3 must-read investing books for new investors

Image source: Getty Images

Ready to learn more about investing? Great! Owning stocks in strong, growing companies can dramatically transform your wealth over time.

Just think about how to own shares in a blood products company CSL Limited (ASX: CSL) could have turned a $ 1,000 investment into over $ 200,000.

If you want to sort out your finances and learn how to invest, here are 3 books that I think are must read to get you started:

1. Steadfast: Your Handbook to Financial Freedom by Tony Robbins

I know, I know, it’s Tony Robbins. But after reading this book cover to cover I think Unwavering is one of the best investing books you can get. In it, Robbins taps into his relationships with the world’s top investors, including Jack Bogle, Ray Dalio, and Howard Marks, to explain how to think about investing and how to get started.

The book explains the importance of minimizing fees, diversification, and being careful with whom you trust for advice. But I also think the book offers valuable information on how to choose individual investments and find big winners like CSL.

3 key points to remember:

  • As investors, we are betrayed by our emotions. We can avoid this by automating the process and allowing time to do the job.
  • When investing, focus on reducing risk and don’t let that get you down. It’s incredibly difficult to navigate your way after a big loss.
  • We need to look for asymmetric returns when we invest in individual companies, where the upside is much larger than the potential downside.

2. One Up on Wall Street by Peter Lynch

If you’re ready to start researching businesses on your own, Peter Lynch’s One Up on Wall Street is the starting point. Peter Lynch was one of the best mutual fund managers in the world in the ’70s and’ 80s, and he shows us how we can use our own “edge” to come up with some of the best investment ideas.

One of the most important ideas in the book is Lynch’s “two minute exercise”. It means being able to explain your reasons for investing in a business, what needs to happen for the business to be successful, and what the potential risks are.

From the best time to buy and sell to understanding business profits, this book is a great dive into the investment process even 30 years later.

3 key points to remember:

  • Every day in our lifetime, we come across potential investment ideas that may go under the radar of professional investors.
  • Choosing actions takes time and dedication. Be prepared to do your homework and devote time each week to research and business news.
  • Understand how the companies you own stock in make money, and write down the specific reasons you own stock.

3. The little book that makes wealth by Pat Dorsey

Some of the best companies are those with a strong competitive advantage or an economic gap. A lasting economic divide allows a business to reinvest its cash at high rates of return, which can turn a small initial investment into staggering wealth.

Dorsey was director of stock research for the investment research provider Morningstar Inc. and his book is a great guide to identifying businesses with strong moats, like A2 Milk Company Ltd (ASX: A2M) and Xero Limited (ASX: XRO).

3 key points to remember:

  • Competitive moats can take many forms, including change costs, network effects, cost benefits, and intangibles.
  • Moats can erode over time, especially as technology evolves.
  • For an overview of the moats covered in the book, you can listen to this fantastic podcast from The Investor’s Field Guide.

Stupid takeaways

Learning to invest can be daunting. But these 3 easy-going books will give you an incredible head start. They’ll teach you what to look for, what to avoid, and give you the confidence to get started.


Source link

Leave a Reply

Your email address will not be published.