Thoughts on the Book: A Random Walk Down Wall Street

Random Walk

One in which future steps or directions cannot be predicted on the basis of past history

Around late last year, I sat down with my first ever book on investing/finance: A Random Walk Down Wall Street. I didn't know what to expect then.

At its core, the book says you should just buy index funds and make it the core of your portfolio, manage it passively. Of course, then buy some individual stocks if you want the excitement.

In other topics which stood out the most to me, The Fitness Manual presents exercises such as: You must start to save and start early, build reserves and insure yourself, be competitive with your reserves, make use of tax relief by putting money in retirement plans, understanding your investment objectives with a sleeping scale.

The Life Cycle Guide presents how you can assess your risk based on age, and how the allocations like cash, bonds, stocks and real estate (REITS) can be rebalanced as you age.

Behavioral finance is talked about, and the lessons from history also stood out to me.

In valuation, there are basically 2 techniques: Firm foundation and castles in the air. The techniques of fundamental and technical analysis are debated in the book.

Being a newbie, it was harder to understand the Efficient Market Hypothesis (EMH), Modern Portfolio Theory (MPT), pricing models and the debate on smart beta in the book.

I felt that the writing was written with the layman in mind, with many analogies and statistical examples. The first part of the book teaches you to always remember the past lessons and relate how your own psychology is often your biggest enemy in investing. The middle of the book got a little more complicated with EMH and MPT. The last part of the book finishes it off with how you can conduct the walk with indexing.

As it was the first serious investing book I read, it was generally easy to read and I found myself leaning slightly to some of what the book proposes. Of course, more than just being a teacher, the book also kicked off other habits. I started to read the Invest section of the TheSundayTimes. I started going to Kinokuniya to satisfy the craving for knowledge. I also bought and read The Intelligent Investor by Benjamin Graham which was a far more difficult book to digest.

Knowledge is power

Francis Bacon

Till next time,
K.

Comments

Value-for-money: Kinokuniya or Booksdepository

Meet Kinokuniya and Books Depository. The former has physical brick-and-mortar and online stores while the latter is solely an online retailer. For all the book lovers out there, I am sure these are some of the places we go in order to satisfy our book cravings. Kinokuniya was where I picked up my first book on investing. I summarised some of my thoughts on that book here . Since then, I have bought at least 6 other books on investment and other genres that cost at least $200 in total from Kinokuniya. Book lovers should also know that Kinokuniya is not the cheapest for pricing. I came to know Books Depository recently, and boy is there a huge difference in price. Let's compare an investment book, say Common Stocks and Uncommon Profits and Other Writings. On Books Depository : $18.56, original price: $30.03 On Kinokuniya : $37.40, member's price: $33.66 If we are to compare prices only, then we have a clear winner here. Kinokuniya is st

My Insurance Policies

Too expensive. A waste of money. I don't need insurance. I don't know how much I'm covered. My parents bought insurance for me and handles it. These are just some of what people say. I've had some friends who said that when the topic is broached. Insurance isn't easy to understand at all! So many policies, so many insurers. To be honest, I'll still choose to let my parents handle it all. But I'm no longer a little boy. I took it upon myself to understand all my policies that my parents bought and which are the policies that I bought on my own. As to how it really started, other than me turning 21, it was also partly due to me wanting to know what I am actually buying. So it is time to look into the policies I have. Readers who know more about insurance, feel free to correct me on any point. Gladly appreciate it! Life Insurance CPF Dependents Protection Scheme Covers every CPF member from 21 years old and insures $46,000 in even

Transitioning into an 'investor'

Nobody said it was going to be easy. I admit that I feel like giving up sometimes. Well, it's only human to choose the easiest path out. For the second half of 2015, I have been actively seeking higher returns on my savings in bank accounts, been busy reading about the current economy, markets and checking the Straits Times Index (STI). After these few months, I'd would to think that I have improved slightly in developing the mindset, slowly but surely transitioning into becoming an 'investor'. Hunting for free money In the later half of 2015, I have opened up an additional bank account: CIMB FastSaver which offers 1% p.a with no strings attached. I have not started work and I have not paid for my own bills to earn higher interest in local banks(e.g the OCBC 360 account) When I shared with my parents and friends, they were skeptical. A Malaysian bank? Perhaps it doesn't inspire much confidence when they see

Life and Finance

Search This Blog