Markets

Two Great Investing Books Worth Reading

By Larry Swedroe

Updated on: August 29, 2009 / 8:10 PM EDT / MoneyWatch

I recently finished reading two books that I highly recommend:

Justin Fox's The Myth of the Rational Market
Jonathan Clements' The Little Book of Main Street Money

The Myth of the Rational Market It's an entertaining history of the battle of ideas between those who believe markets are efficient and investors are rational, and those who believe that markets are inefficient and investors are irrational. Fox does an excellent job of narrating the tale without taking sides. He introduces all the major players in the battle and fills the book with fascinating tales. While the book isn't for beginners, it's highly readable and never dull.

The basic message Fox delivers is that while markets are not perfectly efficient and investors are not always rational, the winning strategy is to invest as if they were -- in other words, invest in index funds, not actively managed funds.

The Little Book of Main Street Money There are very few journalists who actually have investor's interests at heart. Those that do write about what might be called the science of investing, or evidence-based investing. The rest write about the noise, or what Jane Bryant Quinn called "investment porn."

Clements was not only one of the few that truly had investor interests at heart, but he was one of the best of the group (if not the best). I considered his weekly column a must read. The same could be said of this little book. It's only little in size. It's giant in terms of the number of pearls of wisdom that it contains; pearls not limited to investing, but finance in general and life as well.

I highly recommend this book especially for those just beginning their financial journey -- it's a journey you shouldn't take without this book as a guide.