The Industry
The Investment Answer
If you only read one book on this recommended reading list, this should be it. Faced with only 6 months to live, Mr. Murray, a former Wall Street insider, set out to explain what every investor needs to know in order to properly manage their investments and avoid getting ripped off. This book is very clear, concise, and easily read in one sitting. It's also a book most financial advisors would not want their clients to read.
Liar's Poker
Michael Lewis, a former bond salesman at Salomon Brothers, provides a behind-the-scenes glimpse of activity at institutional brokerages. If you trust Wall Street traders now, you won’t after reading this book. It provides an insider's look at the hubris of Wall Street salesmen (yes, they are merely salesmen) and how their interests are definitely not aligned with your own. This book also proves to be insightful for those seeking to understand the history of the S&L crisis and how those events relate to the recent mortgage market meltdown.
The Big Short
The Big Short is an excellent book about the mortgage meltdown, those that gamed the rating agencies, those that fell victim to false beliefs and greed, and those that profited by creating investments to short the madness of the crowd. If you liked Liar’s Poker, you’ll love The Big Short. The book provides yet another example of how investment banks and brokerages are not your friend. In fact, they often fall prey to their own hubris.
Prudent Portfolio Management
The Only Investment Guide You'll Ever Need
Since first published in 1978 this book has been read by over a million Americans. As the author states, "It is the only investment guide you will ever need not because it will make you rich beyond further need for money, which it won't, but because most investment guides you don't need." Plainly written, this book will help you obtain a financially stable future.
A Random Walk Down Wall Street
In this essential book on market randomness, Malkiel describes market efficiency and historic market bubbles with a nod to Graham’s famous quote “In the short run the market is a voting machine, but in the long run it is a weighing machine.” For those who believe anyone can consistently time the market, this book will change the way you view the world of investing.
The Intelligent Investor
Described by Warren Buffet as, “By far the best book on investing ever written”, this is an excellent guide for understanding the concept of value investing. Graham describes the differences between true investors and speculators: true investors adopt fundamentally sound processes to determine security selection while speculators base their decisions on fancy. Written in 1934, first published in 1949, and last updated by Graham in 1973, this book continues to withstand the test of time. Updated commentary by Jason Zweig weighs current events against each chapter of this truly great book.
The Four Pillars of Investing
More accessible than Bernstein's The Intelligent Asset Allocator, this book provides investors with a good understanding of the basics for avoiding pitfalls and developing a winning strategy.
The Intelligent Asset Allocator
Readers beware: The The Intelligent Asset Allocator should be read and digested slowly. With a little effort, most readers will come away with a new sense of reality. Though a bit technical at times, Bernstein's brilliance shines with his objective review of markets, market participants, and construction of sound portfolio process and policy.
The Investor's Manifesto
Yet another fine book by the brilliant Dr. Bernstein. Somewhat confounded by relatively low circulation of his first two books, Bernstein attempted to make this book even more accessible. Though this book does not provide much new additional information from his first two, Bernstein does spend a bit more time discussing behavioral finance.
Pioneering Portfolio Management
David Swensen, the highly successful manager of the Yale Endowment, reveals how a small collection of investment vehicles can be combined to provide excellent performance. Though a bit technical, this influential book changed the way institutional money managers manage portfolios. It can serve as a guide for managing your own portfolio much in the same way the “big boys” manage theirs.
Winning the Loser's Game
Very accessible for everyone, this book will show you why 90% of professional money managers fail to beat the market and why good process and discipline is critical to your success. Ellis convincingly details why market timing is a loser’s game and how to overcome it. This is another book brokers will not want you to read as you will learn how to beat them at their own game.
Unconventional Success
Unlike Pioneering Portfolio Management, this book by David Swensen is geared to the individual investor. Swensen provides a good overview of investments to avoid, necessary core investments, satellite investments, prudent portfolio management, and reasons why active portfolio management most often fails. A must read for anyone serious about preserving and growing their wealth.
All About Asset Allocation
All About Asset Allocation is another terrific book which explains the why and how of choosing an asset allocation for your investments. As your asset allocation is the #1 determining factor of your financial success or failure, you cannot learn enough about the issue. Though I disagree with the author’s use of junk bonds within portfolios, overall this book is an excellent overview of investment asset allocation strategies.
Asset Allocation, 4th Ed
Though geared mainly toward financial planning professionals, this is a very well written book for those desiring a deeper understanding of the mathematics of asset allocation. It also provides a further understanding of the importance asset allocation plays in managing a portfolio's anticpated risk and return profile according to investor goals and preferences.
The Future for Investors
When comparing this book to Stocks for the Long Run, Jeremy Siegel provides much less data and a more common sense look at what financial decision-making processes have worked in the past and which will likely continue to work into the future. Though there is some overlap with his previous book, this one is more accessible. Prof. Siegel also delves into potential repercussions of coming shifts in world wide demographics as well as potential solutions to problems that aging populations create. You'll definately find valuable perspectives in this book you won't find in other books on this web page.
