10 Great Books about Investing and Personal Finance

August 31, 2020

If you look for a book that can teach you how to invest, you will quickly discover that there are gazillions of possibilities.

The biggest problem is that "investing" is a word that incorporates a lot of different disciplines.

Under this label you can find purely motivational texts, based on some general "believe in yourself" sauce.

Or the most exotic forms of trading with complicated financial products.

All these books are paired together with books written by Nobel Prize winners, or by extremely successful investors with a proven track record.

So, if somebody wants to start out, he (or she, of course) needs to figure out what is good from the bullshit.

If this is not complicated enough, there is another problem for somebody who wants to invest and lives in Europe.

The best books about investing are from the US, the most influential country when it comes to investing and finance.

This means that people living in the US have, on average, better financial products available for them (which usually are not available in Europe).

Fortunately, we made some progress, but as Europeans, we still live in the Investing Stone Age

So, reading books that are specifically written for the US audience will not give you a lot of practical information when it comes to financial products available in Europe.

Apart from this "tiny detail" there are some fantastic books that you can use to learn the basics of investing.

At least, they will give you the minimum amount of information you need if you want to make your own investment decisions or delegate them to a professional.

I selected for you the best 10 books available.

They are written in English, of course, but you can always check if there is a version available in your native language if that is easier for you.

The books are divided into two sections.

The first one is for those who have just started investing (or want to start investing), while the second is for those who already have some experience in this field.

Let's get started!

Books for those who want to start or have just started

1. Money, master the game - Tony Robbins

Investing your money is not just about knowing the technical stuff.

It doesn't matter if you know all the financial products available or all the mathematical rules behind the investment world.

It will not be enough if you lack the knowledge of the psychological mechanisms that govern the world of investment.

Money, Master the Game, written by Anthony Robbins, is an excellent introduction to this subject.

The book's main focus is on how to define (and improve) your relationship with money, but there are also more technical parts that discuss different investment products and how the stock market works.

In the book, you will also find interviews with the most famous investors of all time.

And some suggestions on how to create a portfolio that can do well during all economic seasons.

(spoiler alert for financial nerds: they are based on Ray Dalio's All-Weather portfolio).

This book is quite long (688 pages), but there are whole chapters that you can easily skip if you live in Europe.

For example, the description of the American pension system and some financial products that do not exist in Europe.

This book is not overly technical and it's a great introduction to the investment world.

2. Unshakable (Tony Robbins and Peter Mallouk)

If you don't have the patience to read "Money, master the game" and are not interested in interviews with the greatest investors of all time, Unshakeable is a great alternative.

Apart from Tony Robbins, the other author of the book is Peter Mallouk, an independent American financial advisor who manages millions for his clients and helps them achieve their goals through proper financial planning.

This book is very practical.

A handbook that will give you invaluable insight on how to build your investment plan.

It is my personal favorite for somebody who is at the beginning of his journey (unless you prefer to have a more tailored-made approach to your learning, so let's talk LINK)

As usual, there are specific situations that are typical of the American system.

Anyway, all the principles you can find in this book can be applied immediately by investors from all over the world, including Europeans.

3. Fooled by Randomness, Nassim Taleb

Nassim Taleb is one of my favorite authors of all time.

He has a very direct and aggressive style, especially when he talks about economists who are sure they know everything.

In this book, he makes some very interesting reflections on human nature and how we react to the role of chance in our lives and uncertainty.

Fooled by Randomness was the first book he wrote for a wider audience and revolves around a fundamental theme: how difficult it is for anyone not to be fooled by chance.

It is a basic Statistics course, but not the one studied at university with balls and urns, or anything in a predictable environment.

It is Statistics applied to real life, the one where you do not know the initial probabilities.

And learn to use statistical (or even better, probabilistic) thinking is one of the traits you will need if you want to become a successful investor.

Moreover, if you have not read anything about behavioral economics, this text is an excellent introduction to some of the most famous bias that can cost you money, such as survivorship bias and overconfidence.

By reading this book, you will find a guide to better understand and manage your emotions when you invest, especially during moments of euphoria and panic.

4. The Little Book of Common Sense Investing

The author of this book is John "Jack" Bogle, an absolute legend. 

He is the inventor of the Index Funds.

If you don't know what they are, here is a (simplified) definition.

An index fund is a fund that copies specific indexes (for example, the S&P or the Nasdaq) instead of trying to do better than them.

It doesn't sound so great until you do some research and realize how tough is to do better than the index (more on that in the book).

Bogle was the first providing a low cost- high effective solution for non-professional investors looking for the best way to invest their money. 

One of the greatest investor of all times, Warren Buffett, said about him:

"Jack has done more for American investors than any other individual I have ever known."

And American investors (and not only them) repaid his hard work.

The investment company he started, Vanguard, is the number one in the world for the number of assets (money) under management.

Despite this, it continues to charge very low fees to allow investors to earn the highest possible returns from their investments.

In The Little Book of Common Sense Investing, Bogle explains in detail his investment philosophy and why funds that copy indices are the best choice for a non-professional investor.

It is not a book suitable for those who are completely zero experience in the investment world.

If you already have a little bit of experience, but the concept of an "automatic" fund that simply copies an index (an ETF) feels a bit scary to you, or you just want to better understand why it is so effective, this is the book for you.

5. "A Random Walk Down Wall Street" 

"A Random Walk down Wall Street" is one of the most classic investment books.

Written in 1973 by Burton Gordon Malkiel, it has survived the test of time and is now in its twelfth (!) edition, which also has a small chapter dedicated to the 2017 cryptocurrency bubble.

This book is fantastic for those who already have a basic knowledge of the investment world and want to learn more about some basic concepts.

