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The best investing books for beginners

Updated 9th June 2021

Since my list of the best investing books for beginners was first published last year, I’ve moved another dozen or so investing books to the ‘read’ section of my bookshelves. But only one of those made it into my top 5, and it’s gone straight to number 1.

While these are my current favourites, they’ll be subject to change as I continue to plough through the huge number of top-quality investing books out there. All the books listed below are excellent guides for beginners, and really you can’t go wrong with any of them.

I certainly made my own fair share of terrible investing decisions when I was first starting out. Hopefully these help you avoid the major investing blunders, and you get off to a better start than I did…

 

Occam Investing’s Top 5 best investing books for beginners

 
 

5) ‘If You Can: How Millennials Can Get Rich Slowly’ by William Bernstein

 
 

Beginner investing books 4 - If you can - how millenials can get rich slowly

I’m starting the list with a bit of cheat, because this one’s not really a book at all. It’s actually a free e-book, and you can download a copy here. Alternatively, you can buy a paperback copy for about £4 from Amazon.

It only takes a maximum of an hour to read, so is particularly useful for those who are after a short, quick introduction to the world of investing. Given its brevity, it’s especially useful for those young millennials who’ve had their attention spans ruined by compulsively checking Instagram to see how many ‘likes’ the picture of their last meal’s up to.

It’s nice and easy to read throughout, with no previous knowledge assumed. It does mention various US tax wrappers like 401(k) and IRA, which might be off-putting for some readers, but if you substitute 401(k) for ‘pension’ and IRA for ‘ISA’, the lessons are just as applicable to UK investors. The final ‘nuts and bolts’ chapter is entirely skippable for UK investors, and although the ‘3-fund portfolio’ fund choices are also US-focussed, UK equivalents aren’t hard to find – just have a read of ‘The best Vanguard index tracker funds for UK investors’ and ‘The best Vanguard bond funds for UK investors’.

‘If You Can’ hammers home the point that how much you save is the most important thing for young people. It sounds like common sense, but in my experience most people spend 90% of their efforts on trying to maximise returns instead. I’ve written myself about benefits of saving vs investing here.

The author doesn’t go into too much detail around the precise benefits of low-cost indexing, but touches on why it’s such a strong strategy and recommends index funds as the preferred vehicle for investing.

The recommended ‘homework’ readings at the end of each chapter are also great recommendations and it’s worth dipping into one or two if you fancy.

4) ‘Simple Wealth, Inevitable Wealth’ by Nick Murray

 
 

Beginner investing books 3 - Simple wealth inevitable wealth

This book can be difficult to get hold of, given it’s now out of print. I picked up my copy for about £20 from Amazon, but you’ve got to wait for price drops as even second-hand copies are expensive (£60+).

Simple Wealth, Inevitable Wealth is held up as a bible for many investment advisors, particularly in the US, and the fact that it’s still so popular despite being out of print shows how useful the content is.

You won’t find any fund recommendations in this book, and you won’t find any academic evidence either. The book focusses on timeless, fundamental investing truths – which is why it’s an essential read. Its lessons will always be valid.

It’s probably the best book I’ve read on gaining a long-term perspective, and really helps the reader take a step back and put the process of saving and investing into context. It reframes the process of investing away from purely maximising returns, and towards building long lasting wealth.

Because it takes such a long-term view, the book has a real focus on investor behaviour. While other investing books focus on different aspects of the basics – keeping costs low, asset allocation, and diversification – this one helps you get in the right frame of mind to build wealth. With a ‘buy-and-hold forever’ approach, strong investor discipline becomes incredibly important, and the author shows how crucial it is for investors to maintain a long-term outlook when the markets are falling.

Although the author advocates for the use of a financial advisor to help investors stay the course (which is why it’s so popular in the advisor world), the lessons are just as relevant for DIY investors looking to build wealth for the long term.

3) ‘Smarter Investing’ by Tim Hale

 
 

Beginner investing books 2 - smarter investing

There are amazingly few investing books aimed at UK investors, given most of the literature comes out of the US. Tim Hale’s book is a great introduction for UK-based investors looking to start investing.

The book is aimed at complete novices, so avoids the use of jargon and favours plain and understandable language. Similar to other books on this list, the author expounds some compelling arguments for passive investing, but also gives some consideration to other forms of investing, such as factor investing.

