Books to Help You Plan Your Finances Properly
An Introduction to Sound Investment Policy, Risk Management, & History of Financial Markets
The Investment Answer
If you only read one book on this recommended reading list, this should be it. Faced with only 6 months to live, Mr. Murray, a former Wall Street insider, set out to explain what every investor needs to know in order to properly manage their investments and avoid getting ripped off. This book is very clear, concise, and easily read in one sitting. It's also a book most financial advisors would not want their clients to read.
The Only Investment Guide You'll Ever Need
Since first published in 1978 this book has been read by over a million Americans. As the author states, "It is the only investment guide you will ever need not because it will make you rich beyond further need for money, which it won't, but because most investment guides you don't need." Plainly written, this book will help you obtain a financially stable future.
The Intelligent Investor
Described by Warren Buffet as, “By far the best book on investing ever written”, this is an excellent guide for understanding the concept of value investing. Graham describes the differences between true investors and speculators: true investors adopt fundamentally sound processes to determine security selection while speculators base their decisions on fancy. Written in 1934, first published in 1949, and last updated by Graham in 1973, this book continues to withstand the test of time. Updated commentary by Jason Zweig weighs current events against each chapter of this truly great book.
A Random Walk Down Wall Street
In this essential book on market randomness, Malkiel describes market efficiency and historic market bubbles with a nod to Graham’s famous quote “In the short run the market is a voting machine, but in the long run it is a weighing machine.” For those who believe anyone can consistently time the market, this book will change the way you view the world of investing.
The Intelligent Asset Allocator
Readers beware: The The Intelligent Asset Allocator should be read and digested slowly. With a little effort, most readers will come away with a new sense of reality. Though a bit technical at times, Bernstein's brilliance shines with his objective review of markets, market participants, and construction of sound portfolio process and policy.
The Investor's Manifesto
Yet another fine book by the brilliant Dr. Bernstein. Somewhat confounded by relatively low circulation of his first two books, Bernstein attempted to make this book even more accessible. Though this book does not provide much new additional information from his first two, Bernstein does spend a bit more time discussing behavioral finance.
Pioneering Portfolio Management
David Swensen, the highly successful manager of the Yale Endowment, reveals how a small collection of investment vehicles can be combined to provide excellent performance. Though a bit technical, this influential book changed the way institutional money managers manage portfolios. It can serve as a guide for managing your own portfolio much in the same way the “big boys” manage theirs.
Unlike Pioneering Portfolio Management, this book by David Swensen is geared to the individual investor. Swensen provides a good overview of investments to avoid, necessary core investments, satellite investments, prudent portfolio management, and reasons why active portfolio management most often fails. A must read for anyone serious about preserving and growing their wealth.
The Black Swan
Common Sense on Mutual Funds
Jack Bogle, founder of Vanguard, revolutionized the mutual fund market. He shows how many investors are being scammed by investment managers and what people can do to defend themselves. Mr. Bogle’s creation of a low-cost customer friendly mutual fund institution was one of the best things to ever happen for investors.
Winning the Loser's Game
Very accessible for everyone, this book will show you why 90% of professional money managers fail to beat the market and why good process and discipline is critical to your success. Ellis convincingly details why market timing is a loser’s game and how to overcome it. This is another book brokers will not want you to read as you will learn how to beat them at their own game.
Stocks for the Long Run
Want financial data? Jeremy Siegel, finance professor at the Wharton School, provides an astonishing amount of data in this relatively short book. Prof. Siegel provides financial data from 1802 through 2007 including: the relative performance of asset classes, relative risk of each asset class & style, IPO performance, bubble economies & aftermath, fundamental measures as predictors of future returns, monetary policy, business cycles, technical analysis, calendar anomalies, etc., etc., etc. Warning: A good understanding of macro economics, finance, and modern world history will lend greatly to ease digestion of the massive amount of data presented.
The Future for Investors
When comparing this book to Stocks for the Long Run, Jeremy Siegel provides much less data and a more common sense look at what financial decision-making processes have worked in the past and which will likely continue to work into the future. Though there is some overlap with his previous book, this one is more accessible. Prof. Siegel also delves into potential repercussions of coming shifts in world wide demographics as well as potential solutions to problems that aging populations create. You'll definately find valuable perspectives in this book you won't find in other books on this web page.
Capital Ideas is a fantastic book for anyone seeking to learn how modern portfolio management came to be. It was not investment managers or brokers that discovered prudent portfolio management techniques we now take for granted, but a small group of inquisitive mathematicians with enough stamina to charge against them. This group of pioneers crushed the theories of technical analysis and ability to time the market. It’s actually hard to believe so many investors still think they can do just that.
The Power of Gold
The Power of Gold provides a sweeping history of not only mankind's relationship with gold, but also the different ways in which we have attempted to store, trade, and consume wealth. I have little doubt that this book will change the way you view gold and money. Be warned, though, that it's helpful to approach this book having general knowledge of world history from the Egyptians to modern times.
Michael Lewis, a former bond salesman at Salomon Brothers, provides a behind-the-scenes glimpse of activity at institutional brokerages. If you trust Wall Street traders now, you won’t after reading this book. It provides an insider's look at the hubris of Wall Street salesmen (yes, they are merely salesmen) and how their interests are definitely not aligned with your own. This book also proves to be insightful for those seeking to understand the history of the S&L crisis and how those events relate to the recent mortgage market meltdown.
The Big Short
The Big Short is an excellent book about the mortgage meltdown, those that gamed the rating agencies, those that fell victim to false beliefs and greed, and those that profited by creating investments to short the madness of the crowd. If you liked Liar’s Poker, you’ll love The Big Short. The book provides yet another example of how investment banks and brokerages are not your friend. In fact, they often fall prey to their own hubris.
