There are a number of straightforward, short books about investing that I recommend as good reads for the layman or average investor. Short as in well-written, clear, with understandable explanations of complex concepts, while not thick enough to use for flattening fall leaves.
Working your way through 600 pages on finance and investing, you’ll be nagged at some point by the sense that this experience is probably not going to really help you. Who has read the entirety of Ben Graham’s Intelligent Investor? You wonder if even Warren Buffet, his most successful student, made it all the way through.
My latest recommendation in the best-of-short category is The Investment Answer, by Daniel Goldie and Gordon Murray, Business Plus/Hachette, 2011. Sadly, Gordon died during the past year—this was a joint, last project to summarize a career’s learning in the market. Goldie is an independent adviser connected with Dimensional Funds, a topic for another day.
The book takes you through five essential decisions in the space of 70 pages:
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- Do-it-yourself vrs brokers or advisors
- The allocation of risk-on and risk-off assets in a portfolio
- Diversifying among asset classes
- Active (stock picking and timing) vrs passive (indexing) management
- When and how to rebalance
The book is a bit too portfolio theory orthodox for my taste. The battle between alpha and beta, between the inefficient market and the random walk, hasn’t been settled yet. And you shouldn’t hold your breath waiting for the decision from the booth. But you can ignore the logic of these very different approaches only at some, possibly great, risk to your capital.
So here is a clear and succinct (and modestly priced!) book that lays out the terrain. It should give you an idea where some of the ditches are and even a few hidden mines. It could help you make better choices. Not bad for ten bucks.