Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18
Bitcoin BTCUSD Elliott Wave View Calling for Rally toward $15,000 - 13th Mar 18
Hungary’s Gold Repatriation Adds To Growing Protest Against US Dollar Hegemony - 13th Mar 18
Record Low Volatility in Precious Metals and What it Means - 13th Mar 18
Tips for Writing and Assembling the Classification Essay - 13th Mar 18
Gerald Celente "If Rates go up too High, the Economy goes Down, End of Story" - 13th Mar 18
Stock Market Selloff Showed Gold Can Reduce Portfolio Risk  - 13th Mar 18
Silver Does it Again! Severe Consequences - 12th Mar 18
Has the Stock Market Rally Run Out of Steam? - 12th Mar 18
S&P 500 at 2,800 Again, Stock Market Breakout or Fakeout? - 12th Mar 18
The No.1 Energy Stock To Buy Right Now - 12th Mar 18
What Happens Next When Stock Market Investor Sentiment is Neutral - 12th Mar 18
Economic Pressures To Driving Gold and Silver Prices Higher Long-Term - 12th Mar 18
Labour Sheffield City Councils Secret Plan to Fell 50% of Street Trees Exposed! - 12th Mar 18
Stock Market Uptrend Resuming? - 11th Mar 18
Bond Market Interest Rate Yields Are Rising Again… Stocks Are on Thin Ice - 11th Mar 18
Death of Europe's Greenest City, Police State Sheffield Labour Council to Fell 50% of Street Trees - 11th Mar 18
Do All Bull Stocks Markets Need to Have a Bearish Divergence? - 11th Mar 18
An Inflation Indicator to Watch, Part 3 - 11th Mar 18
Online Stock Trading Tips - Tips about Online Trading & Day Trading - 11th Mar 18
NDX makes a new high. What does that mean? - 10th Mar 18
Blue Chip Companies on Track for $800 billion Buyback Record in 2018 - 10th Mar 18
Cheap Gold Stocks Basing - 10th Mar 18
An Introduction to Online Forex Trading - 10th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

The Books You Most Likely Read about Investing Taught You Nothing about Investing

InvestorEducation / Learning to Invest Aug 04, 2017 - 12:28 PM GMT

By: John_Mauldin


BY JARED DILLIAN : Lots of people ask me for good beginner books about finance.

That’s one of the hardest questions I get.

I think back to when I was learning about finance—one of my Coast Guard shipmates had these things called “mutual funds,” so I found some free literature about mutual funds and started reading.

At the time, I was living in an economically unfortunate town in coastal Washington State. There was a used bookstore in town. I bought two books: A Random Walk Down Wall Street, by Burton Malkiel, and Bogle on Mutual Funds, by John Bogle. The first two books I read were books on indexing!  

After reading them, I knew with every cell in my body that the Efficient Market Hypothesis was wrong, and had to be disproved.

But those books were a good start.

So sometimes when people ask me what books they should start with, I tell them about Malkiel and Bogle. Then I tell them that those books are all wrong. They look at me like I have a cabbage for a head.

So now when people ask me how they should learn about finance, I am kind of stuck.

I actually went on Amazon and ordered all the lowbrow personal finance books: The Millionaire Next Door, Rich Dad, Poor Dad, the Tony Robbins book, the Dave Ramsey book.

I wanted to gain insight into what the “average” person was reading about investing, because I hope to one day finish a book on investing for average investors. I also don’t spend a lot of time writing for average investors… sometimes people complain that my Wall Street vocabulary can be a little dense.

I think those personal finance books have some good advice and some bad advice. But the one thing they all have in common is that they don’t really teach anything about finance.

Maybe you form some good habits: you save 10% of your paycheck, you pick some mutual funds. But you don’t learn the theory behind any of it.

Do people want to learn the theory behind it? Or do they just want to be told what to do?

Investing Is Hard

People want things to be easy: “Just do these 7 easy things and you’ll wind up a millionaire!”

Unfortunately, investing is never easy. Not even for the pros. Certainly not for me.

Also, markets have a property called nonstationarity, which asserts that the markets change over time, and a strategy that works today probably won’t work in the future.

That means that simple investing rules of thumb, like your allocation to bonds should be your age, will probably get people in trouble at some point.

The tragedy is that investing requires thinking, and thinking is hard, which is the whole premise of Daniel Kahneman’s book, Thinking Fast and Slow. People don’t like to think. They want to outsource their thinking to someone else.

For example, I cannot fix a car engine. Since I don’t know anything about it, I get help. The money I pay is a stupid tax for not knowing anything about fixing cars.

Getting help with investing also costs money, but at least with your car, you will probably get it fixed. There is no guarantee that your financial advice will be good.

Furthermore, you might get great advice and lose money—that happens a lot.

Or, you might get terrible advice and make money—that also happens.

The sad reality is that there are no simple rules, and your financial advisor is little to no help. We are all condemned to this existence where we have to make actual asset allocation decisions on a real-time basis. Get them wrong, and you retire with very little.

So the answer to the question, “What should I read to learn about finance?” is…

”Good luck, dude.”

There Is Another Way

Still, a financial advisor can help—just maybe not in the way you think.

You can’t expect that your financial advisor (like perhaps, someone from Edward Jones) is sophisticated enough to outsmart algorithmic traders and quant hedge funds.

But they can help with behavioral coaching.

An individual investor is his own worst enemy. He is excited by higher prices and demoralized by lower prices. He buys on the highs and sells on the lows. A financial advisor can help by keeping him invested, and not selling on the lows.

Half the country barfed it in 2009. They vastly underperformed the people who held on for dear life.

When it’s just you and the Vanguard website and the computer in the dark, and you’re down 30–50%, and you have no help, what do you do?

A financial advisor, even a dumb one, can tell you everything is going to be okay. And the returns keep compounding.

Book Recommendations

One more thing. A lot of MBA programs have reputations for being content-lite, but I learned a buttload in my MBA program.

So, buy textbooks. Buy financial institutions and markets books. Buy corporate finance books. Buy bond books. Buy international markets books. Buy portfolio management books. Or actually get an MBA, if it makes sense for you.

Or you can read 400 pages of platitudes from a motivational speaker. Your volleyball.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules