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Thereâ€™s great information out there, but where do you start?
This holiday season, even as brick-and-mortar bookstores go the way of the dodo bird, there are more choices than ever when it comes to financial education and investing. Too many choices, perhaps. Sifting through the vast landscape of information to get to the good stuff can feel like sifting through sand. Some of the choices available to you may have a great marketing hook, a clever title, a notable author, or all three. But the quality of the information inside varies greatly.
Book recommendations can be a difficult trick, because we all have different tastes and investment approaches. But the selections below offer significant appeal for both those looking to be a better investor and those who simply want to be better versed in overall economic principles; the latter can lead to the former.
The Wealth of Nations by Adam Smith
This book is probably a bit like War and Peace—more often referenced than actually read. But if that’s true, it would be a shame, because Smith’s 1776 masterpiece remains fundamental to understanding economic principles. Reading it won’t give you current investment strategies. How could it; the book was written about 235 years before the Kindle became ubiquitous. But it will certainly increase your understanding of economic models and what drives the movement of the markets.
The Intelligent Investor by Benjamin Graham
This highly acclaimed book, cited by legendary investor Warren Buffett and many others as their inspiration, won’t keep you up-to-date on the latest investment strategies. That’s because it was written in 1949. But it will give you a great feel for investment basics that is as financially sound and pertinent today as it was during the Truman administration. It is considered by many to be the “Bible” of value investors. Value investors are great investors to emulate.
Common Stocks and Uncommon Profits by Philip A. Fisher
By now, you’ll begin to notice a pattern to my selections. The best investment strategies are the tried and true, and they’ve been around for a long time. The best investment books espouse those strategies. What makes Philip Fisher’s Common Stocks and Uncommon Profits stand out from the crowd is his unrelenting focus on straying from the investment crowd to find value, and his step-by-step approach to learning how to identify that value.
For the Do-it-Yourselfers
Beating the Street by Peter Lynch
Peter Lynch is a well-known and highly successful fund manager who brings years of investment experience to the table. But the refreshing thing about Lynch’s Beating the Street (1994) and its 2000 follow-up, One Up on Wall Street, is that they’re written not for his experienced investor colleagues, but for regular folks who want to be good investors. The advice in both books is logical, and though some sections may seem like common sense to even investors with the mildest of experience, the tenets espoused in Beating the Street will serve you well through a lifetime of investing. Lynch also has a unique voice and a gift for pithy anecdotes, so neither book feels like coursework. The key takeaway from both books is how to categorize different companies you’re considering investing in, and using those categories to find long-term value.
Common Sense on Mutual Funds by John Bogle
Bogle is widely seen as the pioneer of the index fund, and for good reason. Index funds are a form of passive investing in which the fund is structured to track a stock or bond index such as the S&P50 or the Barclays Capital Aggregate Bond Index, among others. In this 1999 book, Bogle outlines why index funds often perform “active” fund management. Along the way, Bogle successfully argues against what I call “investment guru” practices that tend to benefit the dealer/broker more than the investor. Bogle’s book explains why that is counterproductive for investors, and along the way provides other great nuggets of investment advice. There’s a 10th anniversary edition of this book also that provides some great updates.
None of these selections are a big secret or a groundbreaking recent find, but if you haven’t read them, they’re new to you--and a great place to start building a wealth of investment knowledge.
In part 2, we’ll look at some general guidelines for avoiding bad advice from financial books.