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When it comes to learning about investment, there are several classics on investing that make for great reading. The internet is surely one of the fastest, most up-to-date ways to make your way through the jungle of information out there, but if you're looking for a historical perspective on investing or a more detailed analysis of a certain topic, books will always come to your aid. You can read books with sound financial advice, but if you lack the mind-set to truly build wealth, it will be difficult to achieve financial success. These books are mind-changers! Here we give you a brief overview of these books to set you on the path to investing enlightenment. 1 Rich Dad, Poor Dad (2000) by Robert Kiyosaki This book has been around for a while now, but it’s quite possibly one of the best overviews on wealth building. It deals less with specific moneymaking strategies and more with the mind-set that is necessary to achieve great wealth. Rather than focus on concrete steps for what people can do to fix their financial life, the book presents an alternative mind-set about money. According to Kiyosaki, the rich teach their children a fundamentally different view of the financial world. Kiyosaki's view is that the poor and middle class work for money, but the rich work to learn. He stresses the importance of financial literacy, and presents financial independence as the ultimate goal in order to avoid the rat race of corporate America. The book is built on his early life experience as a child of a well-educated, high income, but perpetually broke father, in comparison to the father of his best friend, who was poorly educated, but a multimillionaire. Kiyosaki's message is simple, but it holds an important financial lesson that may motivate you to start investing: the poor make money by working for it, while the rich make money by having their assets work for them. Kiyosaki advocates investments that produce periodic cash flow for the investor while providing upside in terms of equity value. Real estate investments and stocks that provide dividends are viewed favourably. Real assets add cash flow to your wallet. For example, the book points out that working hard and even earning a high income are not enough to ensure financial success. Rather, the book emphasizes that the rich work smart and spend more intelligently. 2. The Intelligent Investor (1949) by Benjamin Graham The Intelligent Investor is the grandfather of investment strategy books. This book has been hailed by Warren Buffett as the best investing book ever written. Author Benjamin Graham is regarded as the father of the value investing. Graham delves into the history of the stock market, and informs the reader on conducting fundamental analysis on a stock through developing long-term investment strategies and avoiding significant errors. He discusses various ways of managing your portfolio including both a positive and defensive approach. He then compares the stocks of several companies to illustrate his points. The book stresses the importance of fundamental analysis and truly understanding your investments. By learning to analyse potential investments in depth, investors can learn how to spot under-priced stocks backed by robust companies which is determined through fundamental analysis. The central tenet of the book is that a scientific approach should be used when directing your investments. Reading this book, you will learn to keep your emotions out of your investments, and develop a sceptical stance towards anything resembling the type of hype that so often gets the average investor into trouble. The Intelligent Investor won't tell you how to pick stocks, but it does teach sound, time-tested principles that every investor can use. 3. Real Money (2005) by Jim Cramer Popular TV financial analyst Jim Cramer's "Real Money" has continued to sell well since its 2005 debut. The book provides a basic play-by-play analysis of the basic techniques that Cramer advocates for buying stocks. This is not the book for those who want set-it-and-forget-it investments. Cramer does NOT advocate "buy and hold" but rather "buy and homework" meaning that investors spend at least one hour per week analysing each position held. While this ‘homework’ can quickly become a large time commitment, Cramer recommends that investors remain diversified. This may not be the right book for every investor, but if you are interested in the types of things that a hedge fund manager thinks about all day, or if you hold a diversified portfolio, you will enjoy this book. To be continued…
WHY IS IT IMPORTANT TO HAVE AN INVESTMENT? Investing means to put forth an amount of something with the expectation that it will generate a return in the future. You will hear people talk about investing their time or effort, and of course, money. When you invest your money, it means that instead of spending it you are putting it in some sort of vehicle that will use it to make more money. And that’s why investing is important Developing an investment plan requires you to quantify your goals and could greatly improve your chances of achieving the retirement you have dreamed of. It could help maximize the chances of meeting the objectives in your financial plan that best aligns with your financial goals. Regardless of the state of your current financial picture, it’s always a good idea review your financial plan and understand how it relates to your financial goals and be aware of the options you can take that can help your financial well-being. Investing creates wealth. It’s easier to become financially independent when your money is working for you. The greater the return you earn from investments, the less you have to rely on your working salary to support yourself and achieve your financial goals. How do I start investing? Technically, anything that generates a return is an “investment”. This means even your piggy savings account at 1% interest is an “investment”. However, when most people, myself included, talk about investing, we’re referring to more profitable vehicles such a mutual funds, ETFs, and stocks. Personally, I think it’s best to start small and work your way up. Begin with a savings account so you can get used to putting away part of your income, and also accumulate some capital for investments that require a larger buy-in. Mutual funds will also let you start small, whereas opening on a brokerage account to begin trading stocks usually requires at least more. Where most twenty-something seem to be afraid to invest in the stock market, I can’t emphasize enough how much opportunity there is to really kick start lifetime wealth-building if you start now. It doesn’t even matter if you don’t have a lot to contribute, time is on your side. Why should I invest in stocks? Stocks can provide a better return than simply keeping your money in a savings account. I remember when I first learned about how stocks work, the things that shocked me most were: 1. you can receive money on a regular basis simply for holding a stock (this is called dividend) 2. This money will usually increase the longer you hold a stock (many regular dividend payers raise their dividend annually), which means you’re actually paid more every subsequent year you hold an investment). LIFE STAGES FINANCIAL PLANNING The investment strategies and tactics for achieving short-term goals are very different from those used to accomplish long-term ones. Managing for tax efficiency plays a key role every step of the way. ACCUMULATE In the accumulation phase you are working hard to build assets, support the household, save for college and, hopefully, set aside money for retirement. When it comes to investing in this phase, every dollar counts because dollars invested early will work hardest for you later. SPEND Phase two is retirement. During this phase, you’re likely living on a reduced income but now have the time to do things you enjoy. If you’ve planned adequately and factored in the potential for higher medical expenses along with your monthly bills, you should have enough extra money for a good quality of life. RELEASE The release phase begins upon your death when your heirs and charitable organizations can benefit from your generosity. Tax-efficient estate planning gives you the satisfaction of offering a leg-up to your children and grandchildren or a little bit of hope to the less fortunate.