My Top Finacne Books / How They Affected My Outlook

Female Mallard Duck in Colorado - 2007

I am a voracious reader, meaning that I simply cannot satisfy my appetite when it comes to reading new books and exploring new topics. When I was in college I would not only attend class and do the homework, I would read the books we were given even if it was not required. For many subjects, especially in finance, I would read sections that we were not even covering. People who don't keep learning in the markets and in business will be at a disadvantage. Instead I want to keep increasing my edge. So I am always looking for ways to improve and have an ability to put my self-esteem aside when needed so that I can better myself from what I am learning. I also use this reading to re-enforce the effective habits that I have.

Great investors and business people are not born, they are forged by learning from books, other people and most importantly experience. Most bad situations are learning experiences if you can put your emotions aside and look at the situation in the proper light. As you will see from what I have read there is a lot to do with emotions and psychology. While attending the University of Wisconsin - Platteville I spent time to take extra psychology classes which I felt would give me an advantage since emotions not purely logical thought are the biggest driver of most decisions in people's lives.

For people who want to be investors they should read the first two books listed below which is why I listed them as 1A and 1B. If you read only these two books with an open mind I think you will have a much better shot at making money.

#1A: The New Market Wizards - Jack Schwager (1994)

From Publisher: "Some traders distinguish themselves from the herd. How do these spectacular winners whose success occurs across a spectrum of financial markets do it? What separates them from the others? What can they teach the average trader or investor? In 'The New Market Wizards', these wildly successful traders--some largely unknown - relate the financial strategies that have rocketed them to success. Asking questions that readers with an interest or involvement in the financial markets would love to pose to the financial superstars, Jack D. Schwager gets these financial wizards to share their insights."

My Thoughts: This book has so many great insights. I think of the most important has been on how it has affected how I look at investing. It ranks the 3 most important topics in order to be a good investor:

  1. Psychology of trading - investment psychology
  2. Risk Control
  3. Where you buy and sell

The book also discusses having and edge, which is important in the markets. If you do not know what your edge is then you do not have one. My edge comes from my drive, global experience and market knowledge. I have 13 pages of typed notes from this book and think it is a must read for anyone who wants to trade successfully. If people were to read only one book this would be the one since it covers all of the major needed areas in trading. I also used this book as the base to create my what causes investors to lose money document that I also give to my clients.

#1B: Behavioral Finance and Wealth Management

How to Build Optimal Portfolios That Account for Investor Biases - Michael Pompian (2006)

From Publisher: "Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors."

My Thoughts: Understanding the psychological reasons why people make investment mistakes is so important. This books breaks down 20 biases that affect decisions that investors make that hurt them in the long term. Once you understand and know how to look for mistakes that you are making them you can fix these cognitive issues. While emotional issues are harder to work on, these can also be dealt with. Obviously you have to go into this book with an open mind and ability to realize that you can do things better. I would recommend this book strongly to anyone who wants to be a successful investor, even though it is written more from the investment advisor viewpoint.

#3: Emotional Intelligence

Why It Can Matter More Than IQ - Daniel Goleman (1995) and Working with Emotional Intelligence - Daniel Goleman (2000)

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From Publisher: "Everyone knows that high IQ is no guarantee of success, happiness, or virtue, but until Emotional Intelligence, we could only guess why. Daniel Goleman's brilliant report from the frontiers of psychology and neuroscience offers startling new insight into our "two minds" - the rational and the emotional - and how they together shape our destiny. Through vivid examples, Goleman delineates the five crucial skills of emotional intelligence, and shows how they determine our success in relationships, work, and even our physical well-being. What emerges is an entirely new way to talk about being smart. The best news is that "emotional literacy" is not fixed early in life. Every parent, every teacher, every business leader, and everyone interested in a more civil society, has a stake in this compelling vision of human possibility."

