Books on investing?

[liberty16]

I'd like to get suggestions for book titles that are good primers for someone who wants to learn the in's and out's of stocks, bonds, mutual funds, and everything else related to investment. I don't have much money (on account of being a poor student), but I've been playing the S&P with fantasy money on UpDown and have been doing quite well, so I want to take it to the next level, so that when I have the funds to actually play the market I won't make any huge mistakes. Perhaps you know of a decent book that helped you become a successful investor.........

[Palarran]

I'd read "Rich Dad - Poor Dad" by Robert Kiyosaki. Until you've made your first major pile, avoid the markets.

[MarkJ]

I don't know if the US has impartial free traning but you could have a look at the free online traing offered by the Australian Stock Exchange. Its all the same as the US
Stock Market Education Online Australia - Invest in Share Market - ASX

and The Richest Man in Babylon

[TaoJones]

Originally Posted by liberty16

I'd like to get suggestions for book titles that are good primers for someone who wants to learn the in's and out's of stocks, bonds, mutual funds, and everything else related to investment. I don't have much money (on account of being a poor student), but I've been playing the S&P with fantasy money on UpDown and have been doing quite well, so I want to take it to the next level, so that when I have the funds to actually play the market I won't make any huge mistakes. Perhaps you know of a decent book that helped you become a successful investor.........

First, an observation; paper trading is largely a waste of time. It can teach you the basic choreography, but until you actually have some skin in the game, you have no emotional investment in the outcome.

If you believe that investing is a cold-blooded numbers game, then I suggest that you first learn all you can about human psychology. The numbers that you may believe indicate relative "value" in the market are merely reflections of the current state of the endless battle between fear and greed. If you can find a copy, read Human Action, A Treatise on Economics by Ludwig von Mises.

If you believe you have, or can develop, the temperament to trade successfully, try to get a copy of Trading for a Living by Dr. Alexander Elder. It is a good combination of trading tactics and psychology.

Before you put your first dollar at risk in the markets, read American Sucker by David Denby, film critic for The New Yorker. It's a very well-written account of how a sophisticated, well-educated, cosmopolitan gentleman came to learn about the markets, and himself. His intention in writing the book, as Walter Kim pointed out in his New York Times review, was " . . . to freeze and analyze the mental gyrations that allow a deep thinker to become a shallow speculator . . . "

If you still find you have a desire to trade the markets after reading these books, then go for it. Just keep in mind the old adage that, if you find yourself in a poker game and, looking around the table, can't quite figure out who the patsy is - it's you!

TaoJones

[AVSkipper]

I am currently reading Rule #1 Investing by Phil Town. I'm not that far along, but so far, what he says makes a lot of sense and it's quite easy to understand. I recommend giving that a shot.

[cabo_sailor]

I would heartily endorse the suggestion of "How I Trade for a Living" and would add to that "High Probability Trading" by Marcel Link. Both available at Amazon. They are both books that can be read/reviewed over and over and each time come away with a clearer insight.

[Maren]

Originally Posted by liberty16

I'd like to get suggestions for book titles that are good primers for someone who wants to learn the in's and out's of stocks, bonds, mutual funds, and everything else related to investment. I don't have much money (on account of being a poor student)...

There are whole sites on individual portions this topic.

Investing is tricky because there are many different styles of investing, most of work or have worked at one time. However they basically break down into a few camps: fundamental analysis (looking at a company’s income and balance sheets over time), technical analysis (looking at the charts of a security's performance), trading on news or rumor (gotta love that CNBC) and combinations of the pervious three. And there are tons of combinations.

Personally, if I were in your shoes (low cash, have time and want to learn) I would start with ETFs, so consider John Bogle’s The Little Book of Common Sense Investing. Basically his thesis is the vast majority of mutual funds fail to outperform on a consistent basis the index they are most closely tied to. So if you can’t beat the index, join it. The advantage is higher returns (compared to the other 80%), low complexity (and therefore lower costs) and tax efficiency. I would also peruse this thread.

William O’neal’s How to Make Money in Stocks lays out a good combined system but only if you follow it closely. And therein lies the problem. Most people will say they can follow a system's rules, but they usually can’t. This is the essence of investor psychology, but it is also why I think you should trade on paper first even though as TaoJones correctly points out it is totally different beast. If you can’t follow a system while there is nothing at stake, you won’t when there is. The alternative is a painful and expensive lesson. The link in other thread to a friend's set of charts is useful.

Anyway, investor psychology. Add Edwin Lefevre’s Reminiscences of a Stock Operator to the list. It was written way back around the 1930s so you might think things must have surely changed. But the way people think - or don’t - hasn’t. If you have a cognitive bias towards the recent, you should look at Curtis Faith’s The Way of the Turtle.

