The best investment book I have ever read [View all]

[Tomconroy]

Is a book by Burton Malkiel and Charles Ellis called 'The Elements of Investing'. It's a short book, only about a hundred pages. It's theme is that anyone can be a successful investor. It is a skill that can be learned like any other. It is best read when you are in your twenties. With the magic of compound interest, if you start out young, becoming wealthy in retirement is not difficult. I wish the book had been around when I was young. It took me many years to figure out what I was doing with my money.
When our nephew was in college we gave him a copy of the book. His reaction was 'Is this a joke?' We said 'No. You have had earnings from a job this year. We are going to fund a little IRA to start you off. Now just read the book so you will know what to do with it'. I don't know if there is a connection but he graduated, worked for a few years and paid off his college loans, and now has just been accepted at the Wharton School of Economics at Penn. We made the same offer to our niece but she wanted the money to pay down her loans. We'll try again when she is in the working world.
The lessons of the book are pretty simple but often hard to follow in real life. You will never be rich unless you save. You will never save unless you spend less than you earn. Ninety percent of profesional money managers can not consistently outperform the S & P average. Dollar cost average. Stocks are the one thing people don't want when they are on sale. To the long term investor the bear market is your friend. Buy low cost index funds. You can't control the direction of the market. You can control what you pay for an investment.
I lived through the bear market of 2000-2003. I was working for myself. Every month I had to write out the checks myself. Imagine, you put money in every month and your balance just keeps going down. I really didn't know what I was doing but for some reason I kept writing the checks. The smartest thing I did was eventually I just stopped opening the statements from T Rowe Price. I didn't realize it at the time but I was doing what you are supposed to do. I was buying low. When the crash of 2008 came along, I had figured it out. It was the greatest buying opportunity of my life time. By then it was easy. I was working for the state. I just had them take a bit more out of my pay check.
Malkiel and Ellis quote Warren Buffett on long run Investing': If you are going to be buying hamburgers your whole life, you want hamburgers to be cheap. The same with buying stocks.
I just think the book is valuable for all of us whose retirements are dependent on our 401ks and our own Investing' skills. You don't need an investment advisor or high priced fund managers. You just need to master a few Investing' lessons.