Monday Memories: A Random Walk Down Wall Street

This is the sixth of my Monday Memories series of posts. In these posts, I pull a book off my shelf, somewhat randomly, and tell you a bit about it. It’s not a review of the book so much as a memory of the book, a bit about what might have been going on in my life when I read it, and my thoughts on who might like this book. 

The Book

A Random Walk Down Wall Street by Burton G. Malkiel, Fourth Edition, W.W. Norton & Company Inc. Publishers, Manufacturing by the Maple-Vail Book Group. Copyright 1985, 1981, 1975, 1973.

Why This Book?

Though I’m retired now I’ve hung on to a number of the business books that I bought, or that were given to me during my career. On that same shelf I also have books related to personal finance. The shelf these books sit on is right next to the television, which I was watching this week when my eye fell on this book. And I thought, “Well, that’s the book for this week.”

What’s This Book About?

Though I haven’t cracked the cover of this book in years, it is the book that still guides my thinking on investing to this day. Malkiel advocates for the idea of passive investing. Passive investing means you focus on buying “the market” (through mutual funds or, these days, ETFs) rather than individual stocks. You also buy regular dollar amounts on regular intervals (an approach called “dollar cost averaging”). And you reinvest any dividends. This method of investing allows an individual to accumulate wealth slowly over time, and if you do it long enough – say for the length of your career, it can make you a millionaire. This is how most 401(k) plans work, though you can do the same thing outside of an IRA or 401(k) too.

This is a classic book for investors. Anyone who wants to understand how the stock or bond markets work, and how you can profit from investing in them, can benefit by reading Malkiel’s book. It’s an ideal book for someone at the start of their career, as it can help you plan out a strategy for smart financial choices, from investing, insurance, tax planning, etc.

Born in 1932, Malkiel started his career as a securities analyst in the 1960s, and went on earn a Ph.D. in economics, to become the dean of the Yale School of Management as well as a director of Prudential Insurance and the Vanguard Group. He was also a governor of the American Stock Exchange, and a member of the President’s Council of Economic Advisors in the second half of the 1970s. Malkiel is still around, and is currently the Chief Investment Officer at Wealthfront, Inc. 

All of which is to say, he knows what he’s talking about. And, he’s been saying essentially the same thing since A Random Walk Down Wall Street was first published back in 1973. My 1980s copy is the fourth edition, but the current edition is from 2019. Each edition of the book provides Malkiel’s basic advise, but updated to help investors steer their way through the changing landscape of financial technology and investing options.

What Was Going On In My Life When I Read This?

I have tended to be a do-it-yourself-er when it comes to personal finance and investing. The FIRE (Financial Independence, Retire Early) movement that has been so popular over the last few years has been very interesting for me to watch, as many of the tools and techniques espoused by proponents of FIRE build off of a base of passive investing just as Malkiel has been talking about since the 1970s, and that I’ve used since the late 1980s. 

When I bought this book I was just starting out in my career and looking for ways to secure my financial future. I had an MBA, was working a corporate job in Manhattan, and was an avid reader of the Wall Street Journal. I had a goal to retire by the age of 50. Despite all of that, reading Malkiel’s book was an inspiration. He helped put all the pieces into place for me, in terms of what I wanted for my own personal finances.

I have to admit, I waited until I was 55 to retire, even though financially I probably could have pulled it off at 50. As it happened I got involved in the project of a lifetime at work and was at the peak of my career, so delaying leaving for 5 years was actually personally rewarding. Once I did retire, I got lucky enough to be asked to join a team in higher eduction, doing what I’ve called my “retirement job”, where I worked for almost 5 more years. Again, very personally rewarding.

Why Would Someone Like This Book?

If I were starting out on my same career path today, I would undoubtedly have more student debt to contend with than I actually did in the late ’80s. So anyone in that position today would, I think, need other resources or books to help them figure out the best way to handle student debt, and there are many resources out there to help you think through a strategy for your debt (the avalanche and snowball methods discussed here, or the advice for managing debt on a small income discussed here are some examples). But for understanding investing and how best to grow your wealth, I think Malkiel’s book is still the one to read and I’d still recommend it (though in the latest edition) to anyone with money to invest.

So that’s my “Monday Memories” book post for this week. Do you have a favorite personal finance book you rely on? Leave a comment below.