How Investors Can Educate Themselves

By Wes McComb

February 26, 2024

The question “what should I read” from people asking about investments is fairly common. I usually tell them they don’t have to read anything since we will take care of their money for them. But it is a good idea for most people to have some grounding in the topic so that during the inevitable downturns they can ride it out without making disastrous decisions. Because there is no more disastrous mistake than making decisions during a crisis with not enough or conflicting advice. So yes, it is best if you let us take care of your finances, but everyone should have enough education in money matters that they aren’t the spinning trailer in a tornado.

Our team’s weekly newsletter is an excellent place to start. Sent out on Mondays, it usually has five to six entries. The topics are diverse so there is something there for everyone, even if they only have a passing interest in money. There is a week at a glance, covering what happened the previous week. There is usually research on some topical subject such as inflation, housing, supply chains etc. Financial, tax, estate planning ideas are presented along with thoughts on philanthropy, education, homebuyers, aging etc. We have a non-business section that may include a book review, award winning photography or articles by Wes. There is usually included updates on client events, charitable causes we are involved in, details on sponsorships such as Jack Crawfords ski career or Rock with Love. And finally, the most popular item is a cartoon that reflects on one of the topics we covered that week. The cartoon seems to be the hook for most people. There were a couple of times it was not included, and the disappointment was palpable. Palpable meaning that we received calls and emails, not exactly expressing outrage, but indicating it was the only reason they opened our email.

There are some books most of us should read about investing. A grounding in basic investing is important for everyone. The younger the better as well. The magic of compounding is the essence of most of these simpler books. The sooner you start saving the better it is for an investor. Almost all of us are going to be dependent on our savings at some point in our lives so having that pounded into our heads early can make the difference between a comfortable retirement and a worry-filled existence. Even if you live off of your company pension and Canada Pension Plan everyone should understand know how these institutions are able to fulfill their obligations to you. The Wealthy Barber by David Chilton is one of the original books on the basics of investing and savings and has been updated. Rich Dad Poor Dad by David Kiyosaki has also stood the test of time for good reason.

As I stated at the start, the primary reason a person should understand the markets themselves is so that when there are inevitable financial crises such as the Great Recession, the Covid epidemic, Black Mondays or Fridays you are not dependent on the headlines of the time to make rational decisions. Two books that will help you navigate turbulent times are Lords of Finance by Liaquat Ahamed and Devil Take the Hindmost by Edward Chancellor. Ahamed’s book covers the history of banking from WW1 to the end of the Great Depression. By using the central bankers of England, France, Germany and the US to make it a story about people as well as an historical moment he creates a fascinating story. Chancellor goes back much further to the Dutch Tulip and South Seas bubbles and recounts the booms and busts to modern times. They also outline the incremental changes we have learned as a society to mitigate future crises. For example, the Great Recession and the epidemic, for all the mistakes, couldhave had far worse consequences if our central banks and governments had not applied the lessons learned from the past.

Understanding risk and statistics is something we should all be grounded in. Not just for investing but for the ability to assess what is knowledge and what can be applied to our everyday lives. Against the Gods by Peter L Bernstein and How to Lie with Statistics by Darrell Huff will get you started. We are so inundated with information, being able to sort through the fluff is essential if we don’t want to be in a constant state of panic. Whether investing, nutrition, raising children, self-care, or just leaving the house we need to have a grasp of risk and statistics.

The next two books are not as directly applicable to investing but should be mandatory reading. They provide a reasoned explanation of why we have had this unique growth in our society for the last 200 years. How we transformed from a static society, which was the norm throughout human history, to a dynamic society that has not only provided economic growth but also life span increases, the near elimination of poverty, education, peace and good governance. Steven Pinker’s Enlightenment Now solidifies how the Enlightenment values of reason, humanism and science have provided the foundation of our exceptionalism. David Deutch’s Beyond Infinity is a book I am constantly returning to. It is a book about why humans should continue to progress through science, good explanations and the expansion of knowledge. It is so wide ranging it is difficult to summarize in a pithy couple of sentences. Read it for yourself.

To stay on top of current events and news the two newspapers, the Globe and Mail and the Wall Street Journal, are necessary reading. They can attract the best investigative reporters and provide as much unbiased information as is possible in this information saturated world.

This is enough to get started. If any of you want more recommendations after this, please feel free to reach out.

?The information contained herein has been prepared by Wes McComb, a Wealth Advisor at NBF. The opinions expressed do not necessarily reflect those of NBF. I have prepared this report to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations. The opinions expressed represent solely my informed opinions and may not reflect the views of NBF. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed do not necessarily reflect those of NBF.