he has confirmed it. I choose to believe him because he doesn't make exaggerated claims and he basically shares the same view (although different attitude) with possibly the smartest man on earth, Warren Buffet. Plus, he's an old dude (this book was first written in the 70's) and probably have gone through alot. Lastly, the logic is all sound and I cannot find any holes in his book at all. You cannot do wrong if you follow his advice.
Rating: 
Summary: The definitive tome on the "Chicago School"
Review: This is the definitive tome on the "Random Walk" theory of economics - that you can't base tomorrow's price of stock based on it's historical price. The concept is deeper (stronger views claim you can't predict stock price on ANY known information - that it's already baked into the current price) and the book covers the various shades of gray. The author acknowledges differing pricing theories, and presents data to support his ideas. Agree or not, this is the seminal book on the subject. It's core to the curriculum of the University of Chicago's finance program - and that is quite a reference. In fact - if you disagree with the idea, and take a more behavioral or trend-following point of view, the book is worth a read to understand your enemy. :-)
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