Investing 101: A Crash Course in Building Personal Wealth by Michele Cagan (2016)
Hello again! As I mentioned in my last post, I’ll be a guest blogger for The Alexandrite Group this year. It’s my hope to increase my financial literacy and money habits in the coming months, by reading a book a month focused on investing, budgeting, saving, etc. Then I’ll share what I’ve learned and how I expect to apply that knowledge to my own financial habits. Let’s get down to it!
For this first month, I’ve selected a book on investing: Investing 101: An Essential Primer on Building a Profitable Portfolio by Michele Cagan.
This book is a primer on understanding the stock market, bonds, basic economics, and different types of investment strategies. The book assumes the reader has no knowledge on the subjects discussed. Readers may find helpful at times (like the section on options and futures), and dispensable at other times (such as the section on basic economics).
For someone looking for a starter kit to investing their money, without diving too deeply into technical jargon, this is the book for you. The writer succinctly and adeptly runs through the main terms and ideas necessary to begin investing, but the book lacks the level of depth some might be seeking.
Book is best for: Beginners
Star rating: 2 out of 3
Here are some of my biggest takeaways from the book:
- Whenever you get your hands on some extra cash (raise, bonus, finished paying off loans), use it to pay down debt or add to your savings and investments.
- Not sure how to begin your asset allocation? A good way to start is to convert your age to a percentage, invest that percentage into bonds and cash, and put the rest in stocks. So as a 25-year-old, this strategy recommends I put 25% in bonds and cash, and 75% into stocks.
- Value investors believe that over time, the stock price tends to reflect the real value of the company. As Warren Buffet says, “it’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
- Time is one way to diversify your portfolio, especially in the bond market. Look into both short and long-term bonds, like 30 year corporate bonds and five-year treasury notes.
- Don’t try to time the market! This is a surefire way to incur transaction fees that can quickly add up. A buy-and-hold strategy, coupled with a disciplined investment strategy and thorough research can yield large gains over a long period of time.
- Your investing needs will constantly change. At 25 without a family like myself, investing needs and strategies should be different than at 35 years old with a family. Every few years or after a big milestone, look to upgrade your strategies to fit you and your family’s needs.
What I’ll change after reading this book, and where I’ll head from here:
- I’ll look into changing my asset allocation in my portfolio. I realize that my portfolio is not diversified enough, and need to incorporate both short and long-term bonds, as well as index funds or ETFs that cover larger areas of the market. My reliance on blue-chip stocks may leave me a bit on the riskier side.
- In regards to my next book, I’m debating between two: Common Sense on Mutual Funds by John Bogle and A Random Walk Down Wall Street by Burton Malkiel. These are two of the most notable books on investing, and though dated, seem to provide timeless advice for investors to make informed, long-term investments.
Questions or comments? I’d love to hear your thoughts in the comments section below!