The three best beginner investing books

best beginner investing books
[This post about the best beginner investing books may contain affiliate links at no cost to you]

Investing doesn’t have to be intimidating. If you’ve tried to learn about it and failed then maybe you just didn’t look in the right places. That’s why I wanted to take the time to talk about the best beginner investing books. It’s a common question and an apt one. Investing can get complicated but it doesn’t have to be to yield results.

Reading is one of the best ways to learn about investing. There’s nothing better than a book when it comes to getting your investing feet wet. A good book can be the best investment you make in your future self but it’s important that you choose the right one to start.

The best part is that you can do it for free if you use your local library or Overdrive/Libby.

Related : OverDrive – the frugal reader’s best friend

One of the risks that comes with reading is taking on the wrong book at the wrong time. There’s plenty of amazing books out there but some of them are simply too complex for a beginner investor. It’s very easy for a tough book to turn off a person who might otherwise become an engaged investor. Just like with anything in life, learning about investing has to be a taken in steps. You don’t pick up running as a hobby and start with a marathon. You work up to that slowly starting with much shorter runs.

It’s the same with investing. An absolute beginner doesn’t just jump into a complicated book because they won’t understand 90% of it. Not only is that pointless, it can also be detrimental to their growth as they may think investing is just too complicated. It’s not, they just started at a spot you weren’t ready for.

It’s important to start somewhere basic and work up to the complex stuff. When I talk about the best beginner investing books, I’m talking about books for someone who’s brand new to investing. These are books beginners can read, enjoy and learn from without needing to have a background in finance.

In reality, these books have to be relatively simple, easy to read and enjoyable or else people won’t stick with them.

I often see beginner investing lists that include books like The Intelligent Investor by Benjamin Graham. That’s a great book for sure but if that was the first book I ever read about investing, I’d never want to read another investing book again. It’s dense, complicated, pretty damn boring and includes a lot of concepts that would confuse a beginner. Hell, I have a degree in finance and some of the stuff in that book takes a while to digest. On top of that, since it was written in 1949, many of the concepts aren’t all that relevant anymore. It’s just not a good book to get started with when it comes to investing.

There’s a lot of great things to thing about in The Intelligent Investor but a beginner investor doesn’t need to know most of that stuff. If you’re not already somewhat versed in investing then stay away!

If I’m a beginner investor, I want to get a practical introduction to investing. I want to learn the basics first and then build on that if I choose to do so. To me, that’s what’s awesome about investing. You can learn the basics and do just as well as many professionals.

That’s the goal with this list. These are books that will get you 90% of the way there even if you’re starting at 0. They’re not long, not confusing and provide you with a boatload of knowledge to make you a successful long term investor. The beautiful thing is that within these three books, you’ll find a wealth of knowledge and never need to read another investing book again if that’s what you choose.

However, if something in these interest you a lot and you want to read more, there’s tons of material out there to expand upon these basic concepts.

In my opinion, you should read these books in the order I list them for maximum benefit.

The Bogleheads’ Guide to Investing

If a brand new investor could only read one book about investing then this would be the one I would recommend. I credit this book with many of my successes as an investor and it’s one of the reasons my portfolio sits where it does today. Whenever someone comes to me seeking financial advice, I either give them this book or point them towards it.

I first read The Bogleheads’ Guide to Investing when I graduated college and got my first job in 2008. I had a degree in finance but it was this book that became my guidepost for investing when I started to dive into the complicated world of personal investment accounts. It provided me valuable information as I looked at the options available in my 401k, decided on an appropriate asset allocation and thought about opening an IRA. It guided me more than my finance degree when it came to establishing my life on solid financial footing.

There’s a mountain of information in this little book but it never becomes too overwhelming. It’s easy to read and very comprehensive covering subjects ranging from types of investment accounts to taxes to asset allocation. It doesn’t dive too deep on any of those subjects but provides plenty of data to support the assertions and recommendations the authors make.

The book is written by three investors from the great Bogleheads forums and as you might imagine talks mainly about low cost index funds. These guys obviously went into this with the intention to keep things simple while giving a beginner the information they would need to be a successful long term investor and they did a great job with it.

This is a book that will get you thinking about a wide variety of subjects around money. It’s more than just a basic outline of investing. There’s also chapters about the philosophy of money and how to best allocate it with maximum efficiency. Beyond investing, there are discussions around money in general whether it be spending too much on a new car or carrying credit card balances.

The book looks at investing with a holistic approach and doesn’t just say; put your money in this stock and you’ll be good. It shows you how to prioritize saving in order to meet your retirement goals.

As someone who’s read dozens of investing books beyond this one, I can say that a lot of the concepts from many of the classic investing books are well represented here. You won’t get the same level of detail but for many, that may be better.

The truth is that most investors don’t need to know that much about the market to be successful. That idea is at the core of this book and that’s why I think it’s so useful for a beginner. The book goes over all you need to know as an investor in simple and easy to understand terms and gives you multiple paths to get to your goals depending on your risk tolerance.

