A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

Part Four

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A PRACTICAL GUIDE FOR
RANDOM WALKERS AND
OTHER INVESTORS

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12

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A FITNESS MANUAL FOR
RANDOM WALKERS
In investing money, the amount of interest you want should
depend on whether you want to eat well or sleep well.
—J. Kenfield Morley, 
Some Things I Believe
P
ART FOUR IS
a how-to-do-it guide for your random
walk down Wall Street. In this chapter, I offer general
investment advice that should be useful to all investors, even
if they don’t believe that securities markets are highly
efficient. In chapter 13, I try to explain the recent fluctuations
that have occurred in stock and bond returns and show how
you might estimate what the future holds. I also indicate how
you can at least roughly gauge the long-run returns you are

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likely to achieve from different investment programs. In
chapter 14, I present a life-cycle investment guide indicating
how the stage of your life plays an important role in
determining the mix of investments that is most likely to
enable you to meet your financial goals.
In the final chapter, I outline specific strategies for equity
investors who believe at least partially in the efficient-market
theory or who are convinced that even if real expertise does
exist, they are unlikely to find it. But if you are sensible, you
will take your random walk only after you have made detailed
and careful preparations. Even if stock prices move
randomly, you shouldn’t. Think of the advice that follows as
a set of warm-up exercises that will enable you to make
sensible financial decisions and increase your after-tax
investment returns.