There are many ways to learn about investing, but there’s often no substitute for good advice. And a good book on finance and investing is a great place to start. Here are six books for personal investing to start you down the path. Once you have a handle on investing and how you want to approach it, you might decide to schedule an appointment with a financial advisor.
Often considered the bible of long-term investing, A Random Walk, written by Princeton Economics Professor Burton Malkiel, established the eponymous random walk theory. It holds that asset prices on an open market, most notably stock prices, exhibit unpredictable price behavior over the short and mid term.
Prices bob and weave at random, like a drunk taking a random walk down the street. In essence, short-term and intraday prices don’t readily conform to any consistent patterns or trends.
Instead, as Malkiel makes clear, prices exhibit long-term trends. Investors can predict what their assets will do over a period of months and years. The result is one of the most powerful arguments in favor of buy-and-hold investing, and against short-term and day trading.
Written in 1949, The Intelligent Investor is considered a classic textbook on the subject of personal finance and investing. In particular, this book explains two core investing philosophies. The first is the value of long-term investing. Like A Random Walk, this book argues for the principles of holding your assets year-over-year instead of trying to trade for unpredictable, quick profits.
The Intelligent Investor is also one of the first and most thorough books on the subject of value investing. This is a fundamentals-based approach to investing, in which you look for companies with a strong business model whose share price doesn’t reflect that underlying strength. This book argues that an intelligent investor buys for the long haul, looking for good businesses rather than a quick flip. More importantly, it explains how to do that.
And how to avoid them. With this book, we turn from how to do it right to how to get investing wrong.
Written by Peter Mallouk, The Five Mistakes points out some of the most common mistakes you can make in modern investing. From active investing (a good way to lose money) to trying to time the market (an even better way to lose money), this books explains what investors often do wrong.
But that’s not the best part. We can give you a list of bullet points of common investment mistakes, or explain the problem with major errors like timing the market, but The Five Mistakes helps you to understand why people make these mistakes. It explains the thinking that goes into these errors, so that you can recognize yourself making them in advance.
After all, anyone can tell that they made a mistake in hindsight. It takes a savvy investor to catch themselves making a mistake before they lose the money. And this book will help you do just that.
Now, unlike the rest of our entries, this is not a how-to book, nor a book on investment theory. Instead, this is the story of what happened in 2008 when the markets went really, really wrong. The Big Short explains the subprime mortgage crash of the late 2000s, driven by a series of increasingly reckless bets and a breakdown of financial safety systems.
While it won’t teach you how to pick the right stocks, this book is still invaluable. First, it explains some very complicated sections of the market. After reading Michael Lewis’ book, you’ll understand what happened in the Great Recession, and the market forces that led to that unraveling. Second, this book is an excellent primer on risk. It explains what can happen when everyone gets caught up in a bubble, convinced that no risk is too great because no risk is actually real.
If you want to understand the market and how to invest wisely, The Big Short belongs on your shelf.
This is a book that appears, sooner or later, on most articles that recommend books in personal finance. There are several reasons for this, but one of the most important is the asset class involved.
The Little Book avoids the usual discussion of shares and stock picking and goes straight to the assets that should make up the bulk of your portfolio: funds. This book talks about the hows and whys of investing in portfolio-based assets like mutual funds and ETFs, with a particular emphasis on index funds.
Portfolio-based funds are an inherently diverse asset class. They are an excellent way to avoid the volatility that comes with picking individual stocks, and a great way to capture the kind of growth you usually lose by purchasing individual bonds. They are typically a strong investment for most investors, and The Little Book is an excellent primer on the subject.
Like all the books on this list, Andrew Tobias’ The Only Investment Guide has much to say about selecting wise investments. And the advice is, to be sure, very good.
As a SmartAsset reader, you probably won’t be surprised that we approve of Tobias’ emphasis on long-term investing. This book discusses the importance of fundamentals, buying into good companies instead of making quick, technical trades.
Beyond that, though, Tobias talks about how to manage your money around investments. Where will the money come from to make these investments, for example? Tobias discusses how you can budget and structure your finances to maximize your investable income.
What will happen once you make these investments? Tobias discusses tax management and inflation-adjustment, so that you can plan for the future of your portfolio after making withdrawals.
There are many ways to buy smart assets, but it’s important to think about what happens to your cash, as well.
Bottom Line
Learning how to invest is important for just about every household. These six books are for personal investing can help you get started, from teaching you how to think about the market to showing you how to avoid common mistakes.
Tips on Learning How to Invest
- Investment can seem incredibly intimidating. It’s one of the reasons that managed 401(k) programs are so popular. It doesn’t to be though. With just a little bit of education, you can start building your investing portfolio today.
- A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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