Finance
3 books that will help you better understand the stock market and how to invest your money
Former TD Ameritrade CEO Joe Moglia joins ‘Cavuto: Coast to Coast’ to react to Sam Bankman-Fried being sentenced to prison and his outlook for the markets and AI.
The stock market can be a very difficult place for beginners to navigate. Before you start investing your money, you should have a fairly good understanding of how the stock market works.
Investing can be a way for your money to make money for you. That said, you work hard for the money you earn, and investing in the stock market without proper knowledge can cost you.
There are many resources out there to give you the knowledge you need to be confident in the investments you make. Books are one of many resources to explore.
The stock market can be a confusing place when you don’t have the knowledge you need. (iStock / iStock)
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Over the years, there have been numerous books written about the ins and outs of the stock market, and they all take different approaches. Some take a very data-driven approach, while others are more psychology and behavior-based. Certain books cover short-term investing, while others are more focused on the long-term growth of your money.
If you have never invested a dime before, or have just begun investing and want to know more, these are three books that will help you get a better understanding of how the stock market works.
- “A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today”
- “The Intelligent Investor”
- “The Psychology of Money”
1. “A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today”
If you have no idea how the stock market works or what the first steps you should take are, this book is for you.
Think of “A Beginner’s Guide to the Stock Market” by Matthew R. Kratter as a “how-to” guide to investing. This book will answer all the questions you have and provide you with clear instructions on how to get started in the stock market.
Throughout this book, you’ll learn how to open a brokerage account, how to purchase your first stock, how to earn a passive income in the stock market, how to choose stocks and more.
2. “The Intelligent Investor”
“The Intelligent Investor” was written by Benjamin Graham in 1949 but remains one of the most popular stock market books to date.
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This book covers value investing, which is an approach that targets undervalued stocks that could perform well in the long term. This is not a short-term strategy, but instead teaches investors how their money can grow over a long period of time.
Before you get into investing, pick up a few books that will teach you the basics of the stock market. (iStock / iStock)
Even though this book was written in 1949, a lot of the concepts put forth by Graham can still be applied today. That said, there was a revision published in 2006 so the book better reflects a modern market.
The revised edition of the classic business book offers commentary by financial journalist Jason Zweig.
3. “The Psychology of Money”
“The Psychology of Money” is slightly different from the others on this list. This book was published in 2020 by Morgan Housel.
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This book is more of a lighter read than many other money-based books. It focuses more on individuals’ behaviors and financial decisions, rather than math and data.
Knowing the basics of investing can help you accumulate wealth over time. (iStock / iStock)
As a stock market novice, it’s easy to get tangled up in the math and data. The style of this book is easy to digest, while still teaching about investing and money management in general.
Through the 19 different stories presented in the 19 chapters of this book, Housel is able to teach readers how to have a better relationship with money and finances.
It appears T. Rowe Price is benefitting from the record growth in actively managed exchange traded funds.
Tim Coyne, the firm’s head of ETFs, reports the firm is seeing significant growth in the area — listing the T. Rowe Price Capital Appreciation Equity ETF (TCAF) and T. Rowe Price U.S. Equity Research ETF (TSPA) as two established strategies that can satisfy investor demand.
“I think having that professionally managed portfolio is really beneficial to clients,” Coyne told CNBC’s “ETF Edge” this week. “We’re seeing just… greater volatility [and] uncertainty across both the equity and fixed income markets.“
According to Coyne, the T. Rowe Price Capital Appreciation Equity ETF suits investors who are looking for long-term growth.
“The objective of the fund is to outperform the S&P 500 with lower volatility and greater tax efficiency,” he said. “It’s also a more concentrated portfolio, typically holding around a hundred names.”
As of April 24, the fund’s top holdings include Microsoft, Amazon, and Apple according to the T. Rowe Price website. But it’s not all Big Tech. The ETF also features smaller positions in companies like Becton Dickinson and Roper Technologies.
The T. Rowe Price Capital Appreciation Equity ETF is down about 5% so far this year while the S&P 500 is off about 7% However, the ETF is up close to 8% over the past year — roughly identical to the S&P 500’s performance.
Coyne notes the T. Rowe Price U.S. Equity Research ETF follows a similar strategy, but with a heavier weighting in top tech stocks.
“This is more of a large-cap growth product [T Rowe Price U.S. Equity Research ETF],” he said. “There are components of characteristics of both passive and active here. This fund is actually managed by our North American directors of research. So again, strong fundamental research is going into the stock selection.”
Both the T. Rowe Price U.S. Equity Research ETF and S&P 500 are down around 7% since the beginning of the year. Meanwhile, the fund is up almost 9% over the past year. That’s less than one percent better than the S&P 500’s performance.
T. Rowe Price U.S. Equity Research ETF vs. S&P 500
‘Some form of bear market’
Strategas Securities’ Todd Sohn thinks investment demand for active managers will continue to be strong.
“This is the type of the environment where it [active management] can actually shine,” the firm’s senior ETF and technical strategist said. “We are in some form of bear market. This is where the active manager really can come into hand and offer their solution they are doing right.”
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