By Tom Richardson.
We asked money managers, financial advisers and a self-made multimillionaire to nominate the books that taught them the most about creating wealth.
While nothing beats personalised advice from a professional, books can teach you how to be a better investor by providing insights into proven strategies, market cycles and behavioural biases.
Most of the famous books teach you that getting ahead with money isn’t necessarily about what you know, but how you behave, and tuning out short-term sharemarket “noise” is often a good place to start.
We asked investors, financial advisers and a self-made millionaire to nominate the books that taught them the most about creating wealth.
Geoff Wilson, founder, Wilson Asset Management
One of Australia’s most successful money managers, Wilson names One Up on Wall Street: How To Use What You Already Know To Make Money In The Market by famed investor Peter Lynch. Published in 1989, the book teaches amateur investors to use their own life experiences to get ahead.
Lynch’s advice is to “invest in what you know”. For example, if you love Dunkin’ Donuts and notice its stores are always busy, this might give you an advantage over a Wall Street analyst who noticed its success only on his spreadsheets after the stock quadrupled from $2 to $8, and then recommended it to his clients at $10.
“That’s the book that impacted me most in terms of breaking down the logic of investing,” Wilson says.
“Lynch said to think about and observe your environment. The most successful companies are usually in front of you and if you don’t understand a company, it doesn’t work.
“He’s an incredibly successful investor telling you his secrets, so it’s worth a read.”
Wilson’s second pick is Thinking Fast and Slow by psychologist Daniel Kahneman, who won the Nobel Prize in 2002. His 2011 book explores how human brains can be tricked into making bad decisions, or coached into making good ones.
“To me, he’s the father of behavioural finance,” says Wilson. “In this day and age, behavioural economics as an investor is incredibly important as you’re dealing with biases and fast news flows.
“So when you’re investing you’re influenced by all these biases. But really you’ve got to try and eliminate them to buy when everyone is selling, and sell when everyone is buying.”
Kahneman died earlier this year at the age of 90.
Cathy Ding, financial adviser, Morgan Stanley Wealth Management
Ding picks Mastering the Market Cycle: Getting the Odds on Your Side by renowned US hedge fund investor Howard Marks. Marks helps sharemarket investors tilt the odds in their favour by learning to recognise and adjust to market cycles.
“The book gets a little technical, but is easy to read if you have a little bit of interest in investing,” Ding says. “It’s about learning to make better investment decisions and says while timing the market perfectly is impossible, understanding the cycle helps improve the odds of investing.
“For me, as a financial adviser, the attitude to risk is very important – risk is the primary challenge in investing and the ability to manage risk is the mark of a superior investor.”
Shane Oliver, chief economist, AMP
Oliver says Manias, Panics and Crashes: A History of Financial Crises by Charles Kindleberger and Robert McCauley taught him brilliant lessons about markets as a university student in the 1980s.
“I did my PhD on speculation in investment markets and I read it in 1983,” he says.
“For anyone who wants to understand excessive enthusiasm in shares, this is the book. It details how bubbles get made, what drives them, and why people get sucked into them. That got me to understand the psychology behind investment markets.
“In the last 20 years, [asset price bubbles] have become more of an issue and the book got me interested in investing in a big way, and it got me to understand why markets occasionally go crazy, and how to react.”
Oliver also nominates The Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Mike Staunton, and Paul Marsh because it empirically teaches why it pays to hold shares over the long term and not get spooked into selling over fears the market might crash.
“It’s based on a database academics put together of sharemarket data back to 1900 and the clear message is that the place to be long term is the sharemarket.
“Based on very long-term data, it shows optimists win when investing in shares and highlights the power of compound interest.”
Tung Nguyen, self-made multimillionaire
Nguyen, 49, a self-made multimillionaire, arrived in Australia by boat at the age of three with his parents, as refugees from the Vietnam War.
He plans to retire from working as a senior finance manager with Link Group when he turns 50 next year.
He has no formal finance qualifications or education, but says he taught himself to invest by reading 40 personal finance books in 18 months.
Since 2015, his strategy has been to buy assets such as property, gold and bitcoin as a hedge against central bank money-printing. It might have proven wildly successful, but it’s not an approach most financial advisers would recommend.
Nguyen says he has been influenced by Layered Money, From Gold and Dollars to Bitcoin, by Nik Bhatia. Bhatia is an adjunct professor of finance at USC Marshall School of Business at the University of Southern California.
“It goes through the history of money, from gold and silver, to minted coins, then notes of exchange … to how the US dollar became the reserve currency, the role of US treasuries to the modern day, and then bitcoin,” he says.
“It’s a great chronology of how we got to where we are and how markets and people continue to find new ways to innovate around money. It’s really well written and accessible.
“The book is less about bitcoin and more about the history of money that got us to where we are today.”
A second book Nguyen likes is Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better, by Lyn Alden. Favoured by many bitcoin enthusiasts, it seeks to explain the causes of the inflation that has haunted major economies since 2022.
Rachel Wastell, finance writer, Mozo
Wastell. a writer and commentator for financial comparison website Mozo, says amateur stock pickers should not go past the world’s most famous investing book, The Intelligent Investor, by US investor and finance professor Benjamin Graham.
Published in 1949, it is considered the bible of value investing, a strategy that involves targeting undervalued stocks with the potential to perform over the longer term.
“It gives a good foundation for people starting out, but it can be heavy going if you’ve never really read about finance,” says Wastell. “It took me a while to get through, but I kept going back to it, and it has so many great examples about how to improve yourself.
“There’s a risk now with the mobile trading apps that people just see buying shares as a gamble, but investing is a long-term strategy, and it really emphasises that.”
Wastell’s second pick is The Psychology of Money by US author Morgan Housel.
It has sold more than 4 million copies since its publication in 2020 and teaches how many people mistakenly make money decisions because of marketing and perverse incentives, rather than thinking for themselves to build wealth slowly.
“Read it and you’ll understand how sentiment influences share valuations and doing well with money is more about how you behave than what you know,” Wastell says. “It’s really accessible to anyone and shows saving is more important than earning.”
Jonathan Armitage, chief investment officer, Colonial First State
Armitage, who is responsible for overseeing $147 billion, has a left-field pick in The Art of Captaincy: The Principles of Leadership in Sport and Business by former England cricket captain Mike Brearley.
“It’s less of an investing book and more of a business management book,” he says. “Brearley was a successful cricket captain, and after he finished playing, he became a psychoanalyst. It teaches about how to manage talented people and get the best out of them in different circumstances.
“Every big job is about managing people to drive outcomes. So, I think it’s one of the best on how to manage great talents. And there are different perspectives, it’ll teach you to think about dealing with different situations in different environments.”