Devil Take the Hindmost
Devil Take the Hindmost is a must. This well-organized easy-to-read book puts historical market manias and crashes into perspective to help you become a well-reasoned investor today. In our time we have witnessed the internet and real estate bubbles. Unfortunately for many investors, sitting on the sidelines while others made what seemed were tremendous profits was too much for these investors to stand. In the end, it wasn’t the devil that took the hindmost; it was investors that lacked a well-reasoned approach to investing. This book will help you become a well-reasoned investor with the historical perspective you need to be successful.
The Ascent of Money
The Ascent of Money fills in many of the blanks not covered in Devil Take the Hindmost. Furguson leads us through the earliest forms of money, Europeans’ obsession with precious metals, evolution of banking, land investments, manipulations, bubbles, and collapses. A good understanding of the history of money, financial markets, and banking will help you be a better investor today.
Manias, Panics, and Crashes
You cannot learn enough about market history. Though this book outlines the major market manias, panics, & crashes as well as private and governmental responses to them, it tends to do so in a fairly rapid fire manner which makes it somewhat difficult to track. Nonetheless, this book provides a great perspective on the effects of easy credit, speculative bubbles, subsequent crashes, and recoveries that have existed in the past and will continue into the future. Before undertaking a read, you should be fairly well versed in economics, especially in money and banking.
Robert Shiller, a Yale economics professor, provides an in-depth look at potential causes of mispricings within financial markets, tell tale signs of mispricings, and potential cures for avoiding the long run consequences of irrational speculation in the future. If even after the last dot-com and housing bubbles you still think it's easy to spot, avoid, and understand market mispricings, then this book is for you. It's one of the most relevant and thorough books on speculative bubbles you will find.
Reminiscences of a Stock Operator
Based on the seemingly successful stock speculator Jesse Livermore, this book provides valuable insight into stock markets in the early 20th century and how not much has changed before or after that time. Livermore made and lost millions in stock speculation over his lifetime, and finally died broke even after cleaning up in the crash of 1929. Stock speculation can make you either rich or poor, but eating Alpo in your retirement years is not a good outcome. This book will help you put speculation into perspective while being entertained.
Your Money and Your Brain
As the saying goes: "We have met the enemy and he is us". Most investors too are their own worst enemy. This book delves into the anatomy and evolution of the human brain to explain why we do the things we do even if those actions do not make rational sense and may actually harm us over the long term. Understanding the causes and reactions of fear and over-optimism will help you become a more successful investor.
The Only Guide to a Winning Bond Strategy You'll Ever Need
Despite its kitschy title, The Only Guide To A Winning Bond Strategy You’ll Ever Need is a very good summary for anyone seeking to learn more about bonds and bond markets. Though bond investing is often seen as the ho-hum portion of investment portfolios, bonds bring important stability in the short run. Therefore it’s critical for investors to understand the attributes of different bonds before allocating money to them. Though I do disagree with some points made in the book, you’ll definitely be a better and more informed bond investor after reading it.
The Only Guide to Alternative Investments You'll Ever Need
The title is unfortunate, but The Only Guide To Alternative Investments You’ll Ever Need is an excellent book which describes investments outside the more typical stock and bond investments. Before being swayed into buying an “alternative investment” by some slick salesperson or fancy descriptor, read this book. Understanding exactly what you are buying, the risks involved, and whether the asset compliments your overall investment strategy is critical to your financial success.
The Bond Book, Third Edition
Though stocks grab the headlines, bonds play a critical role in every investment portfolio. Digging deeper, investors will find that bonds are not only interesting, but are much more complex than stocks in general. In The Bond Book, Annette Thau delivers a great overview of what every investor should know about the bond portion of their investment portfolio. As bonds are meant to be a portfolio's safe harbor during times when the stock market is turbulent, it's incumbent upon every investor to learn more about them. This book provides that fundamental understanding.
The ETF Book
Exchange Traded Funds (ETFs) in the Untied States have grown from only 1 in 1993 with assets of $464 million to 916 with assets of $882 billion as of September 2010. With such an explosion in popularity, ETFs have become simply too large to ignore. In The ETF Book, Richard Ferri provides a thorough discussion of what every investor should know about ETFs. As with many investment "products", most ETFs have been made to be sold, not bought. This book provides investors with the fundamental understanding they need before entering the ETF market.
All About Asset Allocation
All About Asset Allocation is another terrific book which explains the why and how of choosing an asset allocation for your investments. As your asset allocation is the #1 determining factor of your financial success or failure, you cannot learn enough about the issue. Though I disagree with the author’s use of junk bonds within portfolios, overall this book is an excellent overview of investment asset allocation strategies.
Asset Allocation, 4th Ed
Though geared mainly toward financial planning professionals, this is a very well written book for those desiring a deeper understanding of the mathematics of asset allocation. It also provides a further understanding of the importance asset allocation plays in managing a portfolio's anticpated risk and return profile according to investor goals and preferences.
Though geared mainly toward financial planning professionals, this book should be of interest to anyone nearing or in retirement. Though it may be a bit techinical at times, the reader will come away with an understanding of how portfolio management differs in retirement, why cash flow flooring is so important during retirement years, the calculation of flooring needs, and alternative solutions for flooring. Since the author's audience is all types of investment professionals (including those that are sales oriented), he does stray somewhat from advice you'll likely hear from fee-only NAPFA professionals, but overall the book is quite good and worth a read.
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