The book guides the reader through the process of setting their personal asset allocation and selecting their own funds. The fund selections are likely to be outdated now, given the most recent edition was written in 2013, but the ideas behind the selection process remain relevant.

This is the most technical book on the list, and is an essential read for this reason. It shows the reader how to put all these great investing concepts into practice. The book assumes you have zero knowledge, and guides you through a step-by-step process of building your own portfolio relevant for UK investors.

The author’s arguments are supported by plenty of evidence, which is both a blessing and a curse. Although incredibly helpful for building up the rationale to support his investment philosophy and fund choices, the book can sometimes read like a bit of a textbook. It did feel like a grind to read at times, as the author unrelentingly pulled me along the investing journey bullet-point by bullet-point. I like a good guide as much as the next guy (hence this blog), but there were times where even I had to press pause.

The fact it ranks so highly on this list despite its technical style is testament to how invaluable the contents of the book are to UK investors.

If you’re a UK investor serious about building your own portfolio, and are looking for a detailed start-to-finish guide, then this is the book for you. It will also serve particularly well as a reference point to refer back to thanks to its meticulously ordered structure. It’s a must-read for UK investors taking their first steps into the world of investing.

2) ‘The Little Book of Common Sense Investing’ by John C. Bogle

 
 

Beginner investing books 1 - the-little-book-of-common-sense-investing-2

No list of the best investing books for beginners would be complete without something written by the late, great John ‘Jack’ Bogle. The founder of investing behemoth Vanguard, Jack Bogle’s ‘The Little Book of Common Sense Investing’ is one of the best books beginner investors can read before investing.

The book assumes no prior investment knowledge, and is jargon-free throughout. It’s short (readable in a couple of afternoons), and is a quick, easy read. As the title suggests, the book takes a sensible common-sense approach to investing, focussing on the benefits of simplicity, low fees, diversification, and discipline. You can see from my ‘About’ page that this chimes well with my own investment philosophy.

Particularly worth mentioning is the ‘Gotrocks Family’ story, which is told right at the outset of the book. The story itself is only 5 pages long, but if there was one section from any book on this list that I would recommend people read, it would be this one. Luckily, you can read it in its entirety for free on John Bogle’s website. (The story itself is borrowed from the 2005 Warren Buffett shareholder letter).

The book starts strong, and keeps up the pace throughout. Bogle clearly explains why using past performance is a poor metric for fund selection, why passive investing is superior to active investing, and why investing with popular managers is a bad idea. Given the author was the founder of Vanguard, it’s no surprise that he extols the virtues of a low-cost index-based approach to investing – but that doesn’t make his arguments any less persuasive. All arguments are backed up by both compelling logic and plenty of evidence.

Despite most of the evidence being US-focussed and now slightly out-of-date, a more globally focussed and updated selection of evidence for index investing can be found in the ‘Active vs Passive’ section of this blog.

1) ‘The Psychology of Money’ by Morgan Housel

 
 

The psychology of money

What. A. Book.

Don’t let the title put you off – I have to caveat every time I recommend this with an “It’s not as boring as it sounds”. Really, it’s excellent. The kind of book I wish I was capable of writing. 

The book is based on Morgan Housel’s superb blog post, ‘The Psychology of Money’, which acts as an excellent free snippet of the book’s contents. I’d advise you to read the blog post, have your mind blown, and then I won’t need to persuade you to order the book.

It was the only investing book which featured in my 5 favourite books of last year, and as part of that review, I included three random quotes from the book, as I couldn’t pick a favourite. I’ve flicked through the book and picked a few different ones at random:

“Your personal experiences make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”

“The price of investing success is not immediately obvious. It’s not a price tag you can see, so when the bill comes due it doesn’t feel like a fee for getting something good. It feels like a fine for doing something wrong. And while people are generally fine with paying fees, fines are supposed to be avoided. you’re supposed to make decisions that preempt and avoid fines. Traffic fines and IRS fines mean you did something wrong and deserve to be punished. The natural response for anyone who watches their wealth decline and views that drop as a fine is to avoid future fines.”

“I can afford to not be the greatest investor in the world, but I can’t afford to be a bad one. When I think of it that way, the choice to buy the index and hold on is a no-brainer for us.”

The timeless nature of the author’s advice means you won’t find recommendations for specific funds, or guidance on how you should approach your own portfolio construction. There’s a brief section at the back about how the author approaches his own finances – but if you’re tempted to blindly copy his approach, you haven’t been paying attention.

