A random walk down Wall Street : the time-tested strategy for successful investing

Preface
Acknowledgments from Earlier Editions
Part One
	STOCKS AND THEIR VALUE
		1. FIRM FOUNDATIONS AND CASTLES IN THE AIR
		What Is a Random Walk?
		Investing as a Way of Life Today
		Investing in Theory
		The Firm-Foundation Theory
		The Castle-in-the-Air Theory
		How the Random Walk Is to Be Conducted
		2. THE MADNESS OF CROWDS
		The Tulip-Bulb Craze
		The South Sea Bubble
		Wall Street Lays an Egg
		An Afterword
		3. SPECULATIVE BUBBLES FROM THE SIXTIES INTO THE NINETIES
		The Sanity of Institutions
		The Soaring Sixties
		The New “New Era”: The Growth-Stock/New-Issue Craze
		Synergy Generates Energy: The Conglomerate Boom
		Performance Comes to the Market: The Bubble in Concept Stocks
		The Nifty Fifty
		The Roaring Eighties
		The Return of New Issues
		Concepts Conquer Again: The Biotechnology Bubble
		ZZZZ Best Bubble of All
		What Does It All Mean?
		The Japanese Yen for Land and Stocks
		4. THE EXPLOSIVE BUBBLES OF THE EARLY 2000 S
		The Internet Bubble
		A Broad-Scale High-Tech Bubble
		Yet Another New-Issue Craze
		TheGlobe.com
		Security Analysts $peak Up
		New Valuation Metrics
		The Writes of the Media
		Fraud Slithers In and Strangles the Market
		Should We Have Known the Dangers?
		The U.S. Housing Bubble and Crash of the Early 2000s
		The New System of Banking
		Looser Lending Standards
		The Housing Bubble
		Bubbles and Economic Activity
		Does This Mean That Markets Are Inefficient?
Part Two
	HOW THE PROS PLAY THE BIGGEST GAME IN TOWN
		5. TECHNICAL AND FUNDAMENTAL ANALYSIS
		Technical versus Fundamental Analysis
		What Can Charts Tell You?
		The Rationale for the Charting Method
		Why Might Charting Fail to Work?
		From Chartist to Technician
		The Technique of Fundamental Analysis
		Three Important Caveats
		Why Might Fundamental Analysis Fail to Work?
		Using Fundamental and Technical Analysis Together
		6. TECHNICAL ANALYSIS AND THE RANDOM-WALK THEORY
		Holes in Their Shoes and Ambiguity in Their Forecasts
		Is There Momentum in the Stock Market?
		Just What Exactly Is a Random Walk?
		Some More Elaborate Technical Systems
		The Filter System
		The Dow Theory
		The Relative-Strength System
		Price-Volume Systems
		Reading Chart Patterns
		Randomness Is Hard to Accept
		A Gaggle of Other Technical Theories to Help You Lose Money
		The Hemline Indicator
		The Super Bowl Indicator
		The Odd-Lot Theory
		A Few More Systems
		Technical Market Gurus
		Why Are Technicians Still Hired?
		Appraising the Counterattack
		Implications for Investors
		7. HOW GOOD IS FUNDAMENTAL ANALYSIS?
		The Views from Wall Street and Academia
		Are Security Analysts Fundamentally Clairvoyant?
		Why the Crystal Ball Is Clouded
		1. The Influence of Random Events
		2. The Production of Dubious Reported Earnings through “Creative” Accounting Procedures
		3. Errors Made by the Analysts Themselves
		4. The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds
		5. The Conflicts of Interest between Research and Investment Banking Departments
		Do Security Analysts Pick Winners?—The Performance of the Mutual Funds
		Can Any Fundamental System Pick Winners?
		The Verdict on Market Timing
		The Semi-Strong and Strong Forms of the Efficient-Market Theory
		The Middle of the Road: A Personal Viewpoint
Part Three
	THE NEW INVESTMENT TECHNOLOGY
		8. A NEW WALKING SHOE: MODERN PORTFOLIO THEORY
		The Role of Risk
		Defining Risk: The Dispersion of Returns
		Illustration: Expected Return and Variance Measures of Reward and Risk
		Documenting Risk: A Long-Run Study
		Reducing Risk: Modern Portfolio Theory (MPT)
		Diversification in Practice
		9. REAPING REWARD BY INCREASING RISK
		Beta and Systematic Risk
		The Capital-Asset Pricing Model (CAPM)
		Let’s Look at the Record
		An Appraisal of the Evidence
		The Quant Quest for Better Measures of Risk: Arbitrage Pricing Theory
		The Fama-French Three-Factor Model
		A Summing Up
		10. BEHAVIORAL FINANCE
		The Irrational Behavior of Individual Investors
		Overconfidence
		Biased Judgments
		Herding
		Loss Aversion
		Pride and Regret
		Behavioral Finance and Savings
		The Limits to Arbitrage
		What Are the Lessons for Investors from Behavioral Finance?
		1. Avoid Herd Behavior
		2. Avoid Overtrading
		3. If You Do Trade: Sell Losers, Not Winners
		4. Other Stupid Investor Tricks
		Does Behavioral Finance Teach Ways to Beat the Market?
