This document summarizes key points from the book "A Random Walk Down Wall Street" by Burton G. Malkiel. The book is divided into four parts that discuss the history of stock prices, how professional investors pick stocks, new investment theories and technology, and practical investment advice. It covers various investment theories like the firm foundation theory and the castles in the air theory. It also discusses different analysis methods used by professionals like technical analysis and fundamental analysis. The document emphasizes the importance of diversification and provides basic investment advice like having insurance, investing in tax-advantaged accounts, including bonds in a portfolio, owning a home, keeping commissions low, and adjusting investment strategies based on investment goals and time horizons.

1. A Random
Walk Down
Wall Street
The Best Investment Advice for the New Century By Burton G. Malkiel

2. The four legs of a random walk
A Random Walk is divided into 4 parts
◈ A history of stocks and their prices
◈ How the Pro’s pick their stocks
◈ New investment theories and
technology
◈ A practical guide for the rest of us

3. Stocks and Their Prices
A history of investments, bubbles,
bursts, theories and strategies

4. Key points
Theories
The two prevailing
theories are the Firm-
Foundation and Castles
in the Air theories. Most
strategies are based on
one of these two.
History of Investment
Investing isn’t
something new.
Humans have been
investing since the
dawn of time. From tulip
bulbs in past eras to
stocks and bonds
today.
Bubbles and Bursts
With investment comes
bubbles and the
inevitable burst.
Bubbles have been
happening ever since
investing started and
they always burst in
one way or another.

5. Firm Foundation
A financial assets value
is based on it’s intrinsic
value. The market puts a
price above or below
that value. It is up to the
investor to decide which
side the price is on.
Theories
Castles in the Air
Is not concerned with the
intrinsic value of an
asset but rather the
perceived value. Bases
price and value on what
people as a whole will
think of the asset.

6. How the Pros Play the
Biggest Game in Town
Professional analysis of of stocks and investments

7. Technical Analysis
A method of evaluating
investments based on
statistical data such as
past prices and volume.
It does not take into
account the companies
financials. Relates to
Castles in the Air.
Methodologies
Fundamental Analysis
Bases a securities value
on intrinsic factors, such
as earnings, holdings,
management, and other
qualitative and
quantitative factors.
Relates to the Firm
Foundation theory.

8. The New Investment
Technology
Professional analysis of of stocks and investments

9. Diversification
Most of this section can be summed up into one word…
Diversification. This is the bedrock of Modern portfolio
theory and a supposed way to minimize risk. While
diversification is not bad, risk is not always bad either.

10. A Practical Guide for Random
Walkers & Other Investors
Advice for investing for regular people
(And professionals too)

11. The Basics
Protection
Ensure you have adequate
insurance (life, home, medical)
coverage. Build an emergency fund.
Taxes
Put investments into tax friendly
accounts like IRA’s and 401(k)’s.
Bonds
Provides a solid security in most
instances. Just make sure your
returns keep up with inflation.
Home
Own your own home. Despite the
recent real estate bubble land is one
of the few things that has intrinsic
value no matter what.
Commissions
Gone are the days of high
commissions prices. You can invest
now with low cost brokers that save
you money.
Diversify
While common stocks should be the
bulk of your holding, keep a variety
of things, bonds, REIT’s, Funds,
Indexes, etc.

12. Goal > 10 Years
Invest heavily in stocks
for long haul. Base your
picks on fundamental
data and not on
technical analysis.
Life Cycle Guide to Investing
Goal < 10 Years
Widely diversify your
holdings. Focus on
securities with lower
levels of risk like bonds
and cash as you get
closer to your goal date.

13. “Res tantum valet quantum vendi potest.
(A thing is worth only what someone else will
pay for it.)

14. Works Cited
◈ Malkiel, Burton G. A Random Walk Down Wall
Street. New York. W.W. Norton & Company,
1999. Print