Meet the Random Walk Theory

	Email this page Format for printing Become a Fool! Reuse/Reprint
	Related Links Fool's School Personal Finance Motley Fool Broker Center Online Seminars
	Discussion Boards Discuss This Column Ask a Foolish Question

By Selena Maranjian (TMF Selena)
June 30, 2003

Q. What's the "random walk" theory?

A. It says that a stock's next move is not predictable and not based on past moves. Burton Malkiel discusses it in detail in A Random Walk Down Wall Street. He concludes that people (or animals, presumably) choosing stocks randomly could do as well as the pros, and advocates investing in index funds.

The random walk theory is often discussed, and debated, among investors, and you can read a lot about it in past Fool articles. Some samples:

• Beating an Efficient Market
• Is Investing Success Just Luck?
• Risk and Randomness in the Market
• The Arrogance of Stock Picking
• Certain About Uncertainty

Fool co-founders David and Tom Gardner interviewed Malkiel on The Motley Fool Radio Show. Here's a snippet, in transcript form.

To learn more about investing Foolishly, visit our Fool's School. Or check out some of our inexpensive and well-regarded online seminars (which feature money-back guarantees). You can also learn all about brokerages and find one that's right for you in our Broker Center. 

If you have any questions, thoughts, or opinions on this column, share them with others on our Ask the Fool discussion board.

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.