Retirement Portfolios
Though geared mainly toward financial planning professionals, this book should be of interest to anyone nearing or in retirement. Though a bit techinical at times, the reader will come away with an understanding of how portfolio management differs in retirement, why cash flow flooring is so important during retirement years, the calculation of flooring needs, and alternative solutions for flooring.
The White Coat Investor
A book by a physician for physicians. It's obvious physicians are both smart and hard working, but when it comes to money many make some pretty horrible financial decisions. If you are a physician (or even if you're not), read this book before it's too late. Your finances and retirement years will be much better for it.
The Little Book of Common Sense Investing
In this little book, John Bogle cuts through the bull to focus on the truly important factors critical to improving the odds of your investment success. Namely: forget fads and instead focus on what works, sources of investment returns, expense and taxes, diversification, and asset allocation.
Investment Vehicles
Common Sense on Mutual Funds
Jack Bogle, founder of Vanguard, revolutionized the mutual fund market. He shows how many investors are being scammed by investment managers and what people can do to defend themselves. Mr. Bogle’s creation of a low-cost customer friendly mutual fund institution was one of the best things to ever happen for investors.
Stocks for the Long Run
Want financial data? Jeremy Siegel, finance professor at the Wharton School, provides an astonishing amount of data in this relatively short book. Prof. Siegel provides financial data from 1802 through 2007 including: the relative performance of asset classes, relative risk of each asset class & style, IPO performance, bubble economies & aftermath, fundamental measures as predictors of future returns, monetary policy, business cycles, technical analysis, calendar anomalies, etc., etc., etc. Warning: A good understanding of macro economics, finance, and modern world history will lend greatly to ease digestion of the massive amount of data presented.
The Only Guide to a Winning Bond Strategy You'll Ever Need
Despite its kitschy title, The Only Guide To A Winning Bond Strategy You’ll Ever Need is a very good summary for anyone seeking to learn more about bonds and bond markets. Though bond investing is often seen as the ho-hum portion of investment portfolios, bonds bring important stability in the short run. Therefore it’s critical for investors to understand the attributes of different bonds before allocating money to them. Though I do disagree with some points made in the book, you’ll definitely be a better and more informed bond investor after reading it.
The Only Guide to Alternative Investments You'll Ever Need
The title is unfortunate, but The Only Guide To Alternative Investments You’ll Ever Need is an excellent book which describes investments outside the more typical stock and bond investments. Before being swayed into buying an “alternative investment” by some slick salesperson or fancy descriptor, read this book. Understanding exactly what you are buying, the risks involved, and whether the asset compliments your overall investment strategy is critical to your financial success.
The Bond Book, Third Edition
Though stocks grab the headlines, bonds play a critical role in every investment portfolio. Digging deeper, investors will find that bonds are not only interesting, but are much more complex than stocks in general. In The Bond Book, Annette Thau delivers a great overview of what every investor should know about the bond portion of their investment portfolio. As bonds are meant to be a portfolio's safe harbor during times when the stock market is turbulent, it's incumbent upon every investor to learn more about them. This book provides that fundamental understanding.
The ETF Book
Exchange Traded Funds (ETFs) in the Untied States have grown from only 1 in 1993 with assets of $464 million to 916 with assets of $882 billion as of September 2010. With such an explosion in popularity, ETFs have become simply too large to ignore. In The ETF Book, Richard Ferri provides a thorough discussion of what every investor should know about ETFs. As with many investment "products", most ETFs have been made to be sold, not bought. This book provides investors with the fundamental understanding they need before entering the ETF market.
History of Markets
Manias, Panics, and Crashes
You cannot learn enough about market history. Though this book outlines the major market manias, panics, & crashes as well as private and governmental responses to them, it tends to do so in a fairly rapid fire manner which makes it somewhat difficult to track. Nonetheless, this book provides a great perspective on the effects of easy credit, speculative bubbles, subsequent crashes, and recoveries that have existed in the past and will continue into the future. Before undertaking a read, you should be fairly well versed in economics, especially in money and banking.
Devil Take the Hindmost
Devil Take the Hindmost is a must. This well-organized easy-to-read book puts historical market manias and crashes into perspective to help you become a well-reasoned investor today. In our time we have witnessed the internet and real estate bubbles. Unfortunately for many investors, sitting on the sidelines while others made what seemed were tremendous profits was too much for these investors to stand. In the end, it wasn’t the devil that took the hindmost; it was investors that lacked a well-reasoned approach to investing. This book will help you become a well-reasoned investor with the historical perspective you need to be successful.
The Ascent of Money
The Ascent of Money fills in many of the blanks not covered in Devil Take the Hindmost. Furguson leads us through the earliest forms of money, Europeans’ obsession with precious metals, evolution of banking, land investments, manipulations, bubbles, and collapses. A good understanding of the history of money, financial markets, and banking will help you be a better investor today.
Against the Gods
This is an outstanding book which describes the history of risk and the evolution of man’s attempt to measure and deal with it. This book is very accessible to anyone interested in understanding and dealing with chance (i.e., risk).
