A few weeks back I shared with you that one of the Money Mindful book club ladies and listener of this show requested for me to share some books on investing. So here it is. You ask and I deliver.
Today I am going to give you an overview of four books I have read that have helped me on my share investment journey.
I strongly belief that you do not need to be a financial advisor to know how to manage your money and create wealth. By all means seek expert advice as to where and when you need it for specific topics such as accounting or taxation needs but in general you’ve got this. You do not need to be a rocket science to understand money or know how to invest. Believe me.
There are many ways to create “passive” income streams. I say passive in quotations marks because yes, it is referred to as passive because you do not need to directly trade hours for money but that doesn’t mean it doesn’t require any effort or an amount of time. Once you have got it set up you can be earning money in your sleep so to speak. For example, every month I earn an income from my investment properties. Some months if there is an issue that requires maintenance, yes, I have to invest time in getting that sorted in addition to doing the monthly accounts. However, to get that income each month, I am not required to work a specific number of hours. That money will come into my bank account whether I spend money working on the property or not. It is the same with shares. The share price can rise in value. However, this means nothing unless you actually sell the shares because they can always drop in price too. The way we make an income from shares is to receive the dividend payment. Which, put simply is a share in the profits of the company. The company pay you an amount based on how many shares you have in the company. These dividends are usually paid every six months. A quick side note not all companies pay dividends.
Investing in the share market for the long term is a sound investment to create an income for yourself in retirement and or create generational wealth. You can start with a very small amount of money. In Australia the minimum amount to invest in shares is $500, although because of the fees involved through using a broker it is considered wise to invest a minimum of $1000 so that your fees don’t eat up all the profit.
If you have a regular income, investing in shares is accessible to most people because of the low entry point. As comparable to investing in property, you need a lot more than $500 to start investing in property!
I invest in the share market by investing in a low-cost fund and within that fund my money is invested in an Australian index fund, an international index fund and bonds. Now, if you are thinking what the heck did, she just say? Don’t worry about that at this stage. You will learn as you read the books I am going to cover today.
I can’t stress enough, if you are new to investing in shares, expect that in the beginning you are not going to understand everything. You have to give yourself a chance to learn, process and then consolidate what you have learnt. So, if you feel some confusion or overwhelm in the beginning that is of course is absolutely normal.
Let’s get in to it.
The first book I want to bring to your attention is the Millionaire Teacher: The nine Rules of Wealth you Should Have Learned in School by Andrew Hallam.
Now I bang on about this book so much you could be led to believe I have some special deal going on with Andrew, I don’t. I just genuinely believe it’s a bloody good book.
This is why.
First of all, Andrew is walking the talk. He does what he teaches in the book and since he was very savvy from a young age, he is now living a very comfortable life because he has had the advantage of what we call time in the market. I believe he is now in his fifties and he has been investing since he was nineteen. So, his money has had at least thirty years to experience the wonderful effects of compound interest. If you are no longer a spring chicken, do not fear. Yes, it’s easy to say it’s better to get started investing early but so what? Some of us like myself start later in life and that’s perfect too.
Don’t let that be an excuse to give up on investing.
What I love about Andrew’s book is the simplicity of it. He first teaches us to look at ourselves and our spending behaviour. Question yourself: are you trying to keep up with the Joneses? Are you consuming, consuming, consuming because that is what society tells us to do?
I think the root of this message is be okay being you. Do you want a flashy car? Or do you want to be able to create financial security for yourself and your family and be able to spend your money on experiences rather than things?
Now if you want a flashy car go ahead and get one but love your reasons and do it intentionally, not just because that is what all your peers are doing.
You don’t have to look rich to be rich.
The main reason I love this book and without a doubt recommend it, is that Andrew teaches specifically how to invest in index funds. He teaches what they are and why it makes sense to invest in them. He also references exact funds that you can research for yourself if you are in Canada, Australia, Singapore or America.
To me, his whole investment strategy makes complete sense. If you knew a simple way to build wealth over time that minimised risked and didn’t require costly and unnecessary fees (that greatly reduce your capital growth) or require a lot of time and research why wouldn’t you do it? It makes complete sense to me.
The only short fall for me and something I want to research further is when you invest in index funds you are investing in all the companies, the good the bad and potentially companies you don’t want to support.
If you want to learn more about this book, listen to the interview I did last week with Andrew Hallam and join in tonight at the virtual book club meeting. We will be discussing Millionaire Teacher, what we have learnt and what we can apply. This is live on the Money Mindful Facebook page tonight. If you are listening to this episode from the future you can see the replay on the book club page.
The Little Book of Common Sense Investing: The only way to Guarantee Your Fair Share of the Stock Market Return by John C. Bogle.
I have included this book because it explains index funds by the man who started the world’s first low cost index fund in the seventies, founder and former chairman of the Vanguard Group, John C. Bogle.
