Best Investing Books for Beginners

 Best Investing Books for Beginners

B. Tech .. B. Com .. B.A. ... B. Sc. … There are many subjects in India and the world in which graduation and doctorate programs are available. But, you must have never heard of a Bachelor of Investing or Master of Investing degree. Because anyone can grow his/her wealth by investing. This is not easy. But, with the right direction, anyone can acquire this knowledge. Greetings. 

On one hand, there is no academic course.. and on the other hand, investing is a life-long learning exercise. Though thousands of books have been written on Investment, keeping a beginner in mind, we have chosen 3 books for this blog. 

We have kept in mind that the books should be easy to read. you should be able to understand the concept. and the authors of the books should themselves be renowned investors. And those 3 books are: 

1. Rich Dad Poor Dad by Robert Kiyosaki 
2. Learn to Earn by Peter Lynch 
3. The Dhandho Investor by Mohnish Pabrai 

The teachings are quite different in these three books and, in order to become a good investor, it is important that you keep expanding the depth and width of your knowledge. So, Come, let’s learn something new. 

Rich Dad, Poor Dad is a story where Robert Kiyosaki has introduced two characters...his Poor Dad and his Rich Dad. In this book, emphasis has been given to the attitude of people about money and how to achieve financial freedom. 

The thought processes of Poor Dad and Rich dad about money were very different. The Poor dad said that money can be earned through a high paying and safe job and the same money is used in everyday expenditure. 

But the Rich Dad did not think this way. According to Rich Dad, the role of money is to buy assets that can earn more money for you. Robert Kiyosaki has called this learning from the Rich Dad in his book, the most important foundation of Individual Financial Freedom. 

Robert says that people get confused about the meaning of Assets and Liabilities. According to him, Assets are those that put money in your pocket. And Liabilities are the ones that take away money from your pocket. For example, a house. Let’s assume that you have bought a second house for which you are paying EMI. 

Now a Poor Dad’s definition says that House means asset. But, according to the Rich Dad, this house is not an asset but a liability. That is because that house is not earning anything for you rather, it is only taking out money from your pocket. 

But yes, if you would have put this house on rent and if the rent was more than the EMI, then you can definitely call this house an asset. Robert Kiyosaki’s learning is clear. 

If you want to become rich, then, acquire assets, not liabilities. In Rich Dad Poor Dad. My favourite chapter is the section related to tax. Remember...In his entire book, Robert has suggested we move from being salaried individuals to becoming a businessman or an investor. 

He says that the government itself gives favourable tax benefits to the businessmen as against the salaried people. Come, let us understand this in a little more detail. How is the personal budget of a salaried employee made? 

Let’s say, you earn 100 rupees. First, the government cuts TDS on these 100 rupees. Let’s assume that you are in the 30% tax slab So, after paying the tax, you have 70 rupees to spend. Now, see how the accounting of a businessman is different. 

Let’s again begin with a revenue of 100 Rupees. The difference is that the government doesn’t cut taxes at this stage and gives the opportunity to businesses to first spend on their expenses. This means that if we spent 70 rupees out of 100 rupees. We are left with 30 rupees. 

According to the government rules, you will be taxed on these 30 rupees and not on 100 rupees which is taken in the case of an individual. Now, if we assume the same 30% Then the business was taxed at 9 rupees while a salaried employee was charged 30 rupees. 30 minus 9...that means that a businessman saved 21 rupees. 

Rich Dad and Poor Dad is quite a readable book that explains to us many important principles related to money in very easy language. 

Peter Lynch is the author of Learn to Earn. who is known as one of the best performing mutual funds managers in the world. He continues to hold the record when he gave 29% annual returns to his investors in 13 years. 

This means that if you had invested 10,000 dollars in this fund in 1977 then, by 1990, this 10,000 dollars would have increased to become 2,73,000 dollars. In his book, 

Peter Lynch says that everyone should begin investing early in life and should not wait for the right time or age. He especially motivates young investors to invest in stocks and mutual funds as compared to bonds. 

Because stocks perform better than bonds in the long term. Stocks do have ups and downs but if we look at the long-term, then the stocks remain ahead of bonds 9 out of 10 times. Peter has written several pages on mutual funds and Dollar-cost averaging which we call systematic investment plan or SIP in India. 

He also says that beginners should begin investing with mutual funds to earn good wealth and to continue SIPs for several years. Means till now we had heard that- “Time is Money”. But, the saying of Peter Lynch is also correct - “Time Makes Money”. Simultaneously, Peter says that making mistakes is a part of investing. 

Even big investors make mistakes and also learn from them. For instance, take Warren Buffett. Some 20 to 25 years ago, he had invested in the stocks of airlines. And as per Warren Buffett himself, this was a big mistake. Because the economics of airlines is quite difficult. 

Look at this..airlines require continuous capital investment. cost of operations is high, the prices of airline tickets have not increased in the past 20 years Overall, “Learn to Earn” is purely a beginner’s book and it explains several important concepts. 

If you are already a little bit aware of investing and have started investing in mutual funds and stocks, then, you can replace this book of Peter Lynch with another book from him - “One Up on Wall Street” - which is an advanced book. 

The Dhandho Investor is a beautifully written book that has been authored by Mohnish Pabrai. Before looking into the important takeaways from his book.

Besides being a good writer Mohnish Pabrai is a well-respected fund manager who manages assets worth more than 600 million dollars. Around 1973...when the Gujarati businessmen reached America after Africa, they saw that America was under economic recession and many motels were available at a good discount. 

Seeing this the Patel Businessmen used their ‘Dhandho’ brains. Now, look. Motels have 10 to 15 rooms. After buying the motel, our Patel businessmen and their family made 1 or 2 rooms as their home and rented out the other rooms. 

Now, to run a motel, one doesn’t require many staff members and their family members themselves could manage quite a few works like reception, room cleaning, cooking, laundry etc. And due to these savings, Patels’ motels were operating at very low costs. 

And the ‘Dhandho’ businessmen took the advantage of this very low cost and lowered their room rents because of which many people started living in their motels and the occupancy of motels remained high consistently.

This low cost of operation became the competitive advantage of the Patels. And Mohnish Pabrai has given the maximum stress to this point in his book that, when you invest in any business and company then be sure to always judge their competitive advantage. because, the higher the competitive advantage, the more valuable the business is. 

In the Dhandho Investor, Mohnish Pabrai says that if the situation is in your favour then you must increase the bet, at other times you must remain silent. Talking in the language of test cricket. there is no need to take a run at every ball. 

Play defence on good balls and when you come across a bad ball then hit a boundary. Patels did something like that. When they had to buy the motels, then they made use of loans wherein they invested 5% and the banks invested 95%. 

As their investment in the project was just 5%, if the motels did well, then they would have gained a lot and if they didn’t run, then they would have just lost 5%. In his book, Mohnish Pabrai has termed these circumstances as Heads I Win, Tails I Don’t lose much And Mohnish Pabrai deploys this selective hitting strategy in his funds too. 

There has been a common trait of big investors from across the world... They are all very avid readers. and they keep themselves updated on investing, industry, sectors, companies, tax laws and many other things.

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