Most people would like to find an easy way to get rich, just like they want a quick way to get skinny, or play a musical instrument. But it is a mistake for novice investors to assume that they can find instant success in generating high returns when professionals armed with extensive research and sophisticated technology struggle to do so. Of course, just like people who can get lucky at roulette, they can pick a wonder stock, but the odds are against them. Long-term prosperity can be best achieved by investors who save in a low-cost fashion and in an asset class that reflects the long-term growth of the economy and the corporate sector. Still, investors can be unlucky if they start saving in the wrong era (1920s America or 1980s Japan) or if governments confiscate their assets. These five books provide useful lessons on what approaches to take and, just as important, what moves to avoid.
Intelligent Investor. by Benjamin Graham. (Revised edition, updated with new commentary by Jason Zweig.) HarperCollins; 640 pages; $20.99 and £18.99
This is a foundational text for serious investors, written by a mentor to Warren Buffett, the most successful investor of the modern era. Ben Graham was basically a “value investor” looking for bargains in the market. He honed his skills after the Wall Street Crash of 1929, when equity valuations collapsed. Accordingly, some of his methods for finding bargains are difficult to apply to stocks today. are more expensive. But his principles remain sound. Much depends on the price paid for the shares, so beware of trendy industries. As he puts it, “obvious prospects for material growth in a business don’t translate into obvious prospects for investors” while “a sufficiently low price can turn a mediocre security into a good investment opportunity.”
Clash of cultures. by John Bogle. Willie; 385 pages; $29.95 and £22.99
Like Ben Graham, Jack (as he was commonly known) Bogle focused on the difference between investment and speculation. But instead of buying individual stocks, Mr. Bogle believed that investors should invest in the broader stock market. Thus he was the father of the tracking fund that mimics the behavior of a benchmark such as the S&P 500 Index. He also founded the Vanguard Group, a mutually owned company that provides low-cost trackers and is one of the world’s largest institutional investors. Mr. Bogle was the author of many books, but this book, published in 2012 at the end of his life, summarizes his message. Many investors chase hot stocks and hot funds; They buy high and sell low, and pay high fees to the financial sector in the process. As he writes: “Investors need to understand not only the magic of long-term returns, but also the tyranny of compounding costs.” Read our full review. Book,
lying for money by Dan Davis. Scribner; 304 pages; $28. profile books; £10.99
Trading too frequently, and paying high fees, are two problems faced by the average investor. The third is a victim of financial fraud. Some of the most common scams are described in this gripping book published in 2018. If there’s a shared theme, it’s that when the rewards sound great, investors can’t be bothered to check the details. While regulators may be falling asleep at the wheel, fraud is more common in unregulated areas, as the history of cryptocurrencies has shown. The golden rule for extremely rapid development is; Such examples need to be thoroughly scrutinized. As the saying goes “if it sounds too good to be true, it probably is.”
Triumph of the Optimists: 101 Years of Global Investment Returns. by Elroy Dimson, Paul Marsh and Mike Staunton. Princeton University Press, 352 pages; $180 and £150
One of the highlights of Investing Year is the annual review of the financial markets produced by three academics from the London Business School, most recently in collaboration with Credit Suisse (a bank that perhaps could have better heed the advice in it). The trio has gathered a trove of data from around the world, focusing on returns from stocks, bonds and Treasury bills. He summed up the 20th century in a book published in 2002 that helped explain why a “cult of equities” had developed—namely that stocks consistently outperformed other asset classes. But the book also provides a useful corrective. America’s great success undermines influence investors. Elsewhere, investors have seen their savings wiped out by hyperinflation or revolutionary governments. Just because optimists were right in the 20th century doesn’t mean they will always be right in the 21st. Read our full review of Book,
Investing amid low expected returns. by Antti Ilmann Willie; 304 pages; $21.99 and £21.99
The last book on the list was written by an academic-investor, and thus leans more toward investment professionals. Nevertheless, small investors will greatly benefit from reading this tome, an update on the author’s excellent earlier work “Expected Returns”. on investments (lowering them than those mentioned in “The Optimist’s Victory”). This thesis came out with 2022 being a terrible year for both bonds and equities, the year it was published. But the book also provides an excellent description of many different strategies, from impulse investing (buying assets that have gone up in price) to private equity. book reviewed Here By our Buttonwood columnist.
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