If you’re an investor who doesn’t know where to start when it comes to retirement savings then this is the book for you. For most, this might be the only book they’ll ever need to read about investing.

If you have no interest in picking your own stocks then you can implement the strategies discussed in this book, forget about learning anything else about investing and do just fine.

Investing in a simple Vanguard index fund is good enough for most but some may want more.

One up on Wall Street

Picking your own stocks has a certain appeal to it but it comes with more risk.

I agree with a lot of the concepts talked about in The Boglehead’s guide. People should have most of their money in index funds. They’re a simple, cheap way to get good long term returns. My own portfolio is nearly 75% index funds because it’s the easiest way to invest and doesn’t require any legwork on my part.

I can set it and forget it and that’s not a bad thing.

However, there are some, myself included that want to learn more about investing in individual stocks. One up on Wall Street is a great place to start.

The stock market is a cyclical thing. Technologies evolve and change driving new industries to the forefront but valuations and market dynamics often remain the same. That’s why this book which was originally written in 1989 is still relevant today. Peter Lynch, one of the best investors of all time tells his story of his time as the manager of Fidelity’s Magellan fund.

The book does a great job of introducing some higher level concepts to a beginner while also keeping investors grounded by making sure they understand the risks that come with investing. As the book gets going, Lynch discusses how to find stocks to invest in and goes over the various types of stocks like the growth stocks or the cyclical stock. Then he gets into simple ways to properly value a stock using things such as P/E ratios and growth rates. There’s even some introductory discussions around balance sheets and how to look at them.

One of things that the book gets right is framing the stock market in a long term context. When I first read the book, I was awed by how little has changed when it came to how many view the stock market. It is very interesting to see Lynch’s perspective of market panics and stock market drops as one can frame that against the backdrop of today’s market and see huge similarities. It’s good to have that framework for when the next market crash comes. These things happen as discussed in this book but as long as you stick it out, you’ll probably be fine.

This isn’t a book that will teach you all you need to know about valuing a stock. Lynch does have a tendency to over simplify things for the benefit of the reader but that’s perfect for a beginner. Whether talking about P/E ratios, growth or too much debt on the balance sheet; Lynch uses great examples from his long career as a fund manager.

This book works great as a stepping stone in your path to individual investing. It also serves as a guidepost of whether or not that path is right for you. If you grasp and connect with the concepts talked about here then there’s a lot more to pursue but if you find yourself bored, uninterested or confused then you can always just go back to the simple index fund indexing methodology discussed in the first book.

There are a few things I dislike about the book. Lynch, as a stock investor, is a bit too flippant when it comes to bonds as an investment. He also has a tendency to over simply how easy it is to find stocks. Lynch will make mention of things that the average investor can’t do(like calling the CEO of a company or visiting the company). He does the latter more when talking about his history as a fund manager. However, it speaks to his tendency to make it seem like finding stocks that return 10x is not that hard. All you have to do is keep your eyes open!

Still, this is a great intro to individual investing. That’s as long as you keep in mind that not everyone is as good as Peter Lynch. Investing isn’t easy even if you’re well informed and there’s a reason for that.

A Random Walk down Wall Street

Now you’re probably feeling good about individual investing. Peter Lynch makes it sound pretty easy!

One up on Wall Street is here to bring you back to reality.

A Random Walk down Wall Street may be one of the best books about investing I ever read. It’s much like The Bogleheads’ Guide in that there’s a ton of information here.

However, there’s a lot more about the why to go along with the how.

This book is a defense of the efficient market hypothesis. In essence, it’s the idea that the stock market is efficient and represents all known information. That means finding individual stocks that are “attractive” is harder than it seems and in some ways a guessing game in the long run. There are plenty who disagree with this concept(many in the mutual fund industry) but the numbers don’t lie.

The idea that anyone who beats the market is essentially lucky and rarely does it in the long term is shown clearly in many studies. That’s why 90%+ of active funds failed to beat the index in the 15 years prior to 2016. Even in a 5 year period, nearly 90% fail to beat the benchmark.

The key thing here is that the theory holds up in the long run; not always in the short run.

The book is clear and concise but it does dive into more complicated subjects than the first two books. That’s why it makes sense to read it after you’ve read those first two.

The book does give some guides for the individual investor. It also talks in more detail about bonds and even some new products such as ETFs.

There’s a ton of info here and some of it is a bit more complicated. However, it acts as a good segue into other more complex books.

What to read next

These three books can often be all you need. In fact, many can stop after the first book and do just fine investing in index funds.

However, some may want to delve beyond that. One up on Wall Street is a good entry to individual investing then A Random Walk down Wall Street is a good counterpoint to those who may think that individual investing is easy.

Beyond that the world is open to you. There isn’t much else to index investing that wasn’t covered in these books. Perhaps, that’s why so many people enjoy that style of investing. It’s easy to grasp and easy to explain.

If you want to delve deeper into individual stocks then a book about financial statements is a good place to go next. I’d recommend The Five Rules for Successful Stock Investing as a good starting point.

This book will introduce you to plenty of concepts you haven’t seen before. It will also show you what to expect from more complex investment books. The author does a good job of making complex things relatively simple. Still, it’s more dense, more complex and can be boring and wordy.

