The Keys To Wealth: 4 Investing Books That Changed My Life


Keys.  Keys unlock doors and open gates.  Keys give you access to different places in the world, from which you might otherwise be locked.  Without those keys, there’s little hope of ever reaching those parts of the world.

Investing is kind of like a locked doorway…  Behind some of those locked pathways are the roads to wealth and financial independence.  Unlock the right doors and you can become an incredibly wealthy person.

Except our brains don’t come with a secret set of keys that unlock millions of dollars.  Instead, we have to build those neural pathways with new ideas and new information.

Books are one of the best ways to build those pathways.  Anyone looking to build wealth and achieve financial independence should be a voracious reader.  It’ll change your life.  Really!

While I might read 30 or 40 books a given year, not all of those are going to have a huge impact on my life.  That’s pretty normal… but some books are just special.

Those special books unlocked the neural pathways (for me) that ultimately created my financial independence.

 

Life With No Money

I’ve always been a voracious reader, but early in life I didn’t read the kind of books that would build me wealth.  I mainly read for entertainment.  I had a passion for science fiction novels (that remains today).  I was super-nerdy as a kid, but that passion for reading would be important.  It would serve me well over the years.

As you might expect, I didn’t start-out my life with millions of dollars.  Yes, I started out life with NO money.  I was a poor kid from a poor family — I actually started my career with a negative net worth ($50,000 in debt).  Thankfully, I read a few very important books and changed my life from one of poverty, to one of plenty.

Which books?  I’m glad you asked!  Today I’d like to share those few rare books that made the biggest difference in my life.

 

The Millionaire Next Door

I can remember the exact day I first found The Millionaire Next Door.  It was about a year after college, and right after the DotCom bubble had popped.  I was literally walking through the ‘investing’ section of my local Barnes & Noble store and the cover of the book caught my eye.

I picked up the book, and found one of those cushy leather chairs they used to have in Barnes & Noble stores… I read the entire book immediately right there in the store.  I sat there for hours reading the whole thing. (I was lucky they didn’t kick me out)

Millionaire Next Door

It was a life changing book.  I suddenly realized that the TV version of millionaires I’d been fed my entire life was completely bogus.  Real millionaires were actually pretty normal people.  They weren’t flashy.  They don’t live in huge houses or drive fancy sports cars.  They’re actually really frugal people, that continuously live below their means.

The part of this book that really sold those ideas, was the fact these were not anecdotal stories or some “authority” figure’s opinion on how to get rich.  The ideas in this book are represented with empirical data collected during the author’s research.  The author, Thomas Stanley, merely presents his data for the readers.

This isn’t a book about how to “get rich quick” or how some “special snowflakes” got rich.  The book is based on real research of real millionaires, who built their wealth slowly.  The guys next door that are actually worth millions.

I first read this book 16 years ago, but it was the book that started me down the road to millions today.  It was like a lightening rod — I stood up from that leather chair in Barnes & Noble that fateful day, and became a very different person.

 

The Essays of Warren Buffett

Once I started down the path of building real wealth, I needed to know how to invest.

Unfortunately, learning to invest is a tricky business.  There is no shortage of investing books out there that promise to tell you how it’s done.  But are any of them any good?  Honestly, very few are truly worth your time.

Have you ever noticed how the billionaires of the world rarely write books about investing?  The book, The Essays of Warren Buffett is a strange exception to that rule.  It’s actually a collection of excerpts from Buffett’s shareholder letters (which are available for free).

While Buffett’s shareholder letters were never intended to be an “investing book”, the author has arranged these excerpts from in a way that’s extremely instructive.  In effect, it becomes one of the best investing books ever published.  I can’t recommend it enough.

essays of warren buffett

For me, this was the book that changed how I thought about investing in the stock market — it’s not about gambling on pieces of paper that change price daily.  It’s about buying businesses.

Buffett’s view is that stocks are real businesses with real earning power, and a real value.  As buyers of stocks, we’re simply purchasing pieces of that business’s earning power.

It doesn’t matter if you invest in individual stocks or index funds — this is an outstanding book.



The Future For Investors

For a few years in my early investing career I was completely enamored with tech stocks and growth stocks.  I bought every stupid tech stock that was popular at the time.  My investments did terrible as a result.

The news media and many investing books promote the theory that “growth is the path to riches”, and I believed it… until the fateful day I ran into The Future For Investors by Jeremy Siegel.

Future For Investors

It turns out, much of that growth message touted by the financial media is completely false.  Growth can be an investing trap that pulls you into overpriced stocks and poor returns.   The latest and greatest technology does not always lead to the best investing returns.  On the contrary, change is often the enemy of investing returns.

In reality, as Professor Siegel shows in his book, slow growing (or even declining) industries can provided some of the best returns for investors over long time periods.  Siegel also effectively shows that dividends really matter to investors — in the long run, dividends will make up roughly half of your investing returns.

It’s an outstanding book that broke my “growth-tech” stock habit.  I can’t recommend this book enough!

 

The Little Book That Beats The Market

I also went through an investing phase where I bought all kinds of garbage stocks trying to find “value” investments…aka “cigarette butts”.  I actually did pretty well hunting for these garbage stocks, but I was missing a big part of the investing picture that would turn me into more of a Farmer instead of a Hunter.

The piece of the investing puzzle was quality.  Value can also be an investing trap when you don’t have a quality business… but how do you find quality?  I’d always read about how Buffett went from investing in “cigar butt” investments to quality stocks, but I never understood how to actually measure the quality of a business….

