This is an updated version of an article originally published on May 14, 2020.
Learning financial concepts can seem daunting. Even finding a starting point can be difficult. If you search the internet for an investment term, you often end up with a complex alphabet soup financial conditions.
A better entry point may be to pick up an expert book that presents and explains financial concepts and investing topics thoughtfully and sequentially. Resources like these can help you realize that investing doesn’t have to be intimidating or complicated. Here are seven books that are great places to start.
The Smart Investor: The Definitive Book on Value Investing, by Benjamin Graham
Benjamin Graham is known as the father of value investing. He taught Warren Buffett, an icon of modern investing. His book establishes a framework for assessing the value of a business based on financial value, not short-term negotiation skills. In his book, Graham defined many important investment concepts such as the ‘safety margin’, which is an important contribution in the Morningstar Rating for Equities.
The revised edition includes comments from The Wall Street JournalJason Zweig’s personal finance columnist who contextualizes and modernizes the text. With Zweig’s commentary on each chapter, the book is north of 500 pages, which is a lot; however, this is a thorough introduction to investing. If going through means going through a few chapters, no judgment here.
A random walk on Wall Street: the proven strategy for a successful investment, by Burton Malkiel
If Graham is teaching you how to value a business, Burton Malkiel explains why it might not help you. The Princeton economist argues that markets are efficient because people analyze the value of a business. (Efficiency means that a company’s stock price reflects its current value, and its price will change when new information changes a company’s value.) Malkiel recommends earning market performance instead of it. beat, which he says is pretty good.
The book was first published in 1973, but updated editions have added contemporary topics. These include exchange-traded funds and investing techniques like smart beta (which Morningstar prefers to call âstrategic beta,â but I digress).
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Returns, by John Bogle
Investment icon John Bogle passed away on January 16, 2019, but he left an impressive legacy: He revolutionized the mutual fund industry and was a tireless advocate for investors. He was the pioneer of the index fund, which allowed investors to gain diversified exposure to the stock market at a very low cost, helping them keep more of their hard-earned money in their pockets. His book explains why low fees dramatically affect returns. It also covers topics such as mean reversion and tax costs.
The text is accessible and shorter than many other investing books, and it includes quotes from many prominent financial figures who support Bogle’s claims.
Morningstar 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances, by Christine Benz
Even if you understand the basics of investing, you might find it difficult to incorporate them into your personal finances. Performing them in manageable stages can be even more difficult.
That’s the beauty of this book. Morningstar’s Director of Personal Finance, Christine Benz, breaks down financial planning into small chunks that anyone can handle. You start with basics such as assessing your net worth and building an organizational system, and gradually move on to more advanced topics, including retirement investing, college savings, and planning. inheritance.
If you want to combine the basics of investing with concrete advice, this book is a great option.
Warren Buffett’s Essays: Lessons for American Businesses, by Warren Buffett
Many consider Warren Buffett to be the best modern investor. He rose to fame as CEO of Berkshire Hathaway, a position he has held for over 50 years. Berkshire Hathaway invests in high quality companies with high growth potential. But Buffett only buys such companies when they sell with an attractive margin of safety (tip of the hat to his mentor, Benjamin Graham). This makes Buffett an extreme stock picker. Under his reign, Berkshire Hathaway’s growth far exceeded that of the S&P 500, demonstrating the success of his approach.
Each year, Buffett writes an annual letter to Berkshire Hathaway shareholders, and all of them are posted on the company’s website for everyone to read. Buffett writes in a simple style that is accessible to investors of all skill levels, and he’s often a lot of fun too. “The Essays of Warren Buffett” weaves Buffett’s essays into a sequential and cohesive book.
The Bogleheads Guide to Investing, by Taylor Larimore, Mel Lindauer and Michael LeBoeuf
The advice of The Vanguard Group founder, John Bogle, is covered in this comprehensive guide for investors of all levels of experience. Divided into 23 short and light chapters, this book contains practical advice and explores many aspects of investing, from how to choose the right financial lifestyle for you to how to balance your emotions to truly master your investments. . This guide also provides external resources and other information for readers who want to dig deeper into any of the topics covered by longtime Bogleheads. A second edition of the book was published in 2014 and includes updated chapters on tax law changes, 401 (k) and 403 (b) pension plans and Roth backdoor IRAs.
Bogleheads are investment enthusiasts who honor Bogle and his advice, living a philosophy of “emphasizing starting early, living below means, saving regularly, broadly. diversification, simplicity and sticking to your investment plan regardless of market conditions â. Members actively discuss financial news and theory in a forum.
I will teach you how to be rich, by Ramit Sethi
Adviser and The New York Times Best-selling author Ramit Sethi describes a six-week program for 20- to 35-year-olds to learn the four pillars of personal finance – banking, savings, budgeting, and investing. Sethi shares his strategies for eliminating student loans and debt; find a balance with saving and spending each month; and prepare to buy a house or a car. In the latest edition, it includes stories from readers and insights into the psychology of investing. Sethi strives to show investors how to make investments that grow with them and their goals, and how they can spend their money on the things they want without feeling guilty.
Think, fast and slow, by Daniel Kahneman
This book examines financial planning and decision making from a psychological perspective. How do our biases and flaws influence our financial plans and judgment in the stock market? To find the answer, psychologist and economist Daniel Kahneman explores how two systems work together. “System 1” is fast, instinctive, and emotional, while “System 2” is slow, deliberative, and logical.
Deceived by Chance: The Hidden Role of Chance in Life and in the Markets, by Nassim Nicholas Taleb
This is another book that deals with how our emotions and past experiences affect the way we make decisions, especially financial, in our lives. Nassim Nicholas Taleb also focuses on the random. He believes humans seek out or offer explanations when there aren’t any, pointing out that sometimes things just happen. The search for these explanations then affects our financial decisions and can form certain habits.
The most important thing: common sense for the savvy investor, by Howard Marks
President and Co-Founder of Oaktree Capital Management, Howard Marks shares his journey in investment management and uses his experiences to shed light on what is happening in the stock market today. Marks challenges readers not to go with the crowd and instead invest with a more critical and contrarian approach.
The smart investor, by Benjamin Graham, Jason Zweig (Contributor), Warren Buffett (Contributor)
Benjamin Graham, known as the âFather of Value Investing,â writes about his strategies and thoughts on value investing and offers advice on how to achieve financial goals. His approach to investing inspired one of today’s most renowned investors, Warren Buffett. This is considered one of the most important books on value investing, and Graham reminds readers not to get caught up in every bounce in the stock market.
If You Can: How Millennials Can Get Rich Slowly, by William Bernstein
In this particularly short 50-page read, financial theorist and neurologist William Bernstein keeps finance simple. He teaches the basics to help young people get off on the right foot with their investments and retirement plans.
Bonus: Morningstar’s Long View Podcast
Broaden your investment horizons and look for the long term. Join hosts Christine Benz and Jeff Ptak weekly on The long view for in-depth conversations with leaders in investing and personal finance. All episodes are available on Morningstar.com and anywhere you listen to podcasts.