This is a book about investing in low cost index funds and the reason behind why this is an effective long-term investment strategy. If you don’t know what index funds are or have little or no knowledge of the basics of investing in shares this book is not quite right for you yet. Don’t start with this book and in fact it’s not essential reading to be an investor. I would suggest studying up on the basics firsts by visiting the ASX website and doing one of their free online courses in shares or start by reading the Millionaire Teacher by Andrew Hallam to understand the fundamentals. I have included this book because if you are anything like me and you don’t just believe the first thing you hear and want to learn more, and back up what you have learnt from other sources, this is a good book for that . Frankly, you can start investing just by using the information Andrew teaches in Millionaire Teacher but if you want to learn more, or know you are not blindly following Andrew into the fire and throwing all your money away I think this is a fabulous book to give you the big picture of how and why index funds were started and what the benefits are.
I personally think investing in low cost index funds is a great strategy and Warren Buffet one of the most successful investors of all time also favours it.
So check this one out if you want to learn more. But I wouldn’t recommend it as your entry point.
Motivated Money: Sound Financial Advice for the Post GFC World by Peter Thornhill.
Peter Thornhill is a no BS kind of guy. He doesn’t mince his words and says it how he thinks it is. You have probably guessed I am fan of this style. I recently heard in an interview Peter did that he is now retired on a tidy yearly income from his share portfolio of $400000!
Let’s take the time to listen to what Peter has to say. You may remember in the interview I did with Sandra Stewart earlier this month, that she referenced Peter as someone who offered gold standard advice when it comes to investing in shares.
Although Peter doesn’t teach directly how to invest in the share market as in the minutia of what is required, he teachers how to look at the market through a filter of common sense. This is incredibly important. In my opinion I think majority of Australians don’t understand the share market and make sweeping judgements based on lack of education. This is an essential read to set you straight. Peter states in the book he had two purposes in mind when writing it
- Changing people’s perception about wealth creation
- Providing basic investment knowledge
I think he successfully does both of these things. He gives us empowering information to take charge of our financial destination and does so in a simple and straight forward manner.
This book is not a get rich quick fix. He teaches us to look at money and investing purposefully.
How much do I need? How much is enough?
I highly recommend reading this book to educate yourself on the big picture of how the share market works and how you can sensibly invest in it to create wealth for yourself in retirement.
On the front cover of this book it states 'Simple, easy to understand strategies anyone can use for success!'
I don’t necessarily agree with that statement. So why am I recommending this book?
When you invest in index funds you are investing in all the companies in the share market that the index fund is following. So, for example if you invest in an Australian index fund you are investing in say the top 500 companies or all the companies represented in the Australian share market. When you invest this way, you are not buying shares in one specific company directly. The index fund does that for you. For example, your index fund would have shares in the Commonwealth Bank so you are invested in that company but you haven’t gone out and bought the CBA shares directly.
If you want to buy shares in specific companies then more research is involved and you need to understand the language of share investing so to speak and you can learn that from this book.
If you want to understand how to read the financial news in the papers, this book will explain all the jargon for you. For example, there are statistics available about companies to help you understand their fundamentals, such as the price to earnings ratio also referred to as the PE ratio.
Understanding these statistics help us make sound investment choices when choosing shares. Personally, this kind of investing makes my eyes glaze over and my brain switch off. I don’t want to invest in individual company shares. I don’t want to have to research the companies and understand their fundamentals and unless you are a reckless investor, this is what you need to do if you want to invest in individual companies.
Personally, I think investing in only a few companies is risky because no company is indestructible, unless of course you own shares in a lot of different companies. However, you need a lot of money to do that. There is nothing wrong with investing in companies individually if that is your interest and you want to put the time into understanding the companies.
If you want to do that you need to understand the language of investing in shares and Roger’s book will teach you that.
For me personally, reading this book just affirmed for me that I am really happy investing in index funds and that is the best strategy for me because I don’t have the interest or the inclination to spend large amounts of time researching companies.
I want my investing to be simple, easy to understand and implement, as well as getting the best return with the least amount of fees.
Well there you have it. If you take the time to read these four book recommendations, I have no doubt you will have a sound understanding of the share market and understand more than most people about investing in shares.
If you were only going to read one of these, my top pick would be Millionaire Teacher, followed by Motivated Money.
If you are loving all the valuable content on this blog and podcast and you are enjoying participating in book club. Buying the books through the Money Mindful website is an amazing way to return the love and show your support for the show.
Beyond reading books and learning about investing, if you want to take this work deeper and work on your money mindset and uncover your money block, through one on one coaching I help women connect with their futures self and change their lives. I coach women through the process to becoming who they want to be. You can request a consult with me by emailing me here.
Have a beautiful week my friend.
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