While reading it, you will find many hints on how to build an investment portfolio (unfortunately, always and only with American products) and a "small guide for speculators", which will talk about the two most common types of analysis when you want to buy single stocks.

Technical analysis and fundamental analysis.

The technical analysis is based on price movements and exchanged volumes, and it tries to understand the psychology of the market.

The fundamental analysis, instead, works differently.

Through the analysis of the balance sheet, the sector, and the management in charge, it tries to understand the intrinsic value of a company and then see if the current valuation of the share is more or less high than its intrinsic value.

As a final gem, the last chapters of the book are dedicated to a mini-guide with the key principles to build an investment plan.

For example, how to invest according to your goals and make sure and rebalance your portfolio regularly.

The same principles that we have deepened and adapted for the European markets in Simplinvest.

These 5 books will help you build a solid foundation.

If instead you want something more advanced, keep reading.

Books for those who are more experienced (and want to learn more)

6. The 4 Pillars of Investing - William Bernstein

The name William Bernstein is unknown to most people, even in the United States.

Bernstein is a neurologist who decided to change his career and now is a financial scientist (or at least, I like to call him this way) and an independent financial advisor.

His innate drive to share his financial knowledge has led him to write many books, and "The 4 Pillars of Investing" is the most popular.

This book is a very U.S.-oriented guide that lays down the foundation you need to have in order to invest successfully.

It explores the theoretical foundations (take more risk, get more return), the history of markets, the psychology of investors, and the institutions you need to deal with while investing.

This book combines elements that are easier to understand with more advanced elements.

For this reason, it is not a good first book to begin to enter the investment world.

But if you already have some experience and you want to understand better the more technical part of building a portfolio, then it is a good choice.

Inside you will find also some already made portfolios, but they are based on the American reality, and so they are not very useful for a European investor.

7.Principles - Ray Dalio

Ray Dalio is one of the best investors of all time.

He is the founder of Bridgewater Associates, an investment firm that manages $150 billion and accepts only clients with at least $5 billion in assets.

Not only that: Ray Dalio seems to be one of the very few managers able to really beat the market and therefore this is definitely a book worth reading.

Before rushing to buy it, however, you need to know something very important.

This book does not give practical indications on how to invest.

In the book you can find 3 parts:

  • An autobiographical part, interesting if you are curious to know more about the life of a successful investor;
  • "Principles for Success in Life" in which Dalio explains the principles to use to make the best decisions in your personal life, based mainly on radical honesty;
  • "Principles for Success at Work", extremely useful if you are an entrepreneur who wants to build a successful business.

If you are looking for information on where Ray Dalio invests his money or you simply want the answer to the question "Where can I put my money?" you will be disappointed.

But there are still some gems that can be linked to investments, especially the behavioral part, which are worth reading to improve your understanding of your own psychology.

8. Nudge - Richard Thaler

Richard Thaler is one of the most influential figures in Behavioral economics and he won the Nobel Prize for Economics in 2017.

Before becoming worldwide famous, Thaler wrote several books analyzing the key points of behavioral economics, and "Nudge" is one of the first.

This book introduces the concept of choice architecture or the systems that govern the way we think and we act.

The systems we use to make all the decisions, more or less important, or the ones that other people use for us.

We often don't realize how silently we are guided to an alternative, not always the best one for us.

Nudge is an antidote against unconscious decisions.

After reading it you will feel like you are in a post-Matrix world and you will look with different eyes both at your own decisions and those of others.

More than on investments, this book focuses on "decision making", the science of making the best possible decisions and ranges in various fields.

But you will also find insights from the world of behavioral economics and investment to make your investment process even better.

9.Irrational Exuberance - Robert Shiller

"Irrational Exuberance" is an expression first used in 1996 by Alan Greenspan, the former president of the FED (the American equivalent of the ECB).

The context?

"Irrational Exuberance" was used to describe the mood of the market participants of the American stock market in those years.

If you weren't there, the end of the Nineties saw the formation of a technological bubble in the stock market, and a lot of people had left their jobs to become a full-time trader.

Robert Shiller, winner of the Nobel Prize for Economics in 2013, shortly before 2000 decided to write a book that warned of the technology bubble that had blown out of all proportion.

This bubble became an opportunity to do a scientific study on what are the components that contribute to the formation of an economic bubble, in order to recognize and avoid financial bubbles in the future.

The result of this analysis was Irrational Euphoria, a manual that explains in detail how bubble works.

Inside you will find a description of the cultural, economic, and psychological elements that form a financial bubble, and what to do to avoid losing your money if you are investing during such times.

The book has had 3 editions and the last one (2016) contains interesting elements about the real estate bubble in the USA in 2006 and some elements to better assess the current situation, in particular a new chapter about a possible bubble within the bond market.

10.Antifragile - Nassim Taleb

We all know what fragile means.

Something that breaks easily and does not withstand any external shock.

But what is the opposite of fragile?

The English language doesn't really help us in this case. 

The most common answers are "robust", "resistant" or "resilient" (if someone wants to be cool).

These answers do not describe exactly the opposite of fragile, but only an intermediate stage, in which something remains indifferent to an event. It does not get better or worse.

The true opposite of fragile, Antifragile, is a word invented by Nassim Taleb.

Antifragile is not a detailed manual on how to invest your money.

On the contrary, there are more parts related to the medical world, nutrition, and politics that don't have much to do with it, apparently.

Although they seem disconnected, they actually allow you to better understand the theoretical concepts of this book and put them into practice in the world of investment (and not only).

Two examples above all, the Via Negativa (the negative way) and the barbell strategy.

A great book if you want to refine your investment philosophy and make your investment plan bulletproof.

That's it for today!

If you have any other book that you feel it should be included in the list, leave your suggestion in the comment section below.

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