Capital Ideas
Capital Ideas is a fantastic book for anyone seeking to learn how modern portfolio management came to be. It was not investment managers or brokers that discovered prudent portfolio management techniques we now take for granted, but a small group of inquisitive mathematicians with enough stamina to charge against them. This group of pioneers crushed the theories of technical analysis and ability to time the market. It’s actually hard to believe so many investors still think they can do just that.
The Power of Gold
The Power of Gold provides a sweeping history of not only mankind's relationship with gold, but also the different ways in which we have attempted to store, trade, and consume wealth. I have little doubt that this book will change the way you view gold and money. Be warned, though, that it's helpful to approach this book having general knowledge of world history from the Egyptians to modern times.
Irrational Exuberance
Robert Shiller, a Yale economics professor, provides an in-depth look at potential causes of mispricings within financial markets, tell tale signs of mispricings, and potential cures for avoiding the long run consequences of irrational speculation in the future. If even after the last dot-com and housing bubbles you still think it's easy to spot, avoid, and understand market mispricings, then this book is for you. It's one of the most relevant and thorough books on speculative bubbles you will find.
The Black Swan
In The Black Swan, Taleb describes how unlikely events are actually more common and devastating than we think. He provides strong arguments for organizing our affairs not only according to what we think is the probable outcome, but also against potentially devastating events that may occur.
Reminiscences of a Stock Operator
Based on the seemingly successful stock speculator Jesse Livermore, this book provides valuable insight into stock markets in the early 20th century and how not much has changed before or after that time. Livermore made and lost millions in stock speculation over his lifetime, and finally died broke even after cleaning up in the crash of 1929. Stock speculation can make you either rich or poor, but eating Alpo in your retirement years is not a good outcome. This book will help you put speculation into perspective while being entertained.
The Worldly Philosophers
A wonderful and fairly easy to read book that explores the origins of current economic theory and weaving together diverse economic thought. This book helps to show just how nuanced and complex economic theory actually is as it seeks to explain the financial world, then readjust again as new realities don’t quite fit with current theories.
The Great Crash
Written in 1955, Galbraith set about writing an easy-to read history of the few years leading up to the great crash of 1929 as well as the aftermath. You will come away with a greater understanding of not only financial markets and related institutions, but also the seeming inability of humans to learn from history.
The Worst Hard Time
This is a fantastic book that follows the lives of several real families as they persevered during the Depression as the Great American Dust Bowl swirled about their failing farms. Descriptions are so vivid that you will feel just how difficult it was for families across the Great Plains during the 1930s just trying to make a life of it.
Barbarians at the Gate
Barbarians at the Gate chronicles not only the rise and fall of RJR Nabisco, but also the evolution of corporate American culture from the Guilded Age through the end of the "greed is good" corporate raider era of the 1980s. It provides an entertaining and disturbing insight of how corporate culture morphed from one of executive trusteeship, to one of them placing their own interests well ahead of the owners and employees.
Psychology of Investing
Your Money and Your Brain
As the saying goes: "We have met the enemy and he is us". Most investors too are their own worst enemy. This book delves into the anatomy and evolution of the human brain to explain why we do the things we do even if those actions do not make rational sense and may actually harm us over the long term. Understanding the causes and reactions of fear and over-optimism will help you become a more successful investor.
Thinking; Fast and Slow
Daniel Kahneman and his friend and fellow researcher Amos Tversky are essentially the fathers of behavioral finance. This book, written well after the passing of Tverysky, represents a summary of much of Kahneman’s work surrounding how we think and make decisions. The results might surprise you. Even once you’re aware of common cognitive mistakes, you’ll still find yourself making them most every day! The point is to be aware of these human defects and develop your processes accordingly.
Fooled by Randomness
In Fooled by Randomness, Taleb describes how humans tend to look for patterns in cause and effect where none exist. Assuming causal relationships without solid substantiating facts can lead us to make really bad decisions.
How to Think About Money
In this book Jonathan Clements, a long time personal finance writer at the WSJ, provides practical advice about how to think about and manage our finances in a way that puts money in its place to allow a more comfortable and fulfilling life. The book is built around 5 ideas: 1) Focus on what truly creates happiness 2) Plan on living a long life 3) To be human is to be hardwired for poor financial management 4) Think big picture by focusing on each paycheck 5) Some games are best won by not losing
The Psychology of Money
Easy to read and fast-paced book that helps reframe spending, saving, money, investing, and happiness. "Things that have never happened before happen all the time." "Save for the sake of saving" because although you might not know how you will eventually spend it. Saving now allows future flexibility, which is perhaps the most freeing thing of all. Somewhat out-of-place is the last chapter which discusses how the U.S. consumer got to where we are now and it's a fascintaing thread of history.
Estate Planning
Saving the Family Cottage
This is a great book for anyone considering preserving real estate as a family legacy. At first glance, leaving a piece of property to heirs might seem straight-forward, but difficult issues often begin to arise not long after inheritance. This book details ways in which these issues can be planned for before they transpire, helping to not only keep property in the family for generations to come, but also to avoid rifts between family members themselves.
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