I’m not sure about you, but when I was at school my teachers (and parents) kept telling me to read more books. But what books? And why? Although an ancient medium, the fact that they have survived suggests that there is something very important about concentrating hard and dedicating a number of hours on finishing a book.
Most books, especially those on finance and investing, are not very good. They are either too complicated, or too simplistic. Any book that promises to make you rich whilst only working four hours a week is likely not to be worth the paper it is printed on.
There are, however, a few really good and accessible books on investing that young people really should read. The below five are some of my favourite and, when taken together, will give you an amazing overview of the investing industry and your approach to building an awesome portfolio.
1. The Psychology of Money – Morgan Housel
This is my favourite book about money and investing. Morgan Housel is amazing at breaking down complex principles into simple maxims. These short chapters are jammed packed full of amazing finance and investing best practice – from understanding risk, through to the difference between getting money and keeping it.
My favourite advice to give is to ensure that your lifestyle never exceeds your income – the difference should be put into long-term investments. Buy this book now – you won’t regret it!
2. The Little Book of Common-Sense Investing – John Bogle
You might never have heard of him however John Bogle is one of the pioneers of modern investing. As the founder of Vanguard (the world’s second largest asset manager) and champion of passive investing, his influence ranks with the likes of Buffett and Munger.
The Little Book of Common Sense Investing is an ode to passive investing – the low cost way to track entire markets and investment themes. Bogle argues that, as a normal investor, it is very unlikely that you will consistently beat the market by investing in individual shares. Why not instead invest in the whole market using an index fund and rest easy at night!
3. The Long and the Short of It – John Kay
After the Psychology of Money, the Long and the Short of It, written by leading Scottish Economist John Kay, is my second most gifted finance book. The book, designed for ‘normally intelligent people who aren’t in the industry’ is heavy on high quality explanations and low on jargon.
Kay doesn’t try to overly-simplify the complex world of investing, but instead breaks it down into descriptions and best-practice that every young investor would benefit from.
4. The Essays of Warren Buffett – Lessons for Investors and Managers – Warren Buffett
Warren Buffett has the perfect temperament for investing. He is, in his own words, lazy to the point of total inactivity. He can spend years without making an investment, ignoring hype cycles and high risk/reward investments.
Instead Buffett only invests when he is absolutely sure that a company is significantly undervalued and is positioned to increase its cashflow whilst defending its barriers to entry. Buffett is from Benjamin Graham’s school of value investing (investing based on discrepancies between share price and underlying share value) and is a must read as you seek to avoid the noise and invest only in great companies.
5. Investing In Your 20s and 30s – For Dummies – Eric Tyson
This book certainly isn’t for dummies! Investing in your 20s and 30s is a brilliant, no nonsense guide to the fundamental principles of investing, and how you can translate these principles into strategy and action.
This must-read book helps you feel more confident in your investment strategy by teaching you about portfolio building and diversification, investment goals, and investing in the context of social and environmental aims.
If you are worried about where to start in your investing journey my advice is to buy and read at least one of these amazing books and make sure to read the summaries/SparkNotes on the rest – and remember, the sooner you start investing, the more you can take advantage of the wonderful power of compounding!
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