My Thoughts: I put these two books together because I read them back to back and they are from the author / share a lot of similarities. These books are what really got me interested in psychology and how it affects every aspect of our life. While I have always been a very grounded person these books brought to sharp focus how emotional intelligence was more important than pure IQ. This interest in psychology carried over into many areas of my life and reading. I had also led me to many other books equating money, finance and investments with how people react. Until we understand our own minds we can know how we will react in given situations. These books talk a lot about adapting to situations and working with your feelings. It talks about how to survive and thrive you need resilience, adaptability, initiative, and optimism. It also touches on the topics of self-discovery, self-control, and self-confidence. Overall I would say it is a key book more for learning how to handle your own emotions and how to improve your relationships with other people. But the books have far reaching uses in many areas past the obvious.

#4: Hot Commodities

How Anyone Can Invest Profitably in the World's Best Market - Jim Rogers (2007)

From Publisher: "Before Jim Rogers hit the road to write his best-selling books Investment Biker and Adventure Capitalist, he was one of the world's most successful investors. He cofounded the Quantum Fund and made so much money that he never needed to work again. Yet despite his success, Rogers has never written a book of practical investment advice, until now.

In Hot Commodities, Rogers offers the lowdown on the most lucrative markets for today and tomorrow. In 1998, gliding under the radar, a bull market in commodities began. Rogers thinks it's going to continue for at least fifteen years - and he's put his money where his mouth is: In 1998, he started his own commodities index fund. It's up 165% since then, with more than $200 million invested, and it's the single-best performing index fund in the world in any asset class. Less risky than stocks and less sluggish than bonds, commodities are where the money is - and will be in the years ahead. Rogers's strategies are simple and straightforward. You can start small - a few thousand dollars will suffice. It's all about putting your money into stuff you understand, the basic materials of everyday life, like coal, sugar, cotton, corn, or crude oil. Once you recognize the cyclical and historical trading patterns outlined here, you'll be on your way."

My Thoughts: What I liked most about this book is the history aspect of understanding the markets and learning about how all of the markets are intertwined. One thing I had not thought about was why commodities and stocks often trade in opposite directions. I now understand this and I also understand the history behind several of the commodities that were featured in this book. Another important aspect was learning how minds like Jim Rogers are always looking for the new opportunities or in some cases waiting for the market to bring back old opportunities.

#5: How to Sell Futures - Coffee, Sugar and Cocoa Exchange (1980s??)

My Thoughts: This was a book that I got from work and was asked to read. It was very good because it looks at things from a very client centric approach. It really helps go over items that potential clients will worry about and how a broker can best help them. I also enjoyed reading interviews from brokers talking about what makes for successful new brokers. They talked a lot about listening to clients and how brokers need hard work to be successful. It was really nice because this book shows you how to do things the right way and gave me ideas for how I can best help my clients in the future.

#6: Business Loans From Family and Friends

How to Ask, Make It Legal and Make It Work - Asheesh Advani (2009)

From Publisher: "Skipping the bank is an option: learn how to ask for money from trusted family and friends, keep it legal, and keep everybody happy. About 65% of domestic banks report that they have tightened their lending standards for commercial and industrial loans to small firms (CNN, September 18, 2008).Many entrepreneurs at the early and often untested stages of launching or expanding a small business are having difficulty qualifying for traditional bank loans or venture capital in the down economy, particularly those with poor credit ratings. Business Loans From Family and Friends opens a window on an area of lending that accounts for more than 50% of all startup business investment dollars, and, additionally, is a great resource for those who have identified their lending friends or family, but want to know how to structure the deal so that everyone understands it and no one gets hurt."

My Thoughts: My whole reason to read this book was developing my Fundunity LLC .com business. I used this book to glean as much information as I could to help develop my business processes and web site. I thought it was very well written, but it would not be that useful to most people, you would need to have a need for this specific topic, like lending money to friends or family.

