I’m starting to lose track of the number of people who ask (online and in person) what the best beginner investing books are.
To collect my thoughts, and so that I’m able to send a link rather than having to explain each book every time I’m asked, I’ve compiled a list of my 5 favourites.
While these are my current favourites, they’ll be subject to change as I continue to plough my way through the huge number of top-quality investing books.
5) ‘A Random Walk Down Wall Street’ by Burton Malkiel
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 that 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 jargon.
It’s probably the most in-depth and longest of my beginner investing books recommendations, but is written so well that despite the large amount of content, 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.
4) ‘If You Can: How Millennials Can Get Rich Slowly’ by William Bernstein
This one’s a bit of cheat given that it’s not really a book, but is actually a free e-book. You can download a copy here. Alternatively, you can buy a paperback copy for about £3 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 young people who are just starting out in investing.
It’s very easy to read throughout, with no previous knowledge being assumed. It does mention various US tax wrappers like 401(k) and IRA, which might be off-putting for some, but if you substitute 401(k) for ‘pension’ and IRA for ‘ISA’, the lessons are equally 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.
The book hammers home the point that how much you save is the most important thing for young people, which 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 excellent recommendations and are definitely worth reading.
3) ‘Simple Wealth, Inevitable Wealth’ by Nick Murray
This book can be difficult to get hold of, given that 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 its 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 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 to 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 has a focus on behaviour. 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 equally as applicable to DIY investors looking to build wealth for the long term.
2) ‘Smarter Investing’ by Tim Hale
There are very few investing books aimed at UK investors, given that most of the literature comes out of the US. Tim Hale’s book is the best introduction I’ve found 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’s arguments are supported by plenty of academic evidence – the details of which might be too much for complete novices, but this shouldn’t put readers off. The ideas behind the evidence are all well explained in layman’s terms.
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.
The book provides solid, practical, and sensible advice, and is particularly valuable for UK beginner investors given the lack of UK-focussed investing books out there. It’s a great ‘how-to’ guide that helps new investors take their first steps into the world of investing.
1) ‘The Little Book of Common Sense Investing’ by John C. Bogle
Written by the late, great John ‘Jack’ Bogle, founder of Vanguard, ‘The Little Book of Common Sense Investing’ is one of the best books novice investors can read before taking their first steps into the world of investing.
The book assumes no prior investment knowledge, and is jargon-free throughout. It’s short (readable in a couple of afternoons), and 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 opinions on portfolio construction.
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, and why investing with popular managers also brings its own difficulties. Given that 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.
If I could only recommend 1 beginner investing book for to read, this would be it.