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The year has come to an end and it’s time to get started on our New Year’s resolutions. According to a Nielsen’s survey of the most popular resolutions taken by Americans (and I would assume the same for Canadians) in 2015, 25% chose money goals as their principal commitment. Just as with fitness and other healthcare goals, money management doesn’t need to be a daunting task. It’s just a matter of changing our daily habits. (I agree, that’s the hardest part!) With that in mind, I listed three books that I believe are great ways to start getting your money game in order.
- The Elements of Investing by Burton Gordon Malkiel and Charles D. Ellis
Written by an economist and a well-respected investment consultant, this book has made the cut on prominent money-focused reading lists for many years now. Published in 2009, this little treatise of around 150 pages tried to emulate E.B. White’s very well-known (at least for us Humanities students) Elements of Style by putting down some key concepts for managing your personal finances. Truly a beginners’ guide, this book doesn’t necessarily dwell on specific investment tactics; it rathers lays down foundational material to understand market strategies, especially in terms of asset allocation.
The book is divided in five main parts – Save, Index, Diversify, Avoid Blunders and Keep it Simple – and offers a quite down-to-earth and refreshing perspective that contrasts nicely with all the noise abounding in today’s literature on how to beat the market or other magical-thinking investment practices. You might want to review a few financial key concepts while reading, but it’s definitely worth it, especially if you are thinking seriously in having your money work for you in the long run.
Who should read it? Everybody who has an interest in investment, but no particular knowledge.
- The Essays of Warren Buffet: Lessons for Corporate America by Warren Buffett (edited by Lawrence Cunningham)
Another classic in the genre, The Essays of Warren Buffet doesn’t only give unique insights into the mindset of one of the greatest investors of our time, but is also an interesting plunge into the world of business analysis and management. Going against popular beliefs of the past decades in terms of investing, Buffett’s letters to shareholders demonstrate a business-focused understanding of the market, which he approached with caution and skepticism. Putting money in ventures you understand (rather than opt for diversification) and assess business value on its own rather than trust the market valuation are some ways to counteract what he calls the “manic-depressive” tendencies of Mr. Market.
Aside from his characteristic holding strategy that has proven very lucrative, he discusses corporate governance, his peculiar dividend policies, his views on mergers and acquisitions and the importance of accounting methods in understanding the value of a business or investment. Althouh,, once again, this book does not pretend to be a step-by-step guide offering specific investment advice, it provides in a clear language an overview of an investor’s state of mind as he developed a successful long-term strategy. What I got from it specifically is how Buffett disregarded most popular investment trends to really focus on his own intuition and business sense to build his empire. A lesson to us all.
Who should read it? Personal investors, but also business owners and managers, i.e. anyone interested in corporate thinking and financial management.
- Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb
This book is kind of an odd ball in the world of investing, but has received several outstanding reviews by Fortune, Forbes, The Wall Street Journal and The New York Times, to name a few. First published in 2001, its main goal is to explore human’s natural tendencies when faced to the existence of randomness, which is an undeniable force in market dynamics. The author himself is a rather interesting character: statistician, essayist, scholar and risk analyst, he definitely is a very well-rounded erudite. Mixing statistical demonstrations to fictional allegories and his own reflections on the topics at stake, Fooled by Randomness is at the crossroad between a philosophical expose, a personal essay and a statistical lecture on finance.
Needless to say, although it took me several weeks to finish it (not because it was badly written or too conceptually challenging, but due to other priorities), I absolutely loved it for the thought process it initiated in me. Again, this is not a guide to investing or personal finance, but I decided to include this book on my list because of the humanist and unusual way it tackles investing. I also respect its highly intelligent approach to life and randomness because taking into account the counterintuitive and sometimes upsetting dimension of chance in our daily lives is a challenge that not many undertake. Food for thought.
Who should read it? If you enjoy more intellectual reads and thought-provoking concepts, this is for you. It is also a great remedy against the discourse surrounding the “self-made millionaire” trend and all the popular “easy investing” guides available almost everywhere now.
On that note, I wish you all a wonderful New Year and many pleasant readings along the way!