#7: High-Powered Investing All-In-One For Dummies

Amine Bouchentouf and Others (2008)

From Publisher: "Looking for help making smarter, more profitable high-end investment decisions? Why buy ten books that cover each of the major topics you need to understand, when High-powered Investing All-In-One For Dummies gives you ten expert guide for the price of one? This hands-on resource arms you with an arsenal of advanced investing techniques for everything from stocks and futures to options and exchange-traded funds. You'll find out how to trade on the FOREX market, evaluate annuities, choose the right commodities, and buy into hedge funds. And, you'll get up to speed on using business fundamentals and technical analysis to help you make smarter decisions and maximize your returns. You'll also find ways to be as aggressive as your personality and bank account allow, without taking foolish or excessive risks. "

My Thoughts: This book had a basic overview of several areas that I wanted to learn more about. While I did not read it cover-to-cover it helped me with the basics of such financial tools like bonds and technical analysis. It was very basic but explained the needed information in a quick, concise manner.

#8: Rich Dad Poor Dad

What The Rich Teach Their Kids About Money - That The Poor And Middle Class Do Not! - Robert Kiyosaki (1997) and CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom (2000)

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From Publisher: "Robert Kiyosaki reveals how he developed his unique economic perspective from his two fathers: his real father, who was highly educated but fiscally poor; and the father of his best friend - an eighth-grade drop-out who became a self-made multi-millionaire. The lifelong monetary problems experienced by his "poor dad" pounded home the counterpoint communicated by his "rich dad". Taking that message to heart, Kiyosaki was able to retire at the age of 47. This book lays out his philosophy and aims to open readers eyes by: exploding the myth that you need to earn a high income to be rich; challenging the belief that your house is an asset; showing parents why they can't rely on schools to teach their children about money; defining once and for all an asset versus a liability; and explaining what to teach your children about money for their future financial success."

My Thoughts: I read these books back near when they came out. While, I don't really agree with everything presented in these books. However, there are two key concepts that I feel are very important which cam from these books. Cashflow is such a hugely important concept in life and most people do not understand it. These books go into it and made me spend more time learning about it. Also these books helped me to start thinking about the way that society views money. Often people let money work against them. These books try to get people thinking about how to make money work for them. So all in all these books were a net positive to read and given the the cashflow and view of money aspect they brought had a strong impact on my life, which is why it was ranked as high as it is.

#9: Bank Management and Financial Services

Peter Rose and Sylvia Hudgins (2006)

From Publisher: "The Seventh Edition of Banking and Financial Services is publishing at a time where the world that we live in is changing rapidly. The entire financial sector is threatened by significant risks at home and abroad, inside and outside the individual financial firm. Banking and Financial Services is designed to help students master established management principles and to confront the perplexing issues of risk, regulation, technology, and competition that bankers and other financial-service managers see as their greatest challenges for the present and future. This new edition offers the student many of the key trends and changes in the financial-services sector. With this relevant information students are able to grasp the rapid changes that are happening in this course area and in the real world. Banking and Financial Services also remains the most readable and engaging text on the market, with a plethora of real-world examples and a robust support package for instructors."

My Thoughts: I read this book for two reasons. The first was that some of my competitors in a financial sense for my own business Fundunity LLC .com are local banks. I also read it before doing my interview with the FDIC so that I would be prepared for the interview. While it only partially applied to the two driving purposes behind me reading it, I did learn a lot about how banks work and what the weaknesses/strengths of banks include. This is more of a textbook, not a typical read and it is long winded in many ways but the information is very good. One thing is that I would get a newer copy so that the financial issues of 2008 are covered more in-depth.

#10: The Motley Fool Investment Guide

How The Fool Beats Wall Streets Wise Men And How You Can Too - David and Tom Gardner (1996)

From Publisher: "Today, with the Internet, anyone can be an informed investor. Once you learn to tune out the hype and focus on meaningful factors, you can beat the Street. The Motley Fool Investment Guide, completely revised and updated with clear and witty explanations, deciphers all the new information -- from evaluating individual stocks to creating a diverse investment portfolio. David and Tom Gardner have investing ideas for you -- no matter how much time or money you have. This new edition of The Motley Fool Investment Guide is built for today's investor, sophisticate and novice alike, with updated information on:

My Thoughts: This was the very first investment book that I read, and I read it while I was in high school. It was the first book that helped me to understand the basics of stock investing. I would recommend it for anyone who is starting out and wants to have a basic understand of the markets. Even more than that fool.com has a great web site with tons of information.

