Investing in books essentially allows for the democratization of investment knowledge.
At their affordable price (compared to their pricey equivalents such as investment classes or training academies), it doesn’t cost much to learn from 10 – 20 investing greats.
You might think that with book shops currently being closed, that the book market was struggling. Quite the opposite, book sales are thriving.
These could be finance academics, hedge fund partners, arm-chair investors, stock market historians, or consumer champions. The wide scope of backgrounds of investing authors further emphasis the broad education that readers receive when picking up a bunch of investing titles and committing themselves to note and learning from their contents.
In this article, I will highlight what I believe to be the top five types of investing books that every investor should have on their shelf. This is an impartial guide, which will not name specific titles, because I believe that choice of the title should be made by the individual, so as to tailor the choice to their own investing style and preferences. However, by grouping and categorizing the main finance genres, I’ll hopefully give you some detailed tips on how to assemble your finance bookshelf.
Investing book type 1: Books for beginners
Let’s start in the book category that most should start: investing books for beginners.
If you walk down the aisle of any large bookshop, you’ll quickly notice that the vast majority of investing books cater to beginners.
However, the small selection of books that make it onto shop shelves is truly just the tip of the iceberg of finance publishing. It isn’t until people begin looking at alternative investment books and specialist titles, (such as those personal finance books listed on Financial-Expert’s shortlists) about individual asset classes that they realize that most bookshop investing sections could be labeled ‘My First Personal Finance Book’.
What does this mean for beginners? Well, for starters, you’re well catered for by major book chains. If you’re browsing in-person, you’re unlikely to bump into a title that is stuffed with jargon and won’t keep your attention.
If buying online, you should be warier, because this is a far larger pool of books and you could easily find yourself reading a guide written for industry insiders or finance professionals.
Reviews are a good reference point. Not just the scores themselves, or the common themes, but the number of them. Books with hundreds or thousands of reviews are likely to be mass-market books aimed at the mass-market. By definition, these titles must be beginner-friendly. So there’s a helpful shortcut – don’t just look at the number of stars, look at how many reviews have been left in aggregate, as this can tell you a lot about whether the book is ideal for newcomers.
Books for beginners usually have the following characteristics:
Jargon-free. These books either avoid jargon entirely, or they introduce and define each technical term upfront (usually in the first 3 chapters) to arm their readers with the knowledge needed to get the most out of the book.
Short. Investing in books for beginners who want to engage you and teach you. They don’t need to be 800 pages long to do so. In fact, the longer the book, the less likely it that a reader will even finish the title. As a result, investment books for beginners are usually under 350 pages and are printed in a larger typeface.
It may feel a little patronizing to be advised to start with such a book. But remember – there are no points awarded for reading dense and lengthy books. The focus has to be on what information you successfully understand, absorb, and retain.
2. Stock market history
I firmly believe that any investor taking a large portion of their wealth on the financial markets should be very knowledgeable about what events have unfolded in the past.
After all, how can an investor be fully aware of the risks they are taking, without a historical reference point to what has gone well, or wrong, for shareholders in the past?
The past is not an accurate predictor of future returns, but it gives an idea of the best and worst cases. If an investor cannot afford a repeat of the past, then they should not be taking a position that led to the same outcome previously.
Stock market history is also a piece of national history as well. The great depression, the 2008 – 2009 financial crisis, and the boom which followed.
Each of these stock market events is inextricably linked to political and social change. Reading about these historical matters in the best economics books helps us learn more about our nation’s past, and can only help us to become better citizens.
3. Fabled traders
Investing books about fabled traders come in two forms; autobiography and biography format.
Autobiographical titles are written by the investor themselves. These provide amazing insights into the decision making processes that have led to spectacular gains or losses on the trading floor. They tend to include pieces of the trader’s life situation at the time and usually contain more humor.
Biographies are written by a third party, with or without permission, and interviews with the subject of the book. This means that they are often written by journalists, and read in that magazine-style. Authors tend to seek interviews with as many first-hand witnesses as possible to stitch together a cohesive picture of how events unfolded and what type of person the investor is. Examples include books about Warren Buffett, Elon Musk, and the Wolf of Wall Street.
4. Inspirational ‘get-rich-quick’
Get rich quick books are often shunned by real investors. Often the first investing book a person ever picks up – they can give a skewed view of what investing is really like. Get-rich-quick authors tend to downplay the risk and cherry-pick stories that paint the picture than anyone can become rich easily and quickly.
Of course, this is not the case. Economic theory tells us that profiting in a competitive marketplace of any kind is difficult. Any professional investor or business owner will tell you the same.
However, there’s a magical quality to some books in this genre which shouldn’t be overlooked. These books inspire people by connecting to their deepest ambitions. They lay the groundwork for a financial plan that allows an individual to take immediate steps to realize a financial goal, which can enable a broader life goal.
This is like financial planning principles, with a veneer of show business. If it’s what it takes to initially turn people into investing, then it’s perhaps a necessary evil!
5. Model portfolios
I end this article with my personal favorite type of investing book; model portfolio books. These go by many names; Portfolio management, asset allocation, wealth management.
The common theme between all of these genres is the allocation of your cash to a diversified basket of investments, to achieve the optimal balance between investment returns and risk.
This is ultimately the common craft of all investors, and mastery of portfolio management will set your investments up for life (and with estate planning: beyond!).
I hope you have enjoyed reading about the disparate types of investing titles out there in the market today. My last tip is to dip into all 5 categories to ensure that your own investment education is balanced and well-rounded.