A Random Walk Down Wall Street Essay

3492 WordsFeb 13, 201214 Pages
Randon “A Random Walk Down Wall Street” Book Report A Random Walk Down Wall Street is the “Average Joe’s” introduction to investing. The author does an excellent job of mixing humor, personal feelings, and historical examples of how people succumb to the “Castles in the Air” mentality. The first chapter is devoted to an introduction to the book and the explanation of a “random walk”. The “Random Walk” as Malkiel explains is the unpredictability of future steps or directions based on past actions. He further integrates this term into the unpredictability of the world of investing specifically the stock market. In chapter one he introduces the two techniques used by market professionals to determine what stocks to invest in and when to purchase them. These techniques are fundamental analysis and technical analysis. The first chapter goes on to introduce other concepts in investing such as the effect of inflation, the theory of investing, the Firm-Foundation theory, and what I believe to be the author’s favorite term, the Castle-in-the-Air Theory. I really enjoyed one quote from the author that gives me some confidence in investing in the stock market. The author wrote: “A successful investor is generally a well-rounded individual who puts a natural curiosity and an intellectual interest to work to earn more money.” This quote says to me that with the right motivation and using my own intellect I could be successful in investing also. In the second chapter the author dives into a historical look of how crowds of people have reacted to the prospect of making money no matter how unreasonable the investment is. Examples of such events include: Tulip-Bulb Craze, the South Sea Bubble, and the few years before the Great Depression, where examples of financial disasters waiting to happen. The Tulip-Bulb Craze in Holland proved to be an example of

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