#11: The New Positioning - by Jack Trout - (1997)

From Publisher: "In the same right-to-the-point, no-nonsense style that was a hallmark of Positioning, this sequel squares off against critical marketing challenges such as how to make sure your message gets through in an era of information overload. "

My Thoughts: This book was one of the first books about marketing that I read. It is good in the sense that it really breaks down items into easier parts and gives practical examples using companies. While things have changed since it was originally published I would still recommend it. A lot of what I learned is how the mind works when it comes to the information overload that we are now experiencing.

#12: A Random Walk Down Wall Street

The Time-Tested Strategy for Successful Investing - Burton G. Malkiel (2007)

From Publisher: "Updated with a new chapter that draws on behavioral finance, the field that studies the psychology of investment decisions, here is the best-selling, authoritative, and gimmick-free guide to investing. Burton Malkiel evaluates the full range of investment opportunities, from stocks, bonds, and money markets to real estate investment trusts and insurance, home ownership, and tangible assets such as gold and collectibles. This edition includes new strategies for rearranging your portfolio for retirement, along with the book's classic life-cycle guide to investing, which matches the needs of investors in any age bracket. A Random Walk Down Wall Street long ago established itself as a must-read, the first book to purchase before starting a portfolio. So whether you want to brief yourself on the ways of the market before talking to a broker or follow Malkiel's easy steps to managing your own portfolio, this book remains the best investing guide money can buy."

My Thoughts: While I don't really agree with the random walk premise, I felt it was important to read this book. My favorite part was the first several chapters covering the history of the markets including all of the various historic bubbles that have happened. I also respect his take on the various disciplines and there are parts of what he has to say that are interesting and thought provoking. Overall this is one of those books that I feel is good to read because it helps you understand one of the various takes on how to invest that is one of the big four ways of looking at the markets which I have put in the following order by how important I think they are:

  1. Fundamental Analysis and Marco Economics
  2. Behavioral Finance
  3. Technical Analysis
  4. Efficient Market / Random Walk

#13: The Complete Idiot's Guide to Person-to-Person Lending

Curtis E. Arnold and Beverly Blair Harzog (2009)

From Publisher: "The Complete Idiot's Guide(r) to Person-to-Person Lending fills readers in on what they need to know, such as how person-to-person lending works, who lends and who borrows, and the advantages and disadvantages of Virgin- Money, Prosper, Zopa, and Facebook's Lending Club.

Loans on Prosper and LendingClub rose to $100 million in 2007; by 2010, the online banking report forecasts $1 billion in person to- person loan originations

Javelin Strategy and Research (Dec. 2007) predicts that the demand for person-to-person lending services may grow from $38 billion to $159 billion over the next five years."

My Thoughts: My whole reason to read this book was developing my Fundunity LLC .com business. I wanted to understand the competition that is already established. What I really liked about it was that there was no real competition in the market I was looking to develop. I used this book to glean as much information as I could to help develop my business processes and web site. I found Business Loans From Family & Friends: How to Ask, Make It Legal and Make It Work by Asheesh Advani to be a much better and more informative book.

The Emotion Behind Money

Building Wealth from the Inside Out - Julie Murphy Casserly (2008)

From Publisher: "This book is based upon an insight that's literally turning the financial services industry upside down. It's the notion that we each have specific emotions, or emotional patterns, attached to money that were imprinted on us before we even had a choice to have a checking account. Whether you personally recognize this or not, today those emotions impact every financial decision you face. They are responsible for how you make money and how you keep it, or whether, as is often the case, it seems to go out the door faster than it comes in. Amazingly, those feelings are not just fleeting reactions; they actually influence how much money you'll make and amass throughout your entire life! The purpose of this book is to help you recognize your emotions behind money, and likewise help you discover healthier ways to respond to those feelings. Through everyday language, lively anecdotes, and engaging exercises it will:

My Thoughts: I am looking to read this book to get a greater insight on financial psychology for the entire market, not just in relation to the investing. I think understanding wealth on a personal level will help me better anticipate it on a larger scale as well.

