One of the Best Books on Investing and One of My Favorite Stock Market Books
The Richest Man in Babylon by George S. Clason
One of my best books on investing is The Richest Man in Babylon
by George S. Clason.
It is one of my favorite stock market books and is a classic investing book.
While there are plenty of stock trading books on the market and other stock market books such as penny stock books, this one is of a more general nature.
While the book is not directly concerned with value investing, it has been described as holding the key to thrift, financial planning and personal wealth, and as such deserves a mention in my list.
In the book, the author describes a fable set in the ancient city of Babylon in which a rich man describes to a seeker for wealth the seven cures for a lean purse. They are as follows ...
- The first cure is described as "start thy purse to fattening" and suggests that a part of all you earn is yours to keep - or save at least 10 per cent of what you earn.
- The second cure is to "control thy expenditure"- namely to budget and eliminate unnecessary expenditures so that you can live within your means while saving the required 10 per cent.
- The third cure is to "make thy gold multiply" - namely to put the 10 percent of earnings saved to good work so that it can reproduce itself and generate a stream of wealth. In other words, indulge in the magic of compound interest.
- The fourth cure is to "guard thy treasures from loss" - namely to only invest where the principal is safe by obtaining good advice or by being assured that the amount can be reclaimed. This cure reminds me of Warren Buffett's first rule of share investing.
- The fifth cure is to "make of thy dwelling a profitable investment" - namely to own your own home by borrowing if necessary and re-paying the loan on a regular basis.
- The sixth cure is to "insure a future income" - namely to provide for your old age and the protection of your family. Compulsory superannuation assists us to do this in the modern world.
- The seventh cure is to "increase thy ability to earn" - namely to cultivate your own strengths, to continue to learn and develop new skills and to respect yourself through earning the respect of the community and your family.
The author also explores the nature of good luck and suggests that men of action who take up opportunities that present themselves from time to time "are favored by the goddess of good