Frontier Advisors, writes in his recently published ebook "If You Can: How
Millennials Can Get Rich Slowly" on the importance of
having a basic understanding of finance in order to successfully save
for retirement. On his website and re-posted here with his
permission, he recommends reading the following books on investing.
Those of you who are seeking
investing enlightenment are not going to find much of it on the web.
I suggest you log off, power down
your computer, and read some books. Take your time. The months you
spend perusing this list will be well spent.
I'd recommend reading at least the
first four books listed before even thinking of getting your hands dirty with
1. "A Random Walk Down Wall Street" by Burton Malkiel
An excellent investment primer. It explains the basics of stocks, bonds, and
mutual funds, and will reinforce the efficient market concept.
2. "Common Sense on Mutual Funds" by John Bogle
It provides as much detail as you could ever want
about this important investment vehicle. Mr. Bogle is the founder and retired
chairman of The Vanguard Group, and has been an important voice in the industry
for decades. Beautifully written, opinionated, and highly recommended.
(The book also demonstrates the democratization that
has swept the investment industry in recent years. Until a decade ago the sort
of sophisticated mutual fund analysis described in his book was the brief of
just a handful of professionals with access to expensive proprietary databases
and mainframe computers. Almost all of Bogle's work was done with a subscription
to Morningstar and a statistically competent assistant, and could have been
performed by any small investor with similar software and ability.)
3. "Global Investing" by Roger Ibbotson and Gary Brinson
This is a beautifully written volume on the history of investible assets.
An informed investor cannot know enough about market history, and
this is the best single source in this area. Want to know what the returns for
U.S. stocks have been in each of the past 200 years? The price of gold for the
past 500 years? Interest rates and inflation for the past 800 years? It's all here.
As implied by the title, the authors also provide an excellent perspective
on the place of foreign assets in a diversified portfolio, and provide some
worthwhile insights on portfolio theory and the efficiency of the marketplace.
4. "What Has Worked in Investing" is a free pamphlet from Tweedy, Browne
A low-key sales pitch for their funds, it is also the best compilation
I've seen of the data supporting the value method.
5. "The New Finance, the Case Against Efficient Markets" by Robert Haugen
If you're intrigued by the Tweedy pamphlet and wonder why value investing
still works after all these years, this is your book. The prose is breezy, even
quirky Ben Graham meets Hunter Thompson on bad acid.
6. "Value Averaging" by Michael Edleson
An extremely useful how-to guide on deploying a lump sum of money among
multiple assets. Finally back in print as a Wiley Classic Edition.
7. "The Intelligent Investor" by Ben Graham
A popularized and more readable version of his earlier classic, "Security
Analysis," written with David Dodd. Although it has great relevance to the
markets in general and should be read by any serious investor, it is particularly
pertinent to those who feel compelled to buy individual stocks.
Many of today's most successful money managers obtained their original financial inspiration from these two books. It is always fun to look at excesses in the marketplace and ask, "What
would Ben say about this?" This 2003 edition benefits from annotation by one of
finance's most brilliant observers, Jason Zweig. (By the way, if you get bitten
by the Graham bug and decide to do "Security Analysis," make sure you read the
original 1934 edition, recently reprinted by McGraw-Hill.)
8. "Devil Take the Hindmost" by Edward Chancellor
You simply can't learn enough about market history, and Chancellor's story of
boom and bust in the capital markets, beginning in the 17th century, is pure mind candy. Supersedes Mackay's "Extraordinary Popular Delusions and the Madness of Crowds."
9. "The Millionaire Next Door" by Thomas Stanley and William Danko
If you can't save, it doesn't matter if your name is Warren Buffett.
If you think the road to happiness runs past a Beemer and a McMansion,
this book will scare you straight.
10. "Asset Allocation" by Roger Gibson
Covers much of the same ground as my own books with more emphasis
on the qualities of individual assets. For hard-core enthusiasts only; oriented
towards the financial advisor.
Unless you're a glutton for punishment, you won't read all of these books.
But however many you do, it's time for a treat: a small bon bon written in 1940 by
a man named Fred Schwed called "Where Are the Customers yachts?" The most recent
version from Wiley is graced with forewords by both Micheal Lewis and Jason Zweig should tell you something; aside from being snort-out-your-nose funny, it is also both profound and prescient, full of observations about the financial markets that would not become generally
accepted for a few more generations. You won't be sorry.