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

SOME LAST REFLECTIONS ON
OUR WALK
We are now at the end of our walk. Let’s look back for a
moment and see where we have been. It is clear that the
ability to beat the averages consistently is extremely rare.
Neither fundamental analysis of a stock’s firm foundation of
value nor technical analysis of the market’s propensity for
building castles in the air can produce reliably superior
results. Even the pros must hide their heads in shame when
they compare their results with those obtained by the

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dartboard method of picking stocks.
Sensible investment policies for individuals must then be
developed in two steps. First, it is crucially important to
understand the risk-return trade-offs that are available and to
tailor your choice of securities to your temperament and
requirements. Part Four provided a careful guide for this part
of the walk, including a number of warm-up exercises
concerning everything from tax planning to the management
of reserve funds and a life-cycle guide to portfolio allocations.
This chapter has covered the major part of our walk down
Wall Street—three important steps for buying common
stocks. I began by suggesting sensible strategies that are
consistent with the existence of reasonably efficient markets.
The indexing strategy is the one I recommend most highly. At
least the core of every investment portfolio ought to be
indexed. I recognized, however, that telling most investors
that there is no hope of beating the averages is like telling a
six-year-old that there is no Santa Claus. It takes the zing out
of life.
For those of you incurably smitten with the speculative
bug, who insist on picking individual stocks in an attempt to
beat the market, I offered four rules. The odds are really

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stacked against you, but you may just get lucky and win big.
I also am very skeptical that you can find investment
managers who have some talent for finding those rare $100
bills lying around in the marketplace. Never forget that past
records are far from reliable guides to future performance.
Investing is a bit like lovemaking. Ultimately, it is really an
art requiring a certain talent and the presence of a mysterious
force called luck. Indeed, luck may be 99 percent responsible
for the success of the very few people who have beaten the
averages. “Although men flatter themselves with their great
actions,” La Rochefoucauld wrote, “they are not so often the
result of great design as of chance.”
The game of investing is like lovemaking in another
important respect, too. It’s much too much fun to give up. If
you have the talent to recognize stocks that have good value,
and the art to recognize a story that will catch the fancy of
others, it’s a great feeling to see the market vindicate you.
Even if you are not so lucky, my rules will help you limit
your risks and avoid much of the pain that is sometimes
involved in the playing. If you know you will either win or at
least not lose too much, and if you index at least the core of
your portfolio, you will be able to play the game with more

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satisfaction. At the very least, I hope this book makes the
game all the more enjoyable.