Top 3 Books to read before investing

A lot of people ask me: “Where do I start?”

For someone who is used to the financial markets, like me, I would answer:Oh, you know, start with the basics, Government Bonds, CDs (Certificate of Deposit), then you can start going into ETFs, Stocks, and maybe even to derivatives. But, that is, for someone who already has their bases covered.So then I thought, What are the bases that people should have covered before they even start investing? And that is when I took a melancholic look at my days in college, and I made this list of some of the best books out there that are:A) Have some depthB) Are still easy to be read by someone who has just gotten started

On the plus side, it’s an excellent reminder! Even for veteran investors.

1. A Random Walk Down Wall Street

This is a classic! “A Random Walk Down Wall Street,” written by Burton Malkiel, was first written in 1973 and has been updated over the years, and even talks about Bitcoin and other Cryptocurrency. So yeah, they’re pretty on top of things.

One of the reasons why this book is so popular is its clarity and simplicity. There are as many investment strategies as you can think of, but very few are profitable at all, even less remain profitable throughout the years. Of course, there are no guarantees in life, and this proves especially true when it comes to something as complex as our global economy.We might not know exactly will we happen tomorrow, but we know what has happened in the past, and as Mark Twain once said: “History Does Not Repeat Itself, But It Rhymes.”So how about a blast of knowledge from the past?

2. Behavioral Finance: Psychology, Decision-Making, and Markets

The book “Behavioral Finance: Psychology, Decision-Making, and Markets,” by Lucy Ackert and Richard Deaves, gives the reader the foundations of modern finance, as well as what is often touted as the new paradigm of investment: Behavioral Finances

Let’s start from the beginning. Given a set of potential investments, if we want to maximize our potential profits, its reasonably easy, invest everything in one the instrument with the most substantial profitability. We then figured out that this is not a very good strategy and is barely any different from pure betting, and that’s when a new idea came: Maximize Profit for a Given amount of risk. This is what the Modern Portfolio Theory.

I’ll spare you the details here, but, in short, it’s the idea that we want to diversify our portfolio so that when one set of our investments are going down, the other set is going up, which helps average out our returns. But it doesn’t stop there.

Here’s where the real kicker comes in: People. As humans, we have feelings and emotions. While psychology was already years ahead in the field, financial studies were more preoccupied with the nit and gritty of math, that is until we started noticing that: Humans don’t always act rationally.This lead to the comparison of investment decisions and human behavior, something which gave its founders, two psychologists by the names of Amos Tversky and Daniel Kahneman, a Nobel prize in… ECONOMICS! Yes, two psychologists won a Nobel prize for their work’s impact on economics.

So before you start investing, make sure you know the answers to: 
a) What is "Modern Portfolio Theory"?
b) What are Biases?
c) What is Myopic Loss Aversion?

Don’t worry, Lucy Ackert and Richard Deaves help you find the answer (and explain it better than I can) in their book.

3. Investing For Dummies

When all else fails, get your fundamentals straight.

The “For Dummies” series are, in my opinion, one of the best books one can have on any given subject. They are phenomenally well-reviewed for accuracy, clarity, and on how up to date they are.

“Investing For Dummies,” written by Eric Tyson, already starts with 20 great pieces of advice on guidelines that could help you understand, plan, and invest appropriately with the right mindset.

Don’t miss out on learning how to get your nest egg. Start small if you need to, but start EARLY.