Your very first year as an investor is the most important. The decisions you make your first year of investing will determine a lot about how you will invest for the rest of your career. Make the right choices, and you’ll be set up for long term success and wealth. But make the wrong choices at the start, and your investment career may not last. I’ve picked out 3 great books for the beginning financial investor. If you stay the course (a phrase you’ll see again and again in these books), you’ll want to add a lot more good books to your library. But as a newbie, you can do little better than applying the advice found in these three investing books.
The Boglehead’s Guide to Investing by Taylor Larimore, Mel Lindauer, & Michael LeBoeuf
John C. Bogle founded Vanguard, the low-cost mutual fund giant. Vanguard was initially derided for not even pretending to try to beat the market. And yet, year after year, they bring in market returns better than those reported by actively managed funds. The Vanguard way has become the industry standard, and is built on a simple idea: the behavior of individual stocks in all but impossible to predict. But the Market, taken as a whole, tends to grow over time. Vanguard places stockholder shares in companies based on an index, a list of those companies that exist at certain levels within the market. By latching your funds to a diverse array of companies, mutual fund investor dollars tend to rise with the overall trajectory of the market. Sure there are some down years, but for generations, the market has demonstrated an overall pattern of growth.
Mutual funds are a big selling point in Boglehead’s, an attempt at “idiot-proof” investment. But the book doesn’t stop there. It is also a tremendous primer about all corners of investment. You’ll learn basic investment theory and get a great explanation of industry jargon. This book will serve the new investor well and can be re-read at all stages of life, for reference, for inspiration, for instruction. Boglehead’s was the first book on investment I ever read, and I would recommend it for you as well.
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel by Benjamin Graham
This is an old book. Published in 1949, The Intelligent Investor has been in print ever since. If you really want to be an investor, this is the kind of book you should be reading because, like this book, investors need to last for the long haul. Graham’s theories have proved their value over decades. Warren Buffett got his start this way, describing his early investment philosophy as “85% Graham”.
Graham writes like a coach, sitting the new investor down and teaching them how to unemotionally evaluate stocks and bonds. By the end of this book, you’ll know most of what you need to guide you through your entire investment life. Recent editions have updated text and commentary by contemporary investment journalists. There are “easier” books in the world, but most people can handle this one, and it’s so good it has to make my list.
A Beginner’s Guide to Investing: How to Grow Your Money the Smart and Easy Way by Alex Frey
All right, here’s an easy one. Just because this one is simple to read doesn’t mean it’s light on content. Frey’s book is surprisingly “light” and immensely practical. By the end, you’ll understand how to answer fundamental questions like: How Much Money Do I Need to Retire? What Does a Diversified Portfolio Actually Look Like? Most important, you’ll know step-by-step actions to take you from where you are to where you want to be. You can buy this book from a variety of sellers for about $5. For a first book on investment, it’s hard to find a better option.
If you plan to set out on the road of investment, you’ve got to do your homework about the business of investing first. By understanding the basic tenets of investment, you’ll make sure that your first decisions are going to pay off. When young investors prosper, they have a much better chance of succeeding throughout their entire investment careers. I hope you’ll take the time to learn the basics, and I know these books will help you get there.