Gen Zers might be getting their investing knowledge from Reddit and TikTok these days, but the value of a good old-fashioned book endures. Many of these books were written with retail investors in mind, with step-by-step instructions on many things new investors find daunting, like how to screen funds, how to build a portfolio, how to maximize tax efficiency and so on.
Other books offer a jargon-free overview of how the capital markets work and provide beginner-friendly breakdowns of asset classes like stocks, bonds and alternative investments. Most of these books were also written by prominent figureheads in the investment industry who had a reputation for looking out for the interests of retail investors.
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If you’re looking to kick-start an investment portfolio, then these 11 investing books — in no particular order — are definitely worth adding to your reading list:
1. “A Random Walk Down Wall Street” by Burton Gordon Malkiel
2. “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns” by John Bogle
3. “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor” by John Bogle
4. “You Can Be a Stock Market Genius” by Joel Greenblatt
5. “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb
6. “The Intelligent Investor” by Benjamin Graham
7. “All About Asset Allocation” by Richard Ferri
8. “The Bogleheads’ Guide to Retirement Planning” by Taylor Larimore, Mel Lindauer, Richard Ferri and Laura Dogu
9. “Thinking, Fast and Slow” by Daniel Kahneman
10. “The Big Short: Inside the Doomsday Machine” by Michael Lewis
11. “Your Essential Guide to Sustainable Investing” by Larry Swedroe
1. “A Random Walk Down Wall Street” by Burton Gordon Malkiel
Investors still contemplating whether or not to try their hand at stock picking should give “A Random Walk Down Wall Street” a read to understand its many challenges. Written by Princeton University economist Burton Gordon Malkiel, this book was responsible for popularizing the “random walk” hypothesis. In his book, Malkiel outlines the futility of trying to outperform the market and predict stock prices, citing academic research showing the flaws behind technical and fundamental analysis. He concludes that readers should eschew stock picking and actively managed mutual funds, and instead stick to low-cost index funds to match the market’s long-term average return.
2. “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns” by John Bogle
John Bogle, the late founder and chairman of the Vanguard Group, is a legend among passive investors, many of whom refer to themselves as “Bogleheads” as a tribute to his legacy. In “The Little Book of Common Sense Investing,” Bogle outlines his simple yet effective strategy for matching the market using low-cost index funds. The book is full of timeless behavioral finance advice on how to stay diversified, manage risk, keep biases in check, and avoid hype and fads. Above all, the book exemplifies Bogle and Vanguard’s philosophy of low fees, high diversification and staying the course.
3. “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor” by John Bogle
Exchange-traded funds, or ETFs, might be the trend these days, but there’s still merit in investing in good old-fashioned mutual funds. New mutual fund investors would do well to read another Bogle book, “Common Sense on Mutual Funds.” Once again, Bogle uses historical evidence to show how a low-cost, diversified portfolio of simple index funds will outperform the majority of active funds, stock pickers and day traders. Bogle also describes the intricacies of mutual fund investing at length, highlighting industry trends, tax considerations and expense ratios. This book may be especially helpful for investors trying to pick and choose the best mutual funds in a 401(k) plan.
4. “You Can Be a Stock Market Genius” by Joel Greenblatt
This book was written by Joel Greenblatt, a famous value investor hailing from the Columbia University school of value investing, the same institution that forged the careers of Benjamin Graham and Warren Buffett. In “You Can Be a Stock Market Genius,” Greenblatt breaks down the formula used by famous value investors into simpler, easier to follow instructions for the layperson. Any aspiring value investor will find the advice and case studies in this book useful, as it provides a detailed breakdown of how investors can identify undervalued stocks. Greenblatt also educates readers on different types of corporate events, such as mergers, spinoffs and restructurings, and provides succinct advice on how one can profit from these circumstances.
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5. “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb
Risk management is an important skill to learn for retail and institutional investors alike. Blowing up your portfolio trying to chase high returns is a surefire way to sink your retirement. For a definitive book on the philosophy of risk, readers should consider “The Black Swan,” by Nassim Nicholas Taleb. In this book, Taleb uses a variety of thought exercises to show how people, including investors, underestimate the extreme impact of highly unpredictable events — so-called “black swan” events — and then retroactively find simple after-the-fact explanations for them. Taleb also provides his thoughts on how a system, including an investment portfolio, can be made “anti-fragile” against black swan events by building robustness and an ability to exploit them.
