Thursday, January 20, 2011

4 Investing Insights from Burton Malkiel that Simply Make Sense

A few months back, I featured a helpful investment guide from Burton Malkiel's pioneering book, A Random Walk Down Wall Street. Here are a few more words of investing wisdom from the man who arguably started the field of personal finance, from this recent interview with Yahoo! Finance.

1. On the predictability of stock prices: “It is not that stock prices are capricious in any sense, it is quite the contrary. [Prices are] essentially unpredictable, not capricious, but unpredictable because true news is unpredictable."

2. On the efficient market hypothesis: “The efficient market hypothesis does not mean that prices are always right. We don’t know at any one time whether [they are] too high or too low.”

3. On the intrinsic value of stocks: “[A] stock ought to be worth the discounted present value of the whole stream of cash flows, future cash flows. Who knows what the future is going to be?”

4. On the difficulty of convincing people that it's practically impossible to beat the market: “Telling someone that you can’t beat the market, is like telling a six-year old that Santa Claus doesn’t exist.”
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