Personal Finance Books For Beginners: 4 Picks To Get Started
Here’s our first installment of what we think you need to do to go from an absolute beginner to basically competent in personal finance.
Take a look at other personal finance sites and you will quickly see their book recommendations are tilted towards pop finance, generally feel-good publications full of stories (not math) and meaningless gibberish like “make your money work for you.”
A classic example is if you see a recommendation to read “Think and Grow Rich,” you should run not walk away from whoever is giving you that advice!
That’s not what we’re doing here.
Instead, we’re building a solid foundation so you know and understand what’s going on in finance just as much as any wall street professional and so that you can actually do the math too.
These personal finance books for beginners will take you from learning basic terms to understanding common pitfalls, and finally learning some basic strategies you can start using in your investment portfolio.
All of these books are written so anyone can read them and they’re relatively light reading (not like a textbook).
Along the way, you will also get many common beginner questions answered, like “Should I rent or buy a house?”
Ok, let’s dive in!
1. The Forbes / CFA Institute Investment Course: Timeless Principles for Building Wealth
This is a super fast and easy read at only ~250 pages.
It covers absolute basics like dollar cost averaging, basics of how securities markets and brokerages work, first steps in tax efficiency like traditional vs. Roth IRA, and technical vs. fundamental analysis.
Key Takeaway: learn basic financial terminology and concepts
“Research has shown that 90 percent or more of the variability in portfolio returns is explained by asset allocation. Only a small portion is due to security selection. Yet investors often overlook this critical step, perhaps because they find it boring or less exciting than deciding; what stocks to buy.
However, before jumping into the markets, decide how much of your wealth should be in each of the major asset classes. The answer will depend on a number of factors. Here is a general rule of thumb: the longer your investment horizon, the more risk you should be able to tolerate and the more you can allocate to equities.”
2. Stocks for the Long Run
This is a classic must-read advocating for holding a large percentage of your investment portfolio in stocks.
Also, the reason I tilt my portfolio to Value and am building towards a net long 140 permanent leverage position.
Key Takeaway: despite their volatility, stocks are the best asset class for long-term portfolio growth and should make up the majority of your portfolio (how much exactly depends on your risk tolerance). Despite growth stocks occasionally outperforming for short periods, you should tilt towards value
“Over the past 200 years, the compound annual real return on a diversified portfolio of common stock is nearly 7 percent in the United States, and it has displayed remarkable constancy over time.”
3. A Random Walk Down Wall Street
Now that you have some of the basic terms down from the above two books, you’re ready to start dipping your toe in and looking at actual strategies.
This fundamental piece walks you through most of the classic strategies, from technical and fundamental analysis to behavioral finance, CAPM, and Fama-French 3-factor.
Key Takeaway: After reviewing most of the investment strategies available today, the author ends up recommending a long-term, dollar cost average, buy-and-hold index ETFs strategy. Weight towards stocks based on your risk tolerance and age
“It seems very clear that under scientific scrutiny chart reading must share a pedestal with alchemy. There has been remarkable uniformity in the conclusions of studies done on all forms of technical analysis. Not one has consistently outperformed the placebo of a buy-and-hold strategy. Technical methods cannot be used to make useful investment strategies. This is the fundamental conclusion of the random theory.”
4. Khan Academy Personal Finance Course
Ok, so we’re going a little off course from our promise to bring you the best finance BOOKS for beginners, but this content is too good not to mention.
Plus – this is free!
The course covers basics like compound interest, FICO scores, what is a stock, differences between a mutual fund and ETF, whether you should you buy or rent, etc. You can find the course here.
The course is split up into many short videos (they average around 7 minutes), so it’s easy to choose from a menu what you need and skip what you already know. I also like to watch at 1.5x or even 2x speed.
The course goes through common questions and topics like when you should buy a house vs. rent.
If you like the format, you can continue your finance education with Khan Academy, as they offer significantly more advanced financial topics. Once you’re done with their personal finance basics course, try checking out their Finance and Capital Markets course next, to start moving into slightly more advanced material.
Personal finance books for beginners wrap up: Is your finance education really ever over? It shouldn’t be …
There are hundreds, if not thousands, of personal finance books for beginners to choose from. We think this is a solid start for anyone new to the subject.
Unfortunately, there is a lot of bad advice out there, but these resources are rock solid and will begin building your financial foundation.
While this is a good start, finance is changing so rapidly nowadays it’s important to continue your education. Technology advances are making new inventions and advancements like cryptocurrencies and blockchain change finance at light speed, so consider adding finance to your learning plan.
Once you’re feeling ready, check out our Beginner’s Guide To Investing In Stocks: Our Best Tips and Tricks
At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions are our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.
Meet our Personal Finance Experts:
Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School.
After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.
Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income.
He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?
Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.