Let Us Begin Our Random Walk

Before I begin I would like to thank Johnny Chan for creative inspiration, Mike Alfred for all of the invigorating intellectual discourse and of course Burton Malkiel for his seminal investment treatise "A Random Walk Down Wall Street." Before I sat down to start this blog I took the time to go back and re-re-read Malkiel's book (yes, for the third time). What I found was exactly what I had remembered; a concise, pragmatic, disciplined approach to building wealth. I will use Malkiel's thoughts as a jumping off point to ignite discussion and analyze the wealth building impact of his suggestions.

So what is a Random Walk? Malkiel's describes it as follows:

"A random walk is one in which future steps or directions cannot be predicted on the basis of past actions. When the term is applied to the stock market, it means that short-run changes in stock prices cannot be predicted."

A simple notion with profound implications for the world of investing as we know it. To be sure Burton Malkiel wasn't the first to make the connection between a random walk in the world of mathematics and physics to the world of finance. From physics we know that for something to be a random walk it essentially must fulfill the following three requirements:

1) There is a starting point.
2) The distance from one point in the path to the next is constant.
3) The direction from one point in the path to the next is random.

Thus we begin. This shall be the starting point of our Random Walk to Wealth. Our goal is to apply Malkiel's pragmatic approach to the world of personal finance today. The next step in our random walk is just that; random. Yet, with a little bit of luck, each step on our random walk will be a step in the direction of increased financial clarity, understanding and ultimately wealth.