Investing books are a vital piece of financial self-education. Investing books are not only a continuously refreshing and evolving medium. But they’re also a good store of ‘classic’ and ‘timeless’ investing knowledge which doesn’t go out of fashion.
This means that an investing book is effectively a raw material, a building block if you will. You can use these to hand craft your investing education and use to inform your own investing style.
But what are the different ways you can go about using these published titles to flesh out your personal investing plan? This article will explore how you can use the best investing books to do so. This is an objective article which will not recommend individual titles, but instead will suggest the type of content and topics you should be exploring in order to broaden your understanding of each investing style.
Each of the following sections will address one dynamic investing style, and will highlight the various types of literature and level of detail you will need to go to satisfy the education requirements of each. This is a guide only.
The day trader
A day trader is a short term speculator in the stock, bond, commodity or currency markets. They will take positions of between a few hours and a few weeks, with a view to take advantage of a pricing or valuation anomaly that they believe they have identified.
Of course, generating trading ideas and measuring value is one of the more difficult aspects of this trading approach. But there are other practical difficulties such as maintaining focus, patience and morale whilst trading. It can be quite difficult to check your emotions at the door, therefore the reading topics for this investing style cover quite a few areas:
- Beginners guide to trading on the stock market
- Advanced books covering the different types of price information, and the mechanics of how the stock market works, including how orders are physically executed.
- Books on the psychology and mindset of successful traders
- Academic style tomes covering technical analysis, which is the process of using historic pricing information to make a prediction on future price directions.
The value investor
Investing blog Financial Expert states that a value investor is an investor who looks for bargains on the stock market. Bonds or stocks issued by quality institutions which are being presently underpriced by the market.
The theory follows that if an investor can accurately value companies, then they can identify great businesses trading at a discount, and buying such stocks will suggest that higher-than-average returns can be obtained.
- This is a very subjective practise, therefore consider exploring multiple titles on fundamental analysis and value investing. Different investors like to place a different level of emphasis or focus on different business characteristics. This could include dividend policy, annual growth, protection from competition and the quality of management.
The adventurous investor
The world offers a dizzying array of investment opportunities, yet most investors stick to what they know and understand; stocks and bonds.
But did you know that frozen orange juice, life insurance policies and whisky also form part of adventurous investors portfolios? These are examples within the long list of asset classes beyond stocks and bonds.
Frozen orange juice is a type of commodity, life insurance policies can be acquired as a risk asset, and whisky is an example of art & collectibles.
Adventurous investors who are prepared to step beyond these boundaries explore the multitude of asset classes that form the remainder of a long list.
These asset classes have produced historic returns which rival or exceed that of the stock market. However, they don’t offer a ‘shortcut’ to higher returns, as the risk v return relationship still holds. This means that with the premium return comes higher risk.
It’s therefore important that you read investing books about these specialised areas before you invest in high risk adventurous investment:
Dedicated investment guides:
I recommend just reading books about the investments which you are passionate and interested in. Usually these marketplaces reward a buyer with a keen knowledge of the item being bought and sold.
- Commodities (such as gold, silver and oil)
- Property (such as residential, offices or land)
- Derivatives (options or futures based upon other underlying investments)
- Hedge funds (fund managers using risky investment strategies)
- Structured products (ready made portfolios including derivatives)
- Peer to peer lending (personal loans to individuals and businesses)
- Venture capital (investments into private companies)
- Art & Collectables (Incl toys, classic cars, artwork)
It’s worth paying attention to the personal finance & budgeting aspects of successful investing. Investing returns are difficult to improve, particularly when striving to ‘beat the market’ on a consistent basis.
However, something that you are more in control of is your personal expenditure, your income, and therefore the amount that you can save each month. Also – it won’t matter if you can achieve returns of 20% per year, if you only have a tiny amount to invest each year.
By increasing the proportion of your income that you can save, you will free up more cash to drip feed into investment accounts on a monthly basis. It goes without saying that all else equal, this will lead to greater investment returns, and earlier achievement of your financial goals.
To excel in this area, I advise that you study up on the following topics:
- How to ask for a pay rise
- How to get the most out of workplace pensions schemes
- Investing books on how to create a household budget
- Switching to save on utility bills and other regular outgoings
- Thrifty tips and thought pieces regarding the true cost of a new car or a large house
Taken together, a good understanding of these topics will arm you with the tools to squeeze the maximum savings from your current financial situation, and may enable you to make bold decisions to either increase your income or save costs in the future.
A thrifty lifestyle is not for everyone, so it’s up to you to decide how many thrifty lessons to actually incorporate into your lifestyle to achieve a good balance between current and future quality of life.