Tag Archives: Behaviour

New books: the wise, the intelligent and the manias

Last month, I ordered three books from Amazon and shared the shipping cost with a member in sgfunds.com. Using Office 2.0, we collaborated on Google Spreadsheet to calculate and split the shipping cost. It was quite cool and efficient 🙂

The Wise

The first book Wise Investing Made Simple: Larry Swedroe’s Tales to Enrich Your Future by Larry Swedroe uses stories (sometimes the author’s own encounter with his clients) and analogies to explain how the market really works, why the conventional wisdom in life does not work in investing, what the common mistakes in investing are. It aims to answer the “why” questions to indexing and passive investment, rather than the “how” questions to implement such strategy. The book also touches on the “odds and ends” questions in investing that are normally not the main contents in the “how” books of passive investing, such as:

  • is there any connection between high expected GDP growth rate and high stock market return? (chapter 19)
  • what if everyone indexed? (chapter 21)
  • can active management gain competitive advantage in less efficient market? (chapter 21)

I have difficulty in understanding some terms used in sports (e.g. baseball) whenever they are used in the analogies. On the other hand, many stories are written as a dialog between a financial adviser and the client. This makes a good read for any advisers who want to know how to explain the concept of indexing and passive investing to clients. 😉

The Intelligent

The second book The Intelligent Investor by Benjamin Graham is an interesting one. The author and the book are often quoted in discussions on value investing and stock analysis. So I didn’t pay much attention to the book, until it was quoted in John Bogle’s The Little Book of Common Sense Investing about Graham’s comment on indexing. Out of curiosity, I have browsed the book a few times in book store before I decided to buy it. The latest edition comes with Jason Zweig‘s commentary on each chapter, which is a good read by itself. I would say if I had read this book before, I would still invest in the indexing and passive ways – the ways Benjamin Graham recommended (albeit implicitly) for the “defensive investor” as defined in the book, expanded and explained clearer by Jason Zweig.

The Manias

The third book Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger and Robert Aliber is the kind of book that you will come across if you visit Bogleheads forum long enough. After reading books on asset allocation and passive investing to tackle the expense “enemy”, investors are recommended to read up financial history of market crashes to prepare for the emotion “enemy”. Because a sound asset allocation plan is useless if investors cannot stick to it through the up and down of stock markets. I have not gone through a severe market crash since I started my portfolio, so I am reading this book to “bulletproof” my emotion from the next crash. Besides this book, other books on market crashes and financial history can be found in Bogleheads forum topics at Books on manias and crashes ? and Book on great Depression? Or find a movie on the 1929 Great Depression. 😉

Happy reading!