Books

Refer back to the DIG DEEPER section of Chapter 3 for a short list of books and web resources about personal finance. The following list focuses exclusively on investing.

One Up on Wall Street by Peter Lynch. This book is for those who want to learn more about investing in individual companies. Lynch is one of America’s most successful money managers. He believes that average investors have the ability to beat the market and that investment opportunities are everywhere. He offers advice on how to identify the potential winners and know which numbers really matter.

The Little Book of Common Sense Investing by John Bogle. Considered a classic, this book lays out the investment strategy behind index funds. As a founder of Vanguard, one of the financial giants in the field, Bogle explains why he feels indexing is superior to picking individual stocks.

A Random Walk Down Wall Street by Burton Malkiel. Another classic, this book helps get you thinking about what investment strategy might work for you. Malkiel describes various investment goals for different life stages. The book was recently updated to include cryptocurriences and tax-loss harvesting.

And if you loved the history woven into Chapter 7, then you might also appreciate this book.

A Piece of the Action: How the Middle Class Joined the Money Class by Joe Nocera. This fascinating book explains how middle-class Americans transformed from savers to borrowers by way of financial products like credit cards, mutual funds, and retirement accounts. It shows that many of the things we take for granted have not been with us that long. It also shows how the financial industry is constantly evolving. We believe that values-aligned investing is the direction things are heading.

Podcasts

Money for the Rest of Us. There are a number of episodes of this great podcast related to public equities. You may choose to start at the beginning: The podcast’s earliest episodes cover the basics, with the information getting more involved and sophisticated over time.

Additional Resources

UNDERSTANDING TURNOVER

This Investopedia article does a great job of explaining how a fund’s turnover ratio can affect its tax burden and help prevent unpleasant surprises at tax time.

UNDERSTANDING BENCHMARKS

The Corporate Finance Institute website offers a nice summary of benchmarks and how to use them. (Note: It is often possible to use Morningstar or other finance websites to find the typical benchmark for a particular investment. However, you are free to use whatever benchmark you like to evaluate the performance of your investment.)

ACTIVE VS PASSIVE FUNDS

Morningstar’s active/passive barometer measures the “active” versus “passive” fund performance on a semi-annual basis. The resulting report looks at domestic, international, and emerging-market funds. It also considers cap size and value versus growth funds. This is an excellent resource if you are trying to decide whether you should follow an active or passive strategy in different fund categories.

INDEX FUNDS AND ETFS

The Hidden Dangers of the Great Index Fund Takeover. This excellent Bloomberg article about BlackRock, Vanguard, and State Street explains how these three organizations hold about 80% of all the money in index funds. It outlines the potential impacts of these three behemoths controlling this enormous amount of capital.

Five Reasons to Avoid Index Funds. This helpful Nerdwallet article lists 5 reasons why these funds, though often great investment options, may not be the best choice for you.

ETF or Index Fund: Which Is Right for You? This succinct Nerdwallet article explains the key differences between these two types of investments. Though we explored this topic in Chapter 7 of Activate Your Money, you may want to learn more.

More on ETFs. This piece by Investopedia is a great place to learn more about ETFs. It covers ETF basics and describes types of ETFs, and their risk and drawbacks and outlines potential investment strategies.

DIVERSIFICATION IN PUBLIC EQUITIES

Diversification in Investing: Why It’s Important and How to Do It. This Nerdwallet article contains valuable information about diversification. It lays out how different types of assets performed relative to each other year over year and contains a neat little tool that helps you see what basic, intermediate, and advanced allocations of cash, fixed income, and stock could look like.

Company Size: Why Market Capitalization Matters. This piece by Merrill Lynch digs deeper into market capitalization than we were able to in Activate Your Money. (You may notice that the criteria for mid-cap and small-cap companies in the article are somewhat different than those in Activate Your Money. These differences from source to source are not uncommon.)

Growth vs. Value Investing: Understanding the Differences. Once again, NerdWallet provides key insights into investment concepts. In this piece, they lay out the primary differences between growth and value stocks and why neither strategy is preferred in all situations.

Identify Countries by Market Type. You can invest in companies in the United States, Europe, Asia, or any region in the world. Countries are often grouped together depending on whether they are considered part of developed, emerging, or frontier markets. Every year, MSCI assesses 84 different countries to establish market maps.

Sector diversification is particularly important when choosing individual stocks. This short publication by Edward Jones offers their diversification recommendations for those investing in individual stocks. This includes a section on sector diversification.