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This article originally appeared on MarketWatch.
Maybe you automatically funnel payroll deductions into your 401 (k) account. Either you tried crypto or, God forbid, bought a stock or two even on Robinhood.
But tweets, articles from Google searches, and Instagram screenshots of stock charts aren’t enough to make you a good investor; We must go further. And going further means reading books.
There are many great books on investing, much less on personal finance. But not all of them are suitable for the novice investor.
I’ve picked out four that every new investor should read on investing and one must-read on personal finance. They’re all easy to read, too.
“The Little Book of Common Sense Investing” by John Bogle
Most of the media and Wall Street call Warren Buffett the most influential investor of the last century. But as Buffett’s star and performance fade, the legacy of John Bogle, index fund pioneer and founder of Vanguard (which now manages more than $ 7 trillion), overtakes his. Even Buffett admitted that Bogle’s creation was beyond his own: he recommends investing in index funds and asks his heirs to invest 90% of their money in them as well.
This compact volume distills decades of Bogle’s investment wisdom into just over 200 pages. This sounds the main notes of the philosophy of this investment giant: picking winning stocks or actively managed mutual funds is folly; instead, buy the most diversified index funds, keep costs to a minimum, and let the double miracle of regular investing and compounding do the rest.
“Winning the Loser’s Game” by Charles D. Ellis
The eighth edition of this investing classic, originally released in 1985, arrived earlier this year, and its author sat down for a question-and-answer session with MarketWatch. Ellis was a follower of Bogle (he served on the board of Vanguard and co-chaired the investment committee of Yale with the late David Swensen) and he presents the case for low cost index funds from an angle. different: not only can individuals not win the loser’s game of beating the market; even professionals cannot.
So-called mediocre index funds beat 75% of all funds. And investors ultimately become winners by not losing.
“Extraordinary Popular Delusions and the Madness of Crowds” by Charles Mackay and “Manias, Panics, and Crashes” by Charles P. Kindleberger
These two investment classics together tell some of the greatest fads in modern market history, from Tulipmania to the South Sea Bubble (which nearly ruined one of the great minds in human history). , Sir Isaac Newton) to the stock market crash of 1929 and beyond.
Mackay’s account is historical while Kindleberger, a former professor at MIT, is more analytical, although the book is fairly readable. Kindleberger explains how crises develop, as lending loosens and speculation soars, and the anecdotes in both books should provide sufficient warning about the current excesses in everything.
But since many investors don’t have the imagination to connect the dots, I suspect they won’t. “Popular delusions start so early, spread so widely, and have lasted so long,” Mackay wrote, “that… fifty volumes would barely suffice to detail their history. “
These two, however, will do more than get the job done.
“The Psychology of Money” by Morgan Housel
When I was looking for good personal finance books, however, I felt like Diogenes was wandering the streets of Athens with a candle trying to find an honest man. (Spoiler alert: he’s still looking.)
What is there is often promotional and poorly written. Whether it’s “getting rid of all debt” like in Dave Ramsey’s “Total Money Makeover” or driving used Buicks and keep pinching pennies, no matter how rich you get, like in “The Millionaire Next Door”, these books push a great idea that will solve your financial problems. They are like articles in old Money or SmartMoney print magazines bloated into complete books.
Writers like Terry Savage and Liz Pulliam Weston, whom I know and respect, and Jane Bryant Quinn have written some great books on personal finance. These women were the pioneers of personal finance journalism and you can’t go wrong with everything they’ve written.
But for this book to read, I would recommend “The Psychology of Money” by Morgan Housel. Instead of a chore, this book was a pleasure to read. Housel, a former columnist for The Motley Fool, throws a lot of conventional wisdom out the window and says how you think about money is just as important as what you do with it.
He also says that stupid luck is a big factor in people’s success, that the most important market events are always unpredictable, and the goal of financial planning should be survival. “The ability to stay a long time, without annihilating or being forced to give up, is what makes the biggest difference,” he writes.
Starting early is essential, says Housel, and if you’re a new investor, these books are a great place to start.
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