As a result, it pairs extremely well with either ‘The Little Book of Common Sense Investing’ (for the benefits of passive investing) and ‘Smarter Investing’ (for how to construct a portfolio).

Reading ‘Psychology of Money’ will blow your mind and teach you how to approach your finances at the same time. Reading it in conjunction with one of the other more nuts-and-bolts books will teach you how to put those concepts into practice, so you’re able to construct your own portfolio.

Overall, it’s the best 250 pages on investing, wealth, psychology, and happiness you’ll likely ever read.

Read the blog post, then buy the book.

 

Summary: The best investing books for beginners

 
  1. The Psychology of Money by Morgan Housel
  2. The Little Book of Common Sense Investing by John C. Bogle
  3. Smarter Investing by Tim Hale
  4. Simple Wealth, Inevitable Wealth by Nick Murray
  5. If You Can by William Bernstein

 

Honourable mention

 

‘A Random Walk Down Wall Street’ by Burton Malkiel

 

Beginner investing books 5 - A random walk down wall street

This one was narrowly kicked out of my list of the best investing books for beginners during the most recent update (mid-2021) to make way for Morgan Housel’s superb ‘Psychology of Money’, which went straight to the number one spot.

But it’s still an excellent read for new investors. A Random Walk Down Wall Street is now in its twelfth edition, which shows just how popular it’s proven to be. I read one of the previous editions, but for those looking for beginner investing books to read now, with up-to-date evidence, it’s just been freshly updated with a new edition for 2020.

The first edition was published in 1973, so the fact its core messages have remained unchanged since then shows it’s one of those great ‘timeless’ investing books. It’s one of the seminal books on the efficient market hypothesis, and catapulted the ‘random walk’ idea into everyday investing lingo.

It’s probably the most in-depth and longest of my beginner investing books recommendations, but is written so well that despite the length, it’s still easy to read. There are plenty of interesting stories about past market crashes – from the Dutch tulip-mania to the dot-com bubble – which are used as evidence that while the market isn’t always perfectly efficient, it’s efficient enough for most investors.

The book provides some strong arguments for avoiding trying to pick winning stocks or funds, favouring a low-cost approach, and all the author’s arguments are backed up with plenty of evidence. The author also includes lots of examples for poor investor behaviour, and why behaviour is such an important part of investing.

Favourite quote:

“This chapter’s review of the Internet and housing bubbles seems inconsistent with the view that our stock and real estate markets are rational and efficient. The lesson, however, is not that markets occasionally can be irrational and that we should therefore abandon the firm-foundation theory of the pricing of financial assets. Rather, the clear conclusion is that, in every case, the market did correct itself. The market eventually corrects any irrationality – albeit in its own slow, inexorable fashion. Anomalies can crop up, markets can get irrationally optimistic, and often they attract unwary investors. But, eventually, true value is recognized by the market, and this is the main lesson investors must heed.”

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Past performance does not guarantee future performance and the value of investments can fall as well as rise. The information on this site is provided for information only and does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment including any products or services or an invitation, offer or solicitation to engage in any investment activity. Please refer to the full disclaimer on the disclaimer page.

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Bukowski
13 days ago

Good work. It’s a Solid list and can’t argue with your top 4. William Bernstein’s paper is indeed very good but, as you say, not a full book.

Being a ‘top 5 for beginners’ I would (begrudgingly) drop WB for Ben Carlson’s A Wealth of Common Sense. I’m a financial adviser and theoretically know (or ought to) what I am doing but have read it 3 times in the past 4 years. It’s an excellent book with something for everyone.

RW
1 year ago

one other idea is Early Bird, the power of investing young.

from the review
“Relatively few young people have a natural inclination to plan ahead, a tendency that our consumer oriented culture does nothing to discourage. Without a solid understanding of the power of savings and compound interest, there is no counter-balance to the natural impulse to prefer consumption right now to potentially greater consumption at some point far in the future. An understanding of compounding can be thought of as a partial immunization to falling into destructive spending habits. Early Bird: The Power of Investing Young is a new book intended to introduce young people to the exciting world of investing”

Full review is here
https://www.rationalwalk.com/book-review-early-bird-the-power-of-investing-young/

Alex
1 year ago

Thanks for this post, I am a millenial just starting to take control of my finances. I’ve been reading a lot about saving and investing. Some of this books look like a great addition to my list.