Sunday, February 24, 2008

Books on Investing

I was talking to a friend about some books that would help his high school aged children learn about investing. Here are five recommendations. Note that I am not a CFA and I am not recommending specific investments:

The Wealthy Barber
This is a Canadian classic. Written as a chatty fiction novel, this covers many of the basics of getting your financial house in order. It doesn't cover a lot of details about investing, but it sets a foundation on how to raise the money needed for investing (including paying yourself first and dollar cost averaging).
Learn to Earn
Peter Lynch is a legendary mutual find manager (now retired). He starts by discussing the roles of companies in our lives, and sets an important foundation in understanding the benefits of capitalism. Then we goes on to discuss the specifics of investing. I've recommended this one before to high school students.
The Future for Investors
Jeremy Siegel is a professor at the top rated Wharton School of Business. Siegel's analysis is brilliant, demonstrating why many hot and trendy companies make poor investments, and why many old standby companies offer superior returns for investors. Siegel as demonstrates the importance of dividends and dividend reinvestment.
The Warren Buffet Way
Warren Buffet is the number one name in the investing world. While Buffet himself has not written a book, Robert G. Hagstrom has covered most of the details of why Buffet is considered the world's number one investor. Perhaps what comes through most clearly is that Buffet is investing in businesses, not taking a risk on the stock market. Buffet looks for good businesses that will grow over the next couple of decades, rather than concentrating on the periodic ups and downs of the stock market.
Stop Working
Derek Foster has not written a "classic" book on investing, but he does present a workable plan for an early retirement. Some of his ideas are a little "off" IMHO (like avoiding RRSP's, which are in fact the best investment vehicle for most people) and some could potentially be risky (such as counting on a company to declare a special dividend). But if read in conjunction with these other books "Stop Working" will be helpful.


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