		11. POTSHOTS AT THE EFFICIENT-MARKET THEORY AND WHY THEY MISS
		What Do We Mean by Saying Markets Are Efficient?
		Potshots That Completely Miss the Target
		Dogs of the Dow
		January Effect
		“Thank God It’s Monday Afternoon” Pattern
		Hot News Response
		Why the Aim Is So Bad
		Potshots That Get Close but Still Miss the Target
		The Trend Is Your Friend (Otherwise Known as Short-Term Momentum)
		The Dividend Jackpot Approach
		The Initial P/E Predictor
		The “Back We Go Again” Strategy (Otherwise Known as Long-Run Return Reversals)
		The “Smaller Is Better” Effect
		The “Value Will Win” Record
		Stocks with Low Price-Earnings Multiples Outperform Those with High Multiples
		Stocks That Sell at Low Multiples of Their Book Values Tend to Produce Higher Subsequent Returns
		Does “Value” Really Trump Growth on a Consistent Basis?
		Why Even Close Shots Miss
		And the Winner Is…
		The Performance of Professional Investors
		A Summing Up
Part Four
	A PRACTICAL GUIDE FOR RANDOM WALKERS AND OTHER INVESTORS
		12. A FITNESS MANUAL FOR RANDOM WALKERS
		Exercise 1: Gather the Necessary Supplies
		Exercise 2: Don’t Be Caught Empty-Handed: Cover Yourself with Cash Reserves and Insurance
		Cash Reserves
		Insurance
		Deferred Variable Annuities
		Exercise 3: Be Competitive—Let the Yield on Your Cash Reserve Keep Pace with Inflation
		Money-Market Mutual Funds (Money Funds)
		Bank Certificates of Deposit (CDs)
		Internet Banks
		Treasury Bills
		Tax-Exempt Money-Market Funds
		Exercise 4: Learn How to Dodge the Tax Collector
		Individual Retirement Accounts
		Roth IRAs
		Pension Plans
		Saving for College: As Easy as 529
		Exercise 5: Make Sure the Shoe Fits: Understand Your Investment Objectives
		Exercise 6: Begin Your Walk at Your Own Home—Renting Leads to Flabby Investment Muscles
		Exercise 7: Investigate a Promenade through Bond Country
		Zero-Coupon Bonds Can Generate Large Future Returns
		No-Load Bond Funds Are Appropriate Vehicles for Individual Investors
		Tax-Exempt Bonds Are Useful for High-Bracket Investors
		Hot TIPS: Inflation-Indexed Bonds
		Should You Be a Bond-Market Junkie?
		Exercise 8: Tiptoe through the Fields of Gold, Collectibles, and Other Investments
		Exercise 9: Remember That Commission Costs Are Not Random; Some Are Lower than Others
		Exercise 10: Avoid Sinkholes and Stumbling Blocks: Diversify Your Investment Steps
		A Final Checkup
		13. HANDICAPPING THE FINANCIAL RACE: A PRIMER IN UNDERSTANDING AND PROJECTING RETURNS FROM STOCKS AND BONDS
		What Determines the Returns from Stocks and Bonds?
		Four Eras of Financial Market Returns
		Era I: The Age of Comfort
		Era II: The Age of Angst
		Era III: The Age of Exuberance
		Era IV: The Age of Disenchantment
		Handicapping Future Returns
		14. A LIFE-CYCLE GUIDE TO INVESTING
		Five Asset-Allocation Principles
		1. Risk and Reward Are Related
		2. Your Actual Risk in Stock and Bond Investing Depends on the Length of Time You Hold Your Investment
		3. Dollar-Cost Averaging Can Reduce the Risks of Investing in Stocks and Bonds
		4. Rebalancing Can Reduce Investment Risk and Possibly Increase Returns
		5. Distinguishing between Your Attitude toward and Your Capacity for Risk
		Three Guidelines to Tailoring a Life-Cycle Investment Plan
		1. Specific Needs Require Dedicated Specific Assets
		2. Recognize Your Tolerance for Risk
		3. Persistent Saving in Regular Amounts, No Matter How Small, Pays Off
		The Life-Cycle Investment Guide
		Life-Cycle Funds
		Investment Management Once You Have Retired
		Inadequate Preparation for Retirement
		Investing a Retirement Nest Egg
		Annuities
		The Do-It-Yourself Method
		15. THREE GIANT STEPS DOWN WALL STREET
		The No-Brainer Step: Investing in Index Funds
		The Index-Fund Solution: A Summary
		A Broader Definition of Indexing
		A Specific Index-Fund Portfolio
		ETFs and the Tax-Managed Index Fund
		The Do-It-Yourself Step: Potentially Useful Stock-Picking Rules
		Rule 1: Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years
		Rule 2: Never pay more for a stock than can reasonably be justified by a firm foundation of value
		Rule 3: It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air
		Rule 4: Trade as little as possible
		The Substitute-Player Step: Hiring a Professional Wall Street Walker
		The Morningstar Mutual-Fund Information Service
		The Malkiel Step
		A Paradox
		Some Last Reflections on Our Walk
		A Final Word
		A Random Walker’s Address Book and Reference Guide to Mutual Funds