Books that I am in the process of reading or which I have purchased

Technical Analysis: The Complete Resource for Financial Market Technicians

Second Edition - Charles D. Kirkpatrick II, Julie R. Dahlquist (2008)

From Publisher: "Already the field's most comprehensive, reliable, and objective guidebook, Technical Analysis, Second Edition has been thoroughly updated to reflect the field's latest advances. Selected by the Market Technicians Association as the official companion to its prestigious Chartered Market Technician (CMT) program, this book systematically explains the theory of technical analysis, presenting academic evidence both for and against it. Using hundreds of fully updated illustrations, the authors explain the analysis of both markets and individual issues, and present complete investment systems and portfolio management plans. They present authoritative, up-to-date coverage of tested sentiment, momentum indicators, seasonal affects, flow of funds, testing systems, risk mitigation strategies, and many other topics. This edition thoroughly covers the latest advances in pattern recognition, market analysis, and systems management. The authors introduce new confidence tests; cover increasingly popular methods such as Kagi, Renko, Kase, Ichimoku, Clouds, and DeMark indicators; present innovations in exit stops, portfolio selection, and testing; and discuss the implications of behavioral bias for technical analysis. They also reassess old formulas and methods, such as intermarket relationships, identifying pitfalls that emerged during the recent market decline. For traders, researchers, and serious investors alike, this is the definitive book on technical analysis."

My Thoughts: I have always looked at technical analysis as important because so many people believe in it. But I rank it behind fundamentals and financial psychology. What I believe is most useful about technicals are the fact that they are an unemotional look at the prices over time without other noise. I also personally use technicals when investing, often for support, resistance and entry/exit points. Having never studied all of the different theories in depth I wanted to learn about them. I have went into this book with an open mind and so far it has helped me to at least understand the mind of the technical trader better. I still have most of the book to read and am doing so at a slower pace than I usually would since the material can be at times very complicated.

Option Volatility and Pricing

Advanced Trading Strategies and Techniques - Sheldon Natenberg (1994)

From Publisher: "One of the most widely read books among active option traders around the world, Option Volatility and Pricing has been completely updated to reflect the most current developments and trends in option products and trading strategies.

Featuring: Pricing models Volatility considerations Basic and advanced trading strategies Risk management techniques

Written in a clear, easy-to-understand fashion, Option Volatility and Pricing points out the key concepts essential to successful trading. Drawing on his experience as a professional trader, author Sheldon Natenberg examines both the theory and reality of option trading. He presents the foundations of option theory explaining how this theory can be used to identify and exploit trading opportunities. Option Volatility and Pricing teaches you to use a wide variety of trading strategies and shows you how to select the strategy that best fits your view of market conditions and individual risk tolerance."

My Thoughts: I understand the basics of options and even strategies like strangles and straddles. However, I want to learn more about advanced strategies and pricing models and this book has great reviews.

CFA Level 1 Books - CFA Institute - (2011)

From Publisher: Chartered Financial Analyst December 2011 Level 1 Books

  1. Ethical and Professional Standards and Quantitative Methods (Volume 1)
  2. Economics (Volume 2)
  3. Financial Reporting and Analysis (Volume 3)
  4. Corporate Finance and Portfolio Management (Volume 4)
  5. Equity and Fixed Income (Volume 5)
  6. Derivatives and Alternate Investments (Volume 6)

My Thoughts: I have yet to be able to read all of these books, but I the desire to do this. My jobs and interests have kept me from being able to read every part of each of these books, but I have read sections that I have wanted to know about in particular from each. I am anticipating that I may read all of these books in the second half of 2012 and possibly take the CFA Level 1 exam in December, but I have not scheduled anything for this.