We all know that investing is exciting, but those endorphins come with real risks. But, at the risk of sounding repetitive, these risks can actually be curbed by investing in your own education. The more that you know about how the markets work, solid investment strategies, and what factors affect the industry, the higher the possibility you’ll make good decisions when it comes to investing your hard-earned money.
Did you know that Warren Buffett, the single greatest investor of all time, read 1000 pages every single day when he was just starting out in the markets? He credits this time as being one of the main reasons for his financial success.
Want to be like Buffett? We do too. Start by reading the best investing books of all time. We know you’re time poor, so we’ve compiled a list of Warren’s faves, as well as Nassim Taleb’s, Seth Klarman’s and our most successful Hatch investors’, too.
1. The Intelligent Investor
by Benjamin Graham
Benjamin Graham is said to be one of the top investment consultants of the twentieth century, not to mention Warren Buffet’s mentor. It’s not for nothing that Buffet called it “the best book on investing ever written”! Graham’s magnum opus is seen as the bible for share market investing. The best part of this book is his value investing approach which can help aspiring investors generate steady profits. AKA "the father of value investing" and the "dean of Wall Street," Graham’s claim to fame is making money on the markets for his clients (and himself) without taking big risks. He’s credited for creating many principles of investing safely – principles built on his diligent financial evaluation of companies. And he’s got the experience to back it up: Graham's personal losses in the 1929 crash and Great Depression led him to perfect his investment techniques.
Graham has 3 principles to safe but smart investing:
Always analyse the long-term evolution and management principles of a company before investing.
Protect yourself from losses by diversifying investments.
Never look for crazy profits – focus on safe and steady returns.
Never trust “Mr. Market” (an imaginary business partner who offers to buy you out, or sell you his interest daily). Mr. Market is not very clever, but is unpredictable and suffers from serious mood swings.
Stick to a strict formula, dollar-cost averaging, and you’ll be fine.
2. The Warren Buffett Way
by Robert Hagstrom
Robert Hagstrom’s New York Times’ bestseller distills the essence of Buffett’s strategy into nine simple principles that can be used by all investors, from novice to expert. Hagstrom explains the psychological foundations of Buffett’s approach and gives readers a roadmap to master the principles and behaviors that have made Buffett the greatest investor of our generation. Hagstrom also happens to know a little about investing himself – as the chief investment strategist and managing director for Legg Mason Investment Counsel, he’s the author of multiple investment books.
Think like a long-term investor.
You’re neither right nor wrong because the crowd disagrees with you. You’re right because your data and reasoning are right.
“Loss aversion” is the tendency of most investors to overweight the pain of losing money, and is one of the biggest obstacles that investors must overcome.
Behave rationally in the face of market volatility.
3. Rich Dad Poor Dad
by Robert T. Kiyosaki
Robert Kiyosaki is an upstart. He challenges many widely held beliefs about investment success, debunking the myth that you must earn a high salary to be wealthy. He also explains how to teach kids about money because he believes the problem we face today is a lack of financial intelligence and financial education...he’s not wrong! Rich Dad Poor Dad shows you how to start building wealth by teaching you the right mindset, accounting basics and wealth building strategies, even if you don’t have a clue about personal finance.
We let the two main emotions everyone has around money dominate our decisions: fear and greed – fear will make you risk averse and won’t get you anywhere with investing, greed is “keeping up with the Joneses” but never getting ahead.
Pay yourself first each month – you’re your own biggest asset, so invest in yourself.
Use your money to acquire assets instead of liabilities.
Starting today is the most important thing.
4. One up on Wall Street
by Peter Lynch
Say hello to the ‘must-read’ for the rookie investor. His investment philosophy is simple, logical, and easily replicated for people just starting out in the markets. And, if you don't agree with his philosophy, you’ll still learn the very valuable lessons from his advice on buying shares. Not just for rookies, advanced investors have a lot to gain from reading Lynch’s investment strategy – it just might change their own! This book essentially simplifies share picking and brought Lynch great success in his profession as a fund manager at Fidelity, the well-known US mutual fund company.
Understand the nature of the companies you own and the reasons for holding the stock.
Be suspicious of companies with year on year high growth rates.
Companies that have no debt can’t go bankrupt.
Invest in simple companies that appear dull, mundane, out of favour, and haven’t caught wall street “buzz”.
5. Winning the Loser’s Game
by Charles D. Ellis
Don’t be put off by the cheesy title: in his book, Winning the Loser’s Game, Charles Ellis’ provides a solid foundation for the investor who is just starting out in the share markets by using a tennis analogy. Using easy-to-understand language, the book covers the fundamentals of the markets and investment strategies to help people increase their investing literacy. The main premise of the book is that individual investors can achieve greater success working with financial markets instead of against them. A proponent of long-term investing, Ellis explains the futility of “short-termism”, and discusses at length the benefits of long-term investment policy as a key driver of investment success. The founder of Greenwich Associates, one of the oldest investment consulting firms in the US, Ellis advises an approach to investing that requires you to know where you’re going with your money before you start investing it.
Save. If you don't live below your means, financial freedom is not within reach.
Don't speculate. Invest.
Don't invest in new or interesting investments. Wall Street has an endless source of investments that look too good to be true!
