Eight personal finance classics every saver must read
A surprising 21% of Americans think that聽聽is the most practical way to accumulate several hundred thousands of dollars. The problem with this financial plan is that the odds are against you. You're more likely to be聽聽(one in 3.7 million chance) than聽聽of the Mega Millions (one in 259 million chance).
The key to financial stability is learning the essential concepts and skills necessary to make smart choices. To help you steer in the right direction, here are eight more classic personal finance books that are still worth reading. (See also:聽)
1. The Great Crash
"The four most dangerous words in investing are 'This time it's different.'" This is not only one of the聽, but also one that stands the test of time. First published in 1954, John Kenneth Galbraith's聽聽provides a great review of the rampant speculation and record trading volume of the stock market in the 1920s, leading to the Wall Street crash of 1929.
You could easily swap the dates and numbers of聽The Great Crash聽and describe about any other market bubble, be it the Black Monday of 1987 or the dot-com bubble of 2000. Learn the signs of an economic bubble so that when somebody promises you a quick-rich investing scheme, you can reply with a quick "no."
2. Total Money Makeover
You may know Dave Ramsey from his popular radio show,聽, touching on life's tough money questions. Whether you're already a fan or haven't ever heard from him, you should read his 2003 book,聽, which is a complete guide for financial prosperity.
The main appeal of聽The Total Money Makeover聽is its down-to-earth and down-to-business approach to managing your finances. Those struggling with debt or finding it difficult to build an emergency fund can find step-by-step guides, often including worksheet templates to track progress.
3. One Up on Wall Street
Superstar investor Peter Lynch seems to be able to do it all. He turned $18 million in assets into more than $14 billion, personally hired some of the聽聽you've never heard of, and penned several bestsellers.
Written in 1989,聽聽is a great guide on how to spot investment opportunities. Lynch offers easy-to-follow advice on how to review a company's financial statements and what numbers to focus on. A major draw to this book is Lynch's guidelines on how to find a "tenbagger" (Wall Street slang for a stock that makes you ten times your money).
4. Common Stocks and Uncommon Profits
There are very few investors with聽. However, the Oracle of Omaha is well known for giving credit where credit is due. He credits 85% of his investment philosophy to Ben Graham and the remaining 15% to Phil Fisher. "I am an eager reader of whatever Phil has to say, and I recommend him to you," said Buffett about Fisher's work.
First published in 1958, Fisher's聽聽was the first investment book to become a New York Times bestseller. The growth stock investing advice of聽Common Stocks and Uncommon Profits聽is as relevant today as it was back in 1958. Just ask Buffett.
5. A Random Walk Down Wall Street
Ask any group of money experts about their top 10 list of financial books and you're bound to run into Burton G. Malkiel's聽听辞蹿迟别苍.
First published in 1973,聽A Random Walk Down Wall Street聽is a great primer for novice investors to understand their full range of investment opportunities when starting a portfolio. While some stock-picking pros may disagree with Malkiel's random walk theory (the idea that stocks take a random and unpredictable path), the empirical evidence shows that only 20% to 35% of active fund managers聽聽for their category. This fact is why聽A Random Walk Down Wall Street聽is still relevant today.
6. The Millionaire Next Door
Just like Napoleon Hill was trying to figure out "what makes a winner?" back in 1937 in聽(included in my other list of聽聽you must read), Thomas J. Stanley and William D. Danko were trying to find out "What makes a millionaire?" in聽聽in 1996.
Through their 20-year study of wealthy individuals and their habits, Stanley and Danko were able to identify the seven common traits that show up again and again among those who have accumulated wealth. Those traits can give anybody a much needed wake-up call on how to run his or her finances!
7. The Four Pillars of Investing
"A TRIUMPH! Bill Bernstein's new book offers sound principles, unvarnished history, and unmatched understanding of the process of successful investing. It is my candidate for the best investment book of 2002." This was praise from John C. Bogle about聽.
What's good for the founder and retired CEO of The Vanguard Group should be good for you as well. In this book, author William Bernstein lays down a commonsense investor's guide built on four pillars: the relationship of risk and reward, the history of the market, the psychology of the investor and the market, and the folly of taking financial advice from investment salespeople.
8. The General Theory of Employment, Interest, and Money
There are very few books, such as聽聽from John Maynard Keynes, that have influenced so much economic and fiscal policy around the globe.
Even today, Lord Keynes' ideas are relevant when discussing economic events. Whether you're planning to vote Republican or Democrat in this upcoming election, there is a good chance that some of the economic advisors of your candidate are聽. While聽The General Theory of Employment, Interest, and Money聽can be a book hard to digest, it provides good insight into what your candidate is planning to do in times of booms and recessions. Also, this book increases your understanding of foreign government policies, which are important for assessing risk of investments abroad.
To avoid missing the best parts, just make sure to look for editions that include the footnotes.
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