Well, now I feel like I have to go on so I don’t slight Technical and Fundamental Analysis

Michael Kahn’s Technical Analysis Plain and Simple is a good primer into the subject, but John Murphy is the master.

Benjamin Graham’s The Intelligent Investor rounds out the list. There is an updated version with Jason Zweig.

All this only scratches the surface.

Personally I would also read Thomas J. Stanley’s The Millionaire Next Door. The key point is being frugal and owning your own business. Most people make there money in their own business.

As for the Robert T. Kiyosaki Rich Dad series, I would his advice with a grain ... no, make a tablespoon of salt. I believe a lot of his ideas are oversimplified or simply misleading. One of the airlines that services the East Coast of the US has magazine that, years ago, had an interview Robert T. Kiyosaki. In it, he was hoping for just one more real estate bust so he could buy up a lot of properties because he thought properties were overinflated. The interviewer asked if advising people to buy when he the prices were overinflated was a bad idea. His response was it might be bad for the others but not for him. That isn’t the sort of guy you want giving you advice.

[Hubec]

When I was in high school I played with paper investing and did quite well. When I left high school I tried some actual investing and I did even better. But I started noticing something; even through I never lost money on a stock, and I handily outperformed the markets the stocks didn't seem to move for the reasons I thought they should. It took me a while but I eventually realized I didn't now what the 'eff I was doing. Even though I was making money I got rid of all individual stocks.

So how was I able to make money? Well a couple reasons; because I didn't pay any fund fees, because the market was a bull at the time, because I was lucky. But the biggest reason took me a while to understand/accept. It was because I was taking relatively large risks. Unfortunately I'm not a mathematician or a risk analyst, so I can't explain it fully, but the basic principle is obvious; by investing in a small number of stocks my risk is far greater than a well balanced mutual fund. While my return was good it wasn't nearly good enough to offset the increase in risk.

I guess this all boils down to; Don't think you're a good investor just because you make money at it.

If I invest in stocks these days it's through index funds - they're pretty kick-ass... In a bull market. My best investment lately was a year ago when I went against my banker's advice and did not invest the proceeds of my Canadian house sale in the US economy. I'm still trying to figure out what to do with that money.

[Delezynski]

Liberty16,

If you are asking here on a cruising board, I would suggest you read "The Automatic Millionaire"! You can see info on it at Amazon.com
Amazon.com: The Automatic Millionaire : A Powerful One-Step Plan to Live and Finish Rich: David Bach: Books

It would mean a lot to a younger cruiser who haas time on their side!

Greg

[David M]

You first have to learn what it is all about and how it all works and then you have to learn how to invest. Its best though to lean how to overall manage your life and your finances before throwing yourself into any investments. You first have to do the big picture before doing the smaller picture..which is investing. For example there are too many people who have money invested while in the mean time are running massive credit card balances.

Do the overall money picture first. Learn how the market works, and then invest.

There is no way around the risk/reward equation. Except that the younger you are, the more risk you can afford to take.

[vera libertas]

I thought my first post would be about sailing...

I would highly recommended Jim Cramer's "Mad Money", many may scoff at this but if you can get past his personality it is a fantastic book for a beginning investor. It will give you a good sense about 401(k)'s, Roth and Traditional IRA's, mutual funds, stocks, etc. He also gives some of his favorite Mutual Fund's and stocks.

After reading that I would also recommend "The Essay's of Warren Buffet", it's a great read as well.

A good website is Stockpickr! Your Source for Stock Ideas, you can view portfolios from the likes of Warren Buffet, etc.

Hope this helps.

[Islandmike]

There are many, many books out there, and many different theories on how to make money, invest yur money, buy and sell options, selling covered calls, etc. I have found that they all make it sound easy, safe and prosperous, and it certainly can be. But what I have also discovered is that you learn just enough to be dangerous... Be prudent.

[speedoo]

When you are ready to get serious about long term investing (as opposed to the latest fad/book that tells you "how to make millions overnight") read Malkiel's "A Random Walk Down Wall Street".

A Random Walk Down Wall Street ... - Google Book Search

I've been an investments professional, read hundreds of books on the subject, and this is absolutely the best. Nothing else comes close, IMO. If I had read it way back when the first edition came out, in 1973, and put it's principles into practice, I'd have ten times the net worth I have now. Easily.

[David M]

speedoo....I second that. That's a good one.

I still think people need to focus on good money management first, of which investing is just one element. I heard the average person in the US has $17,000 in credit card debt...not good. Its very difficult to get a rate of return on an investment, minus taxes on gains, that is greater than the typical interest rate that is found on a credit card. Pay off the credit card first, then invest.

David

[Islandmike]

David,

Roger that my friend. Credit cards have ruined many peoples dreams.