6. “The Intelligent Investor” by Benjamin Graham
Considered the father of value investing, Benjamin Graham penned this 1949 investing classic that’s still published today, and for good reason. “The Intelligent Investor” still remains one of the most accessible, comprehensive, and thorough treatises on value investing philosophies and techniques. Graham’s brand of fundamental analysis is still used today, and focuses on five factors: long-term growth prospects, management quality, capital structure, dividend record and dividend rate. Beyond financial ratios, Graham also devotes a substantial portion to analyzing cognitive biases. The most famous allegory of his is “Mr. Market,” which serves to illustrate how true value investors should not succumb to the market’s often irrational valuations for stocks.
7. “All About Asset Allocation” by Richard Ferri
Rick Ferri is a former U.S. Marine Corps fighter pilot, stockbroker and college professor. He’s been published in Forbes, the Wall Street Journal and other investment periodicals. Today, he works as a fee-only financial consultant holding a chartered financial analyst, or CFA, designation. Ferri is known in the passive investment community for his “Core-4” model portfolios, which provide beginner investors with sensible asset allocation guidelines. In “All About Asset Allocation,” Ferri outlines the principles behind different asset classes, the best ways to mix and match them, how to manage your asset allocation over time and how to select funds. For investors trying to put a portfolio together, this book offers some down-to-earth insights.
8. “The Bogleheads’ Guide to Retirement Planning” by Taylor Larimore, Mel Lindauer, Richard Ferri and Laura Dogu
“The Bogleheads’ Guide to Retirement Planning” is another Ferri book, co-authored with a number of other writers, and marries the best parts of John Bogle’s passive investment philosophy with sensible personal finance and retirement planning strategies. Successful investing is more than just creating a well-performing investment portfolio, and this book provides the blueprint for the critical remainder. Ferri’s book explains the intricacies of different retirement plans, how taxes affect retirees, provides examples of withdrawal strategies, and even goes into disability and estate planning. The book also contains numerous real-life anecdotes from around 40 Boglehead investors who contributed to the book.
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9. “Thinking, Fast and Slow” by Daniel Kahneman
Daniel Kahneman is a famous psychologist and economist who contributed some of the most important theories in behavioral economics, namely prospect theory. In “Thinking, Fast and Slow,” Kahneman outlines the heuristics and biases present in human judgment, such as anchoring, overconfidence, availability, loss aversion, the sunk cost fallacy and framing. Central to his book is the concept of two systems of thought, one being fast, automatic, emotional and unconscious, and the other being slow, methodical, logical and calculating. Beginner investors will find plenty of anecdotes and thought exercises to take away and apply to managing their portfolios and trades in a more rational, effective manner.
10. “The Big Short: Inside the Doomsday Machine” by Michael Lewis
Although available as a movie adaptation, “The Big Short” remains the definitive classic for new investors looking to understand the circumstances behind the 2008 Great Recession. Michael Lewis takes readers through the views, thoughts and actions of numerous high-profile players during this time, including famous hedge fund managers like Michael Burry and Steve Eisman. The book is candid when it comes to identifying the causes of the mortgage meltdown and provides a comprehensive outline of the subsequent fallout and consequences from the collapse.
11. “Your Essential Guide to Sustainable Investing” by Larry Swedroe
New investors wishing to implement environmental, social and governance, or ESG, considerations in their investment portfolio and strategy will find “Your Essential Guide to Sustainable Investing” extremely helpful as a how-to. In this book, author Larry Swedroe explains step-by-step how investors can decipher the different metrics and ratings of ESG investment products, provides academic research on how sustainable investing has performed, and outlines how investors can measure the social impact their investments truly make. With a myriad of different ESG fund options out there today, this book can help beginners simplify their decision-making.
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11 of the Best Investing Books for Beginners originally appeared on usnews.com
Update 12/19/22: This story was published at an earlier date and has been updated with new information.
