Here are some great books we recommend that will help you become a better investor.
Thinking Fast and Slow
Daniel Kahneman explores our natural biases and predispositions towards errors in judgment. His various comparisons of reactionary instinct versus reasoned thought can give us insight into the way we think about investing. Do we have systematic biases that cause us to make mistakes in our investing strategy? How can we better understand and mitigate those biases and use our brain to the fullest capacity to think critically about investment strategies?
A Random Walk Down Wall Street
History continues to repeat itself through manias and depressions. Burton Malkiel’s account helps us to see the cyclical nature of markets and understand the value in not reacting to drama in the financial news.He explains why fees really do matter; fees significantly destroy your ability to create wealth through compounding returns. With a comprehensive look at a century of market returns, Malkiel delivers compelling evidence for the efficacy of broad based, low fee indexing as a time-tested strategy for long-term investing success.
Winning the Loser’s Game
Ellis breaks down all the ways in which individual stock-picking is a loser’s game. A loser’s game is like amateur tennis, where most games are won not by executing the most spectacular winning shots, but rather by avoiding beating yourself (hitting into the net or out of bounds).Investing for the long haul is a loser’s game in that avoiding major mistakes is much more valuable than attempting to execute brilliantly timed trades. Ellis shows that instead of playing the loser’s game, investors need to focus on building a sound, consistent investment strategy and sticking to that plan to meet long-term investment objectives.
Thinking In Bets
Former professional poker player Annie Duke takes lessons learned from a lifetime of competing in high-stakes cardrooms and illustrates how most decisions we make are functionally bets. Seeing the world through this lens gives us insight into sound decision-making even though none of us knows the future.Our natural tendency is to see results as retrospective inevitabilities. But that prevents us from a more objective way of thinking—that in order to make good decisions under conditions of uncertainty, future outcomes must be thought of probabilistically, not deterministically.
The Signal and the Noise
Silver defines signal as an indication of an underlying truth, and noise as random data that we misinterpret as a signal. In a world where we are bombarded by attention-seeking drama, it is increasingly difficult to filter what is a signal, and what is just noise. Silver explores the various follies involved in making predictions while also giving insight into what actually makes for a good forecast.
Golf is Not a Game of Perfect
Even though this is a book about golf, the message resonates in many walks of life: Perfection is the enemy of good. Expecting and demanding perfection from yourself can get in the way of thinking clearly and doing a good-enough job. Frustration, anger, and unrealistic expectations that you deserve good results just because you try—these are the enemies of having a good investment plan. Investing is not a “game of perfect”—it is about being realistic, making good decisions, sticking with a plan, trying to come out with as good results as you can reasonably expect, and not insisting that you must be a genius who beats the market.
The Psychology of Money
While investing is often approached through mathematical models and quantitative research, the success of your personal financial plan depends more on how you behave than the financial assets you purchase. In this quick read, Morgan Housel explores some common behaviors and predispositions that often destroy value if they go unchecked and guides the reader towards establishing the foundations of a sustainable long term plan.