This is simply the best book I know for the new investor. The author is a well-known economist, who writes well and seeks to share his knowledge.
21 December 2020
I have been investing since my mid-20s. Since then, I must have read dozens of books on the subject.
The challenge I often face is a friend or relative asking me to recommend something they can read to begin learning about investing. What single book should I recommend?
For many years, my standard choice was “The Intelligent Investor” by Ben Graham. However, to most readers that book feels somewhat outdated and rather austere.
In early 2017, I read a favourable review of this book in the Financial Times. While I did not feel any personal need to read the book, I decided to get it to see if it lived up to its description.
If it did, it might replace “The Intelligent Investor” as my standard recommendation for a new investor to read. It did.
The book comprises just 269 pages + 19 pages of Glossary, Bookshelves and Bookmarks, and Bibliography.
I have reproduced the table of contents below as the easiest way of giving an overall view of what the book is about.
Can you be your own investment manager?
From gentlemen to players
Before you begin
Review financial risks outside your investment portfolio
Realistic expectations through conventional investment strategies
Sense about shares
Basics of bonds
Pillars of property
Facts about funds
Efficient markets and asset values
Illuminating but not true
Strategic trading, moral hazard and market manipulation
Investment strategies for imperfectly efficient markets
When the market loses its mind
The power of conventional thinking
Accounting for earnings
Cash is king
Risk and uncertainty
Subjective expected utility
My ship came in
Diminishing marginal utility
Mind your portfolio
The capital asset pricing model
Narratives and patterns
Mirages, systems and hot hands
Models and their limits
Forecasts and their limits
Approaches to risk
When bonds were no longer boring
Establish your portfolio
The conventional investor’s portfolio
Developing a strategy
Reviewing your goals
Diversification is the key to managing risk
The illusory security of cash and bonds
Very simply, this is the best introductory book on investment that I know.
A little while after I read it, I lent it to my son-in-law who is a university graduate but who does not have a financial background. He found it illuminating. More recently, I have bought a copy for my younger daughter but am not aware whether she has read it yet.
In July 2020 I created “My short reading list on investing” to recommend just five books about investing, as well as explaining on that page why everyone needs to take an interest in the subject.
I put this book into the list, obviously in first place as the book that I recommended everyone to begin with.
If you care about your long-term finances and are not already an experienced investor, you should read it. Indeed, even if you are already experienced, you should read it to benchmark what it says against your personal practices to consider whether any changes are warranted.