If you’ve read Scott Adams’ financial advice and my financial tips in case you win a startup lottery, then you might be interested in a few more pointers to good resources. Some web pages and books:
– Don’t Play the Losers’ Game, by Henry Blodget. This is a short, accessible piece that explains why picking individual stocks on Wall Street is a bad idea for almost anyone.
– Website: the Bogleheads forum. An incredibly smart group of people who like to discuss investing, finance, and money. Their investment philosophy page is pure financial wisdom distilled.
– A Random Walk Down Wall Street, by Burton Malkiel. This book is remarkably readable, though it can be dense at times. If you believe you can pick individual stocks with enough success to beat a diversified portfolio of low-cost index funds, this is the book you should read to throw a wet blanket on that belief.
– The Lazy Person’s Guide to Investing, by Paul B. Farrell. This book will show you how to outperform the majority of active money managers in just 15 minutes a year. This book is seriously good. If I had to recommend only a single book, this book might win: it’s a breeze to read, but it imparts nearly as much wisdom as much denser tomes.
– This is a great description of how Google tried to educate and protect its employees before Google’s IPO. You’ll get most of the idea from the first page. How can you not love an article where a financial advisor admits “We work in the most overcompensated industry in the country”?
– The Wall Street Self-Defense Manual, by Henry Blodget. In many ways, this book is a deeper version of Blodget’s article that I linked to above. This book is short, readable, and packed with most of the advice that you need to know.
– If you’re ready to go deeper, consider The Four Pillars of Investing, by William Bernstein. You might also check out Bernstein’s The Intelligent Asset Allocator.
– Rich Dad, Poor Dad, by Robert Kiyosaki. This book has its flaws, but it’s very readable and could be good for teenagers or college students. The book uses stories to discuss the goal of financial independence via assets that produce money. I grew up in a family focused on academia, so this book was a good wake-up call that a lot of people care about money, not just getting a Ph.D.
Money and Wall Street stories, color, and culture
– Realistically, I’d recommend almost anything that Michael Lewis has ever written. His most recent book is Flash Boys and I enjoyed that story. But I also enjoyed Liar’s Poker, The Big Short, and Boomerang.
A few more to consider:
– Perfectly Legal (rich people get away with lots of tax loopholes)
– Confessions of a Tax Collector (a tale from inside the IRS when the IRS had more teeth)
There’s also a whole sub-genre of books about rich people:
– Richistan (pretty entertaining)
– The Millionaire Next Door (most millionaires are cheap!)
– Rich Like Them (mostly a bunch of anecdotes from interviews)
Stock Options
– Consider Your Options, by Kaye A. Thomas. If you’re joining a startup that offers stock options, I strongly recommend that you study this book from cover to cover. It can help you avoid a lot of treacherous mistakes. If you don’t put in the time to understand your stock options, you might regret it later. Thomas also has a good book called Capital Gains, Minimal Taxes that covers the mechanics of a lot of tax issues and logistics for investors.
– I really recommend Consider Your Options as the definitive work, but An Engineer’s Guide to Silicon Valley Startups, by Piaw Na is very accessible. This book also covers a wide range of skills that you might need if you want to join a startup. Disclosure: I know Piaw from his time at Google.
– I have used Stock Options: An Authoritative Guide to Incentive and Nonqualified Stock Options as a reference for at least one complicated situation.
– Want to understand stock options at a basic level? Stock Options for Dummies isn’t too bad.
Anti-recommendations
– This won’t be popular, but I just don’t find John C. Bogle’s books very readable. I agree with him about lots of things, but his books like Don’t Count on it! just didn’t grab me.
– Hedgehogging, by Barton Biggs. I’m not even going to link to this book–that’s how angry this book made me. Biggs actually writes stuff like this: “My real theory is that the investment superstars have some special magic with markets that enables them almost intuitively to do the right things most of the time.” What hogwash.
Elsewhere in the book (which lists a copyright date of 2006), Biggs quotes someone who accurately identifies the housing bubble: “another bubble is about to burst. Existing home prices have been rising 7% to 8% a year, financed by Fannie and Freddie.” Then Biggs goes on scoff at the guy, like “Look at this dork, predicting a major depression due to a housing bubble in the next three years.” The Wikipedia page on Biggs reports that Biggs’ hedge fund was blindsided by the subsequent global financial crisis. If you want a snapshot of how Wall Street can suck, then you might want to read this book.
– I’m not a big fan of Jim Cramer. If you want to watch Cramer for entertainment that’s great, but exercise caution on his advice.
– Beating the Street, by Peter Lynch. I just don’t think this book has aged very well. You can pick up most of what you need from other books. The advice to “invest in what you know” can be good. However, it also risks becoming “invest in what’s familiar” instead of doing your homework.