It was a mystery, until I read The Little Book That Beats The Market.  Yes, the title of the book is very silly.  Just ignore the stupid title and give it a read.  Much of the book’s contents are focused on supporting the author Joel Greenblatt’s “magic formula”, but he actually has some very good points about investing in the book.

the little book that beats the market

Despite the goofy title, if you look up Joel Greenblatt’s investing record, you’ll realize this guy is not a quack.  He’s a very good value investor with an incredible record.  Whether you believe his “magic formula” works or not, the contents of his book are actually very good because he has a focus on capturing quality investments.

For me, this idea of weighing both quality and valuation metrics together at the same time changed how I invested.  No longer would I chase a bunch of garbage stocks looking for a quick win — measurable quality matters too!

 

Final Thoughts

Those are the four investing books that changed my life.  While they might not seem like much on the surface, ideas are powerful things if they take root in an open mind.

Will these books change your life? Will they set you on a course for wealth, financial independence, and millions of dollars like they did for me?

It’s hard to say — My mind was open to the ideas they presented.  Everyone interprets the world in a different way, but we absolutely must not stop exposing our brains to new ideas and new approaches.  Never stop reading.

Every book is like another key to try in life’s locked doors.  If you read enough, one day you find a key that unlocks an important door — ideas so powerful they will change the course of your life.

I look forward to finding the next one.

 

[Image Credit: Flickr]


14 thoughts on “The Keys To Wealth: 4 Investing Books That Changed My Life

  • July 15, 2017 at 3:09 AM
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    Thank you for sharing your insight into these four great books! Like you, I used to have a totally different perception of millionaires. After I started reading FI and PF blogs, I realized that millionaires can be normal people like me. It’s changed my mindset about saving and investing in the right place to yield the best possible long-term return.

    I listened to the audio version of The Money Makeover by Dave Ramsey and thought it was a great book too!

    Reply
    • July 16, 2017 at 5:17 PM
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      I call Dave Ramsey the Chic-Fil-A of personal finance. Some love him and some hate him. He puts out a product that’s better than many of his competitors.

      Reply
  • July 15, 2017 at 5:01 AM
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    Thank you for these recommendations and reminding me of the importance of reading books!

    Reply
  • July 15, 2017 at 5:32 AM
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    I would add I will teach you to be rich by Ramit Sethi for high school grads or college kids. Well written in a language they should understand. I wish school had emphasized reading one or two of these books instead of 20 Greek Classics when we were younger. Maybe in the next 10 years that will change, but for now it is up to the individual. Great list and The Millionaire Next Door is a personal favorite of mine.

    Reply
  • July 15, 2017 at 8:51 AM
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    Thanks for sharing your list of top-4 investing books that changed your life. I have read the Millionaire Next Door a few times. I have not read the other 3. Based on your recommendations, I will add them to my list of financial books to read.

    Reply
  • July 15, 2017 at 9:47 AM
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    Growing up I hated reading, especially because I had to do it. It took a few years after college and grad school to realize that reading was actually fun since I wasn’t being forced to do it anymore. Now I wish I had more time to read (silly job gets in the way). I now have a laundry list of books I want to read… looks like I have 4 more to add!

    Reply
  • July 15, 2017 at 4:38 PM
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    Thank you for the recommendations. I’ve read the MND a long time ago, and am going through the other three based on your endorsement.

    -Mike

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  • July 15, 2017 at 7:19 PM
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    Great, thank a lot for sharing your list of books.
    So far I’ve read only one book from this list. I am trying to read at least 1 book per month. And already have a list of 15 books to read.
    Friendly Russian recently posted…Do you ask for discount?

    Reply
  • July 16, 2017 at 10:21 AM
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    Thanks for sharing. I have read MND a while back, and it really helped me to train and set my mind sets right. It really is all about the mindset of how you approach money and life.

    Reply
  • July 17, 2017 at 8:10 PM
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    It is interesting how sometimes the light can go on and give you a purpose to save. I went to several “get rich quick” seminars, but the real estate section was a great inspiration. I did not purchase anything at the seminar, but learned as much as I could after that.

    Reply
  • July 17, 2017 at 8:28 PM
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    Why am I not surprised that I’ve read all of these books and love them all. The Millionaire Next Door was a game changer for me, especially when I used the formula to calculate the net worth we should have. I was stunned that I was way behind and that only motivated me to increase our net worth.

    Reply
  • July 18, 2017 at 6:26 AM
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    Thanks for sharing these. I’ve read one out of five so I’ve got some work to do. I try to get audiobooks from the library since I can use work commuting time to pop in CDs and listen to them. Definitely beats the radio 🙂

    Reply
  • July 19, 2017 at 3:58 AM
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    Hi Mr Tako! I read The Little Book too though I felt it was harder to implement given that many to the stocks filtered out were small caps (in my test universe). Thus, my conviction level to allocate a large % to a single small cap idea wasn’t high. moreover, i found that since you cannot determine how many opportunities the magic formula would find, there could be challenges in deploying your funds.

    Currently, i’m reading jack bogle’s little book of commonsense investing. it’s more about indexing but intriguing from a mathematical angle. another good book is margin of safety by seth klarmen. only 400 copies ever produced though.

    Reply
    • July 19, 2017 at 7:23 AM
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      I’m not advocating for the “magic formula” and explained so in my post, but look deeper… It’s a real verifiable performance record. Why did the strategy work so well for him?

      Sometimes books aren’t about telling you what to think, but about making you think. Good luck getting your hands on Seth Klarmen’s book!

      Reply

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