Top positive review
Highly practical investment advice backed by strong economic foundations.
on April 2, 2014
<i>A Random Walk Down Wall Street</i> centres around the Efficient Market Hypothesis (EMH) which states that individual investors can not use past information (e.g. SEC reports, CEO interviews, and economic forecasts) to profit from trading stocks since these facts (and perhaps opinions) have already impacted the stocks' prices.
Based on economic theories on the EMH, the author argues that individual investors should invest in balanced index funds to try to replicate the market return -- the best scenario for any investor with an average amount of luck. He denounces active mutual funds as a waste of money since their high management expense ratios (MER) are not compensated by superior returns when compared to the index funds. He also provides other useful ideas to investors including introducing the idea that one's willingness to take risks should depend on one's future earnings potential.
This book is one of my favourite books on investing because of its highly practical advice backed by strong economic foundations. Fortunately, it has become extremely easy to follow his strategy given the wide availability of ETFs and relatively low trading fees for the average retail investor.