SAGA — Doing things properly

Useful books for potential investors

Potential investors can all help ourselves understand and take control of our finances with a little diligent self-education. Here are some books which I believe form a good basis for the subject:

Like in any other field, you can never stop learning, and there are no hard-and-fast rules that ensure success. But these at least should give you a reasonable start and allow you to build up some confidence in understanding how investing works.

Investing for Dummies, by Tony Levene. I like the ‘Dummies’ books, even if the titles sometimes suggest they’re much more basic than they really are.

The format is easy to read and they are written in a refreshingly non-preachy style. This one covers pretty much all the basics - the different types of investments, how they work and what risks you should be aware of - and might well whet your appetite to delve a little deeper into the subject. If so, a more specialised book from the same publishers, focusing on shares, is Value Investing for Dummies, by Peter Sander and Janet Haley. 'Value' investing is a particular style. It's the way Warren Buffett works, and as he became the second richest man in the world as a result, it's worth taking seriously.

To get into the theory and practice of value investing takes some work, but this book leads you through all the steps very clearly, using real company data as examples. An alternative to the first Dummies book is The Financial Times Guide to Investing, by Glen Arnold.

This is quite a comprehensive book and, coming from one of the world’s top financial newspapers, you can rely on its authority. It covers all the basics and also discusses some more esoteric investment tools. I find it to be a little less user-friendly than the Dummies, but that’s just a question of the kind of style you prefer. It will certainly get you off to a very good start.

As you read these introductory books, you’ll come to realise that there are very many different ways to approach the subject of investing.

One particular style, which is admittedly controversial, is what is formally known as 'technical analysis', often called 'charting'. This is a fascinating subject, the central idea being that studying charts of the movement of share prices can tell you something about how they're going to behave in the near future. I have to say that not everyone believes in the merit of this approach; but it's how I got started, and I certainly recommend you have a look.

Another good starting point is The Investor's Guide to Charting, by Alistair Blair. This is written from an unusual standpoint - by someone initially sceptical - and as a result provides a balanced view of the pros and cons.

Finally, something completely different: Market Wizards, by Jack Schwager. A market professional himself, Schwager interviews a group of top traders, mostly working in more esoteric areas of the investment world such as futures and options. It isn't a handbook, but nonetheless the stories of how these traders made - and sometimes lost - huge fortunes are entertaining and at times inspiring, with plenty of priceless nuggets of market wisdom. Read it, not as a manual, but more to get an insight into an important but little-known world.

* Dr John Andrews is a British investment management consultant and writer, living in Switzerland. His views are personal, and you should always consult a professional investment adviser.