That’s what happens as you move past the beginner level of investing. Books get more complex and can be a drag if you don’t find the subject matter interesting. You’ll also see concepts repeated or framed in different ways. It’s common to read a book and find that a lot of the subject matter was already covered in these three books in a simpler way.

Investing can get confusing too. Sometimes you might read things that seem to disagree with other things you’ve read. On top of that, these books aren’t page turners 99% of the time. You really have to love investing to keep reading.

That’s why most people are better off just sticking to the basics. I think the book I mentioned are three best beginner investing books.

You won’t learn how to analyze a stock twenty different ways. However, you will learn how to be average in investing.

The good thing is that being average in investing beats 90% of the people who analyze stocks for a living. On top of that, you’ll save a ton of time and won’t have to read a thousand books. That’s not bad at all.

Maybe you’ll find that you can’t put these books down. If that’s the case there’s a ton of other stuff to read so get going and read more. If not then you’ve learned enough anyway and can spend the rest of your time doing what you love.

investing books

Advertisements

21 thoughts on “The three best beginner investing books

  1. I have not read many investing books. That said, I have heard of all of these and they all have a great reputation. Most of my reading on the topic came from investment news letters and personal finance magazines. For what it’s worth, the one investment book I read and really liked was the Ultimate Dividend Playbook by Josh Peters.

    Thanks for highlighting these great books Time.

    Tom

    1. Tom, you can definitely get enough knowledge these days without touching a book but for most investors, a book is a great starting point.

  2. Thanks for this nice list. I only already read the first one. I’ve put the other two on my Kindle tracker. I’ll definitely get them when they reach a lower price. I really like this kind of books, but they are generally too expensive. Thanks 🙂

  3. Thanks for the list. Great to see some one NOT advising Grahams book. I actually got it last Christmas and since I’m still a beginner and I read a lot of great reviews about it I really wanted to give it a try.

    I can’t really get through it at all 🙁 I’ve read the bogleheads guide to investing in a few days as well as a few others like that.

    Maybe I’ll try again next year 😉

    1. Yea Graham’s book has some great chapters but a lot of it is really really heavy even for an experienced investor.

  4. The Intelligent Investor was my first financial book. And as you write, it was too complex for me back then. I would not recommend it to beginners, and I bet I would still have a tough time with it today.

    My next book was One Up on Wall Street, and then Beating The Street. And (again) as you write, it got me into picking individual stocks.

    My awaking came during the read of A Random Walk Down Wall Street. It changed my perspective from chasing hot stocks, to seing things in the long run. It literally was the book that made me pursuit FIRE. As I now find this possible, by just following the market. All though my portfolio at this time do not have any index funds.

    Thanks for the tip on The Five Rules for Successful Stock Investing. I’ll be sure to give it a try.

    1. The Five Rules is a good one to read for sure. I do agree that A Random Walk is a great book, one of my favorites. I read it more recently than a lot of others and it does such a great job of summing so many things up that others books have covered.

  5. I loved one up on Wall Street when I first read it, but you make a great point – it does make investing sound a little too easy, and Random Walk down Wall Street absolutely brings you back to reality. Even thought I love investing in individual stocks, I think RWDWS is one of the best investing books I’ve read – it lays out the whole stock market history and different perspectives really well, and is highly evidence focused rather than trying to be too ‘inspirational’.

    1. One of the best parts about both One Up and Random Walk is the historical context you get as an investor. It’s nice to see that panics, market over reactions, fear about missing out and overpriced markets and poor investor decision making have happened and will continue to happen.

  6. Great list. You’re right that The Bogleheads Guide to Investing is the only book many will need to read. A great fourth book is JD Spoilers Do You Want to Make Money, or Would You Rather Just Fool Around? It gives the way that you actually can beat the markets in individual stock investing. I wish I had read this one in my twenties.

  7. I find reading (and learning) the basics is good even for the more advanced crowd – in the world of investing and elsewhere. Sometimes it’s even more beneficial than reading more advanced stuff.

  8. A really well-written article and a logical approach to learning the ropes of investing.

    I’ve never actually made the time to read The Bogleheads’ Guide To Investing, but need to. I’ve also had A Random Walk Down Wall Street on my list for a long time.

    I learned a lot about investing piecemeal over the years from the Bogleheads forums, JL Collins, and Darrow Kirkpatrick from Can I Retire Yet?. All excellent resources and highly recommended.

    1. The Bogleheads forums were big for me when I first started investing – a great resource. The Boglehead’s Guide are like those forums tightened up into book form – very solid.

      Thanks for stopping by Mr. FFP.

  9. ‘Reminiscences of a Stock Operator’ is a great one and required reading for most trainees at trading houses.

    You basically get an enthralling story that shows what’s possible with some guts along with sitting on your hands when in a winning position!

    1. Also, Market Wizards is a must and an easy one to dip in and out of. Dozens of interviews with the big traders of the 80s. Makes them seem very human and mortal when you see how close they came to blowing up their accounts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.