Finished with a book by Burton Malkiel, best known for the many times reprinted 1973 hit A Random Walk Down Wall Street. The book "10 principles" is, on the one hand, a continuation, and on the other hand, a simplified version of the "Walk", designed for beginners, and I decided to start with it in order to move sequentially, as the author himself says, from simple to complex.
It is believed that Malkiel is the main ideologist of passive investment in index funds, which should be the basis of investment portfolios. This position is very popular today in the US, and in Russia there are also a decent number of supporters stuck in FinEx funds and beyond. True, today American investors are gradually moving away from this and partially selling off their shares, and the funds are losing commission profits because of this. Well, in 1973 there were no such funds from the word at all, so they looked at the still young Burton as a freak then. Later they appeared and gained popularity, and at the same time the companies that these funds created rose up.
When A Random Walk Down Wall Street became a bestseller, the publisher asked Malkiel to write a 200-page light version for those who didn't understand the stock market and hated numbers. And so it turned out "Walking on Wall Street at the minimum." For a novice investor, the book turned out to be really good. Here and simplicity of presentation, and humor, and living examples. However, I had to step back from what I already knew about investing and imagine that I wanted to buy my first stock.
Burton Malkien is a well-known 90-year-old economist and ambassador of the efficient market hypothesis, according to which all material information is immediately and fully reflected in the market price of securities. However, he agrees that some markets are clearly inefficient, showing signs of a random walk. That is, there is a mismatch. But the American market is considered efficient. Is the Russian effective? That is the question.
Malkien gave 28 years of his life to the leadership of a large investment company Vanguard Group. Yes, yes, the same Vanguard. It all started with military service. He worked as a financier, and then IBM machines began to be used for work. He was so imbued with them that he invested all his money in IBM stock - $ 5,000. He said more than once that these shares are still with him, but their price is already millions of dollars.
I love books that are about a certain amount of something. All of them can be succinctly reduced to just a list. Someone will consider the rest of the information to be water, but it is important to make allowances for the target audience.
10 rules
First, the author writes about the fact that you need to save money from your salary and, in general, how to start and not quit:
1. Start saving right now, not postponing. Time is money.
2. Stay on course. The only sure way to wealth is regular investment of savings.
3. Don't let yourself be taken by surprise (about insurance and reserves).
4. Use all tax incentives (they are also available in the Russian Federation, if that).
Then he talks about how to build a diversified portfolio:
5. Complete the investment portfolio to your liking (tells how to distribute assets).
6. Don't forget to diversify.
7. Pay yourself, not others.
8. Respect the wisdom of the market.
9. Invest in index funds.
10. Don't be your own worst enemy: don't turn into a dumb copycat.
All these rules are described in the second part of the book, and in the first part the author briefly goes over the basics. What are stocks, bonds and that's it. Intelligibly, if someone does not know, you can read. He does not give a single frankly harmful advice, all of them really help.
About what else: about Albert Einstein, about why to fire your financial adviser (as if one of us has one), about the types of securities in simple words, about tulip fever, soap bubbles, the relationship between risks and returns. About the S&P500 index, well, various examples from history.
Who should read it: Exclusively to novice investors who have not yet read anything other than, perhaps, The Richest Man in Babylon. The books for beginners are all more or less the same, although there is a focus on index funds. With a big stretch of an owl on the globe, this works in Russia too, but the restrictions are very significant. I will not express my personal opinion on how best to invest, yet this is not about me, but about the book, and everyone must decide for himself whether this approach suits him or not.
Summary: a good book with basic ideas, but I still want to form a full-fledged opinion after reading Walking Down Wall Street. I give the book 6 passive funds out of 10. Exclusively for the extremely strong simplification of the material. Again, I am not a CA, so my assessment should not be relevant to those who will have this book first about investments.
