While there is a ton of great financial information on the internet, I still think the best way for a beginner to learn how to invest is to read a book. It’s by far the most efficient way to understand all the history and research behind why people like me promote low-cost index fund investing. The more you know, the less you’ll be tempted to pay high fees or chase hot stocks.
By my count, I have read and reviewed 24 financial books so far. Here are my picks. They would make a great gift or simply provide some useful reading during holiday downtime. I own all of these books, and they were some of the best money I’ve ever spent.
Best Beginner Personal Finance Book
 The Richest Man in Babylon:Short and very easy to read. Teaches the merits of living below your means and investing the rest for the future. [my full review] |
Best Starter Investing Book
 A Random Walk Down Wall Street: Provides a great frame of reference for investing, giving a history of the markets and laying out clearly the surprising findings that monkeys can beat Wall Street. [my full review] |
Best Overall Investing Book
 The Four Pillars of Investing: If you’re just going to read one book on investing, this should be it. Thorough yet concise. [my full review] |
There are a lot of great books in this arena, these are just my personal favorites. Read the reviews on Amazon (and maybe use your free Prime membership). Be sure to look on Half.com, Overstock.com, or Froogle to get a better price (take into account shipping), or check them out from your local library.
I also recently ran across another reading list at AltruistFA.com, which has expanded my own To-Read list further.
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The book Rob Black always talks about as the foundation of good financial management is The Truth About Money by Ric Edelman. I’d be interested in your take on the book.
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I would have to agree with you on your selections and reasoning.
-Wes
By the way, notice that these are the same books I bought for my Thanksgiving giveaway, although I’ll be keeping my dog-eared copies and sending out new ones 😉
I continually see that book “The richest man in babylon” recommended all over the pf blogosphere. I gotta check it out…
I read The Four Pillars because of your review, and I thought it was excellent! I’ve taken a lot of simple modeling techniques explained in that book to heart (prepping my own retirement, etc.). I am still interested in The Intelligent Asset Allocator too… but I think you said you can get most of what you need from the FOur Pillars, right?
That being said, I really want to read A Random Walk because its a classic (and for good reasons). Where does John Bogle’f first book (I forget the name) where he introduces index funds fall on your chart?
I might need to check out this Babylon book too, since you haven’t led me a stray yet!
thanks for the list. I will check my local library.
You have to check out “Transforming Debt Into Wealth” by John M. Cummuta. It ‘s not actually a book but vhs. I don’t really see how it turns debt into wealth, but it has a system for getting out of debt very very rapidly. Try to get it cheap though. It goes for over $100 on eBay, but I was lucky enough to get it for a couple bucks at the Salvation Army. Try not to pay more then $20 for it.
“The Richest Man In Babylon” is by far the best place to start out. If you haven’t read it; READ IT NOW! (preaching to the choir, I know…)
It is a timeless lesson on the value of saving and investing in what you know. Without its basic principals, it is hard to use the other books because you wouldn’t be putting money away to invest.
“The Richest Man in Babylon” is a great book for anyone to read. It is a very easy read. The “Four Pillars of Investing” is also an excellent read. I have yet to read the third book, but I am putting it on my wish list now.
Thanks for the list, I probably will throw this on my site and send a linkback. I wish I would have seen this before I went to the library yesterday.
Thanks!
the Richest Man in Babylon is available for free download (usable for 21 days) at netlibrary. You can get account at most libraries or use an existing library card online to create an account.
The Four Pillars of Investing would be my choice if I could own only one book on investing. It is more than just a book to read to gather a few ideas–it is literally a reference you may read many times. Rarely does a week pass when I don’t open this book again to check on something and invariably another bookmark is added. (I now have over fifty bookmarks which enable me to recheck key passages.)
The Only Investment Guide You’ll Ever Need by Andres Tobias is one of the classics. On Tobias’ website, he links to a site (the only one he links to, BTW) by Less Antman, whose long-term asset allocation strategy is 50% domestic stocks and 50% foreign. You won’t find this in many investment books because owning large amounts of foreign stock wasn’t common until recent years.
Among softer titles, I liked All Your Worth by Tyogi and Warren. They suggest dividing your income into Must-Haves, Savings and Wants. A couple of simple principals are that anything that isn’t a must-have shouldn’t be a must-pay, so it’s OK to have a mortgage (you must have housing) but not a non-cancellable gym membership. But nothing is a must-pay if you can get rid of the debt and the payment simultaneously (e.g. you can get rid of the car payment by selling the car).
‘Economic Indicators” is interesting, too, in that it gives you a very bare-bones, factual account of how different assets will perform based on various economic trends.
The Richest man in Babylon is a great book. I’ll check the others out too. Mind if I repost?
How would you compare “The Four Pillars of Investing” to Bernstein’s “The Investors Manifesto”? I am not totally sold on the idea of index investing being the best way to invest, but it sure would be easier than picking individual investments. I suppose that is what Bernstein and many others are trying to tell me.
I haven’t read Investor’s Manifesto, so I can’t comment. Four Pillars does a pretty good job of laying out the argument for low-cost, passive investing.
I found that The Richest Man in Babylon was a pretty good Book, his idea is simple yet effective. Good story. Thanks for the share.
Smart man! Richest Man in Babylon is by far my favorite book on personal finance and wealth building. The basis of my blog is because of that book. Cheers!
The The Richest Man in Babylon is a classic! A good read that offers financial wisdom in the form of ancient tales of merchants, herdsmen, etc.
This is a great tip. The more educated you are the better choices you make!
Similar to The Richest Man in Babylon, I quite enjoyed The Wealthy Barber. If you haven’t read it, it’s kind of like an expanded, and plain english version of TRMIB.
The Four Pillars of Investing is a great starter book and one that I myself read when I was first starting out.
Thanks for the list!
These are excellent choices. What’s interesting is that your top two choices don’t really go into any technical depth when it comes to building wealth or investing – they are more high level and philosophical in nature. These books almost tell you what not to do and how not to think. This is key – investors are too often overconfident, greedy, or naive and they end up not beating the market over the long term because of it. Simplicity and disciple is really the best option for the vast majority of retail investors out there.
For me the go to reference for share investing is The Intelligent Investor by Benjamin Graham. An old book now with some lessons and advice that never gets old.
Can I suggest another one? I’m a bit biased because I’m the one who wrote it, but I believe it fills a void in the market. I focused on real stories from ordinary people who either have the option to retire early, or are well on their way to having that option. Heck, I’ll even send you a free copy if you promise to give me some feedback (that goes for anyone reading this if you ask nicely). I’m not sure if the link will show up here, but search Amazon for “Set It On Fire Jon Sterling” and you’ll see it.