I have read the most recent version of Malkiel’s “A Random Walk Down Mainstreet,” and it made me thankful for those people who actually go out and try to make a return for themselves on the market. It provides a service that current leftist critiques of finance capitalism forget – they provide liquidity and aid price discovery. Now, that is just a small part of what they do, and the bulk of their profits are actual rents, and half of the people will end up losers whatever system they try – because there are some patterns in the market, but I am a believer that the market will stay irrational longer than I can stay liquid. I guess at heart I am pretty conservative about what I do with my money because people like Malkiel and Bogle speak to me so much.
"The Little Book of Common Sense Investing" is like a cover version of Malkiel’s classic, coming in with a shorter page count and being less of a sales document – though where the recent “Random Walk” made me curious about Wealthfront and reading this made me go to the Vanguard website, I still am paying more in fees than I should to the company-administered 403(b) even in their so-called Index Fund. This is a pretty well-written book, but it does have a bit of an odd structure, with short chapters closed by asides referencing the current point made with an outside source instead of integrating it in the main chapter. Overall, though, it is a strong case for indexing your funds and taking advantage of the work the active traders do. When you are buying the market, you are giving up the chance of some great stock or sector that goes parabolic, but it also prevents you from thinking you are clever and taking a short position in that same sector just before it goes parabolic. Buy and hold and buy again seems to be the best way to ensure that the money you do invest will be there when you need it at the end of your life. I’m not trying to get rich by any means, but I’m also not looking to degrade the quality of my life at the end.