We can’t promise that adopting a similarly voracious book habit will bring you the fame and fortune of Mr. Buffett. However, we can promise that the following ten books will get you up to scratch on all things investing in 2018. Whether you’re an experienced trader or about to make your first investment these books will get you up to speed on everything you need to know about investing.
- Winning the Losers Game
- The Laws of Wealth
- The Intelligent Investor
- The Little Book of Common Sense Investing
- Balanced Asset Allocation
- Expected Returns
- Lords of Finance
- Against The Gods
- Template for Understanding Big Debt Crises
- Thinking, Fast and Slow
Best investing books for beginners
Winning the Loser’s Game
Now in its seventh edition, Winning the Loser’s Game is a personal finance must-read. The premise of the book is that individual investors can achieve far greater success working with financial markets instead of against them. That sentiment is especially pertinent in today’s volatile markets.
Drawing on his experience as managing partner of Greenwich Associates, Charles D. Ellis says the futility of “short-termism,” striving to attain relatively immediate performance by stock picking and market timing, compared to the greater benefits of long-term investment policy, is the key driver of investment success.
The Laws of Wealth
Daniel Crosby makes a compelling argument that what we can control – our own behavior – is what ultimately determines the long-term success of our investments.
A psychologist by training, Crosby argues that the behavioral shortcuts we use to make our everyday lives more efficient actually hinder our ability to be successful investors. His argument can be academic at times—he cites a dizzying number of studies—but it’s accompanied by enough real-world anecdotes (drawn on his professional experience as an asset manager) and easy-to-understand graphics that you’ll feel like you’re racing through the book.
Crosby breaks everything down to 10 rules of behavioral self-management and includes ‘What now?’ summary sections at the end of each chapter, pointing you toward what you should think, ask and do to put into practice the lessons you’ve learned.
The Intelligent Investor
Originally written in 1949 and hailed by Warren Buffett as the book that “changed his life,” The Intelligent Investor is considered a stock market bible.
The book is based on value investing, an investment approach author Benjamin Graham began teaching at Columbia Business School in 1928, but, we promise, still works. This approach of shielding investors from substantial error and teaching them to develop long-term strategies has since been honed and refined by generation after generation.
Graham takes the reader on a value investing journey, beginning with the history of the stock market—it’s more interesting than it sounds, trust us—and examines fundamental stock analysis and both positive and negative portfolio management before comparing real company stocks against each other
A recent revision includes updated commentary by financial journalist Jason Zweig, whose perspective crucially incorporates the realities of today’s market.
The book may be almost 100 years old, but its wisdom is timeless.
The Little Book of Common Sense Investing
According to John C. Bogle, founder and former CEO of The Vanguard Group, the problem with trying to beat the market is “it’s a loser’s game” and “the more the managers and brokers take, the less investors make.”
In The Little Book of Common Sense Investing, Bogle offers a solution: index funds.
He contends that “the simplest and most efficient investment strategy is to buy and hold all of the nation’s publicly held businesses at very low cost”. In theory, this is the only investment that guarantees a fair share of stock market returns.
Originally published in 2007, the book’s tenth-anniversary edition includes updated data and two new chapters.
Open a Wealthsimple account and benefit from the power of compound interest
Best books to learn advanced investing concepts
Balanced Asset Allocation
Balanced Asset Allocation introduces the core concepts behind constructing a balanced portfolio, which is vastly different from the traditional 60% stock, 40% bond allocation.
The emphasis is on understanding what fundamentally drives asset class returns and then building balanced portfolios based on these relationships.
Investment consultant Alex Shahidi walks you through the logic behind the balanced portfolio framework and provides step-by-step instructions on how to build the right portfolio. Shahidi also explains how to avoid the most common investment tactics that expose even well-balanced portfolios to unanticipated risks.
The end result is a portfolio indifferent to the economic climate, in contrast to conventional portfolios, which are often highly dependent on a strong economic outcome.
Investor and advisor Antti Ilmanen’s Expected Returns is a one-stop reference for measuring the expected returns of long-term investments.
The 2011 book begins examines how historical returns and academic theory could provide indicators for future returns. Ilmanen then discusses case studies on areas such as value-oriented equity selection and tail risks before wrapping up with a helpful set of takeaways.
Expected Returns uniquely combines the current state of financial theory and empirical evidence with useful practical insights but revolves around Ilmanen’s key message: Investors should concentrate more on expected performance and forward-looking tools, instead of the more comfortable extrapolation of historical data and trends.
Investing books to understand market history
Lords of Finance
Beginning with the First World War, Lords of Finance examines events as told through the personal histories of the four heads of the Central Banks of the United States, Great Britain, France, and Germany.
After the First World War, these central bankers attempted to reshape the world of international finance, supported by the gold standard. For a time, they succeeded. But then: the Great Depression.
Published in 2009, Lords of Finance explores the mistakes and triumphs of the time and was a go-to manual during the most recent global financial crisis.
It offers a potent reminder of the enormous impact that the decisions of central bankers can have and of the terrible human consequences that can result when they are wrong.
Against the Gods
In Against the Gods, Peter Bernstein explores human efforts to understand how risk and probability are so inextricably linked to the success and failure of a society.
The book begins with the earliest forms of gambling in Greece, continues through the beginnings of modern European mathematics and eventually dives into chaos theory. Along the way, Bernstein demonstrates that understanding risk is crucial for engaging in everything from game theory to winemaking.
The book is billed as a history of risk, but it’s primarily concerned with the history of money and the history of financial risk.
A Template for Understanding Big Debt Crises
Ray Dalio, the founder of hedge fund Bridgewater Associates, shares his template for how debt crises work and the principles for dealing with them effectively.
Dalio dissects numerous debt meltdowns from the last 100 years by converting what is a sprawling issue into a clear process of cause and effect, highlighting patterns that exist in even the most chaotic developments.
The template comes in three parts:
- Part one carefully breaks down Dalio’s template for dealing with debt crises
- Part two examines in depth the 2008 financial crisis, the 1930’s Great Depression, and the 1920’s inflationary depression of Germany’s Weimar Republic
- Part three offers 48 more case studies of domestic- and non-domestic currency debt crises, supported by detailed graphics.
The sum of the three parts makes Dalio’s central point crystal clear: Spread out the cost of the debt widely enough, and a crisis can be survived.
A book about economics and behavioral economics
Thinking, Fast and Slow
In Thinking, Fast and Slow, psychologist Daniel Kahneman examines how your thought processes can affect your success in investing.
The way we think is driven by two systems. System 1 is fast, intuitive, and emotional; System 2 is slower, more logical, and methodical. Everyone naturally harbors biases and preconceptions, but Kahneman explains that these can be understood (and neutralized) by knowing how the two systems shape our judgments and decisions.
By locking away biases and preconceptions, one can make investment decisions thinking clearly, rationally and analytically.
The book’s primary focus may be investing, but Kahneman also explains how biases can affect our everyday lives and other financial decisions.
All that reading got you emotionally invested in the idea of investing? Sign up to Wealthsimple, one of the only automated investing services to offer all of its clients unlimited human support. Every Wealthsimple client gets state of the art technology, low fees and the kind of personalized, friendly service you might not have thought possible from a low-priced investment service.