So those are some books and websites that I’ve liked or disliked. How about you–what books about investing, money, or finance would you add to the list?
Lots of good calls on there – Mint’s blog is starting to pick up some useful info too (plus I love their app!). I know Cramer can be too rapid fire / no depth for most folks but if you follow his public trades, his logic is usually pretty sound and insightful.
Nassim Talebs books are well worth a read, especially The Black Swan: The Impact of the Highly Improbable. Learn about fat tails and kurtosis and why making and losing money with investing is usually up the stairs and down the elevator!
I agree totally with Scott Adams’ Financial Advice – but the full detail behind it can be found in another seminal work: that of “The Richest Man in Babylon”. That started as a series of advice sheets from an insurance company in the 1920’s but is packed with useful advice from end to end. That includes the effect of compounding interest, of avoiding being a participant in games (e.g.: lotteries these days) by looking at the financial interests of all parties involved, and betting on folks who have knowledgeable backgrounds (not get rich quick schemes).
There is an audio book version lasting over 90 minutes on YouTube, but the paper (or Kindle) book is excellent too. I bought a copy for my grandchildren, and they each have an index tracking account I pay into for them (Baby Lola included – age 2 months and already with a few shares in Apple and Google alongside her trackers).
I agree that Michael Lewis has some great books. Boomerang and The Big Short were both enjoyable.
This is a very good list. Absolutely agree that A Random Walk Down Wall Street should be on everyone’s reading list.
As for notable emissions, I would add three books by Nassim Nicholas Taleb: Fooled by Randomness, <The Black Swan, and Antifragile. All are fantastic and I recommend them highly.
For a more general (but fascinating) discussion of risks prevalent in financial markets, I also recommend Peter L. Bernstein’s Against the Gods: The Remarkable Story of Risk.
I’d also like to add the writing (and books) of John Lanchester to the list. He’s an occasional contributor to the London Review of Books with some of the best writing about the financial crisis and the behaviour of both banks and government, albeit from a London Lense. Journalism if the highest order.
I agree with this. I.O.U. is a very clear, well-written, and funny at times book about the financial crisis, tracing its origins to the collapse of the Soviet Union and predicting ramifications continuing for decades.
I’ve not read it yet, but the great Tony Robbins’ new financial book, Money: Master the Game–7 Simple Steps to Financial Freedom, is being heaped with universal praise. It’s definitely one to look into.
Thanks. More of good readings out here. Looks like were gonna burn the night.
Nice list, Matt.
I read Beating the Street a few years ago and I don’t agree it’s aged, even though the specific examples aren’t relevant and value vs. growth investing has not “worked” for a long time.
The lengths to which he would go to have a clear mind, avoid seeing models instead of reality, and ‘play’ at work (crayon test, talking to children, avoiding people, etc.) to do well are more important than ever.
I would also recommend Dale Ledbetter’s book “How Wall Street Rips You Off…And What You Can Do to Defend Yourself”. A very easy read with great information. It is on amazon at the below link I believe. http://www.amazon.com/Wall-Street-Rips-defend-yourself/dp/0967876915
Hey I really like that you are sharing your input into the stockmarket I just recently setup an account at loyal 3 to get into investing. Now Matt do not take this as spam, but as a good resource for use newbie stock buyers. At the loyal 3 site you can invest in as little as 10 bucks and there are no fees to buy or sell the stock you own…I got some Amazon stock with my small investment and made a huge 5 cent return thus far haha. I just wanted to test the waters with their services before I put in a few hundred and wanted to share it to others who maybe like me and do not want to invest a bunch before getting a good idea on what and what not to do.
Nice problem to have, some of us are just trying to survive and get to the next meal.
I have endured 5 years of on and off working through illness and have lost financially all my safe guards. Like I said nice problem to have deciding where to invest your money.
Matt, I think you’d like Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager. It’s a book of interviews with a hedge fund manager taken from the literary magazine n+1. Covers Bear Sterns, the bailout, and Madoff from an inside view. Quick read and very interesting look at the financial industry.
I’ll repeat my recommendation for Fortune’s Formula. I think Ed Thorp was an even better investor than Warren Buffett, and if he hadn’t gotten mixed up with Mike Milken he’d be our metonymy for “genius investor.” And as a bonus he worked with Claude Shannon.
So glad to hear you say that about Bogle’s writing. I couldn’t make it through Enough. Stopped at page 30 or so, and I’ve read through Thucydides and Xenophon’s histories.
I’m liking the financial stuff on your blog. Maybe something on estate planning?
The first book you need to read is Benjamin Graham’s http://en.wikipedia.org/wiki/The_Intelligent_Investor followed by securties anaysis if you want to get hard core
Benjamin Graham was Warren Buffents mentor