My brother loaned me his copy of this book years ago after I read Thinking, Fast and Slow, which shocked me when it mentioned that all the high-paid investment managers on Wall Street are no better at selecting stocks than a monkey throwing darts at a copy of the Wall Street Journal. When I mentioned that to my family, my brother promptly gave me his copy of this book, which of course sat on my bookshelf for years before my resolution to read and return all the books I’ve borrowed over the years.
This book by Burton G. Malkiel is a fascinating and comprehensive look at the world of investing. Malkiel looks at everything from mutual funds and bonds to futures and options and everything in between. When I was watching “Squid Game” and the main character found out his childhood friend had lost everything by betting on futures, I actually knew what they were talking about!
This book is readable, but not super accessible. Malkiel uses a lot of financial jargon, and while he does a good job of explaining most of it, there were a few things I had to Google. That said, he does do the math for you and demonstrate with charts and graphs so you can see how certain investing strategies can be incredibly beneficial or super risky (or both). He also comes up with anecdotes to explain how these strategies work out in the real world so it’s not just all theory.
As much as I appreciated the information I gleaned from this book, I think my favorite part was the tone Malkiel uses throughout most of it. He describes the different kinds of strategies for choosing stocks and then explains why each one does not work in the long run, and he appears to be quite gleeful in that last part. He makes no attempt to hide either his contempt for them, nor his attitude of smug superiority. It did make me want to read a book on investing from a more traditional investor if only to get another perspective.
If you’re curious about investing, but you have no desire to read 425 pages of jargon, complete with charts and graphs, I’ll sum up for you: invest in an index fund and contribute to it regularly, even if it’s only small amounts. Don’t freak out and sell all your stocks when the stock market crashes, because (so far) it has always come back up. Even Malkiel admits there’s no way to predict a crash, but he says there are ways to limit your losses when a crash happens (such as strategically investing in futures or options).
At the very end, he does give tips for reducing risk while choosing stocks if you are hell-bent on choosing your own stocks, but that’s only if you enjoy the thrill that comes with risk and you’re not gambling with your entire life savings.