Write down your goals and investment policy and stick to it.
Distrust your feelings. Human instinct is usually dead wrong.
6. The little book of common sense investing
by John C. Bogle
Sadly, John Bogle has just passed away, but he’s left a legacy of genius. The Little Book of Common Sense Investing provides an alternative to actively managed funds by introducing readers to low-cost, passive index funds as a sustainable investing strategy. During a time when everyone was trying to beat the market with great stock picks, Bogle had the brilliant idea of mimicking what the indexes did and not managing anything. It’s this spark of genius that helped him build one of the most successful investment companies in the world: Vanguard.
Actively managed funds aren’t ideal because past profits don’t guarantee future success.
The majority of your money is best invested in safe, low-cost index funds.
You can’t go wrong by just choosing the cheapest index fund.
7. The 5 Mistakes Every Investor Makes And How To Avoid Them
by Peter Mallouk
Peter Mallouk’s firm, Creative Planning Private Wealth Management, has been named by CNBC as the top independent wealth management firm in the US. In this seminal book, Mallouk outlines some of the most common investor errors he’s seen over the course of his career as a wealth manager. He highlights that “what not to do” is just as important as “what to do” when it comes to investing. Whether you’re a finance expert or new to investing, Peter’s observations are insightful and will help you develop a solid investing strategy.
Base investments on whether the market will go up or down.
Constantly trade stocks.
Misunderstand performance and financial information.
Believe you are an expert, admit what you don’t know.
Work with the wrong financial advisor.
8. Global Investing: A Guide for New Zealanders
by John Ryder
Finally a Kiwi book! Global Investing: A Guide for New Zealanders takes you on a real-time view of the Global Financial Crisis, using it as a catalyst to teach you how equity markets work. John Ryder is the first half of “Ry-man,” in Ryman Healthcare, one of the NZX’s strong performers over many years, so his investment advice is worth something. Relevant to Kiwi investors and international investors alike, the book examines the things that lead inexperienced investors to make mistakes and lose money. Ryder shares his own approach to investing, explaining how he analyses trends and financial models, to decide where he should put his money. He also shares his trading strategies to help you polish your investment techniques.
Higher interest rates create better alternatives for investors (bank deposits or bonds) and lead to a downward adjustment in share prices to provide a comparable dividend yield.
The return for active investors is proportional to the amount of work that they put into finding undervalued shares and identifying stocks that are in specific situations.
The contrarian believes that crowd behaviour, such as extreme optimism or extreme pessimism, leads to an over reaction that is capable of being exploited for profit.
Stay with the market or stock while it is heading in the right direction – let your profits run on and cut your losses.
9. Liar’s Poker
by Michael Lewis
Michael Lewis was fresh out of Princeton and the London School of Economics when he got a job at Salomon Brothers (#RIP), one of Wall Street’s premier investment firms. During the next three years, Lewis rose from callow trainee to bond salesman, raking in millions for the firm and cashing in on a modern-day gold rush. His book is a very entertaining read about the competitive environment of Wall Street’s trading floors describing an environment where no room is allowed for weakness, and where bold risk-taking is the life-blood of the industry. Better known for his books Moneyball and The Big Short (if you haven’t seen these movies, do so right now!).
Liar’s Poker isn’t a how-to book like the others in this list but it talks about two main elements:
An insider’s view of the fast-paced and testosterone-driven world of trading and sales on Wall Street. (Perhaps somewhat romanticised and glorified, but ultimately riveting to read!)
The other half explains how some of the most powerful securities in the world were created – namely high-yield “junk” bonds and mortgage-backed securities.
10. Other investing resources
Okay, so there were 9 best reads. The thing is is that it’s 2019, and most of us are used to gleaning financial tidbits from sites we surf on our mobiles and tablets. While we still see books as ultra-important to financial self-education, we’re also pretty thrilled to be living in a digital age where we can get the insights we need immediately, at the tap of an index finger. To celebrate how far we’ve come, here are our 3 most popular go-to websites for investing resources, rated from beginner to advanced, because we’re good like that.
Beginner investors: Investopedia’s Investing 101 tutorial
This eight-part tutorial offers a comprehensive guide for the novice investor. It starts with the question “What is investing?” and progresses into compounding, types of investments, portfolios, and diversification. The first of Investopedia’s investing tutorials, or university, this is a great place to start if you’re just new to investing and want to get a handle on the basics before you start investing through Hatch.
Intermediate investors: Motley Fool
Motley Fool’s goal is to build “the world’s greatest investment community.” Bold. It has a variety of resources to choose from, including its website, books, a newspaper column, a radio station, and a newsletter. Dedicated to helping the world invest better, The Motley Fool was founded in 1993 by brothers Tom and David Gardner. They help millions of people attain financial freedom by educating them as they believe that the person best positioned to take care of your financial future is you. (We agree with that too!)
Advanced investors: Seeking Alpha
Seeking Alpha primarily sources its content from its community, meaning investors and money managers share their knowledge, and recommend and explain their stock picks. Seeking Alpha also provides free earnings conference call transcripts which show management’s take on and stock analysts' questions about a company’s prospects. From market news to earnings reports, Seeking Alpha offers a solid foundation of information for seasoned investors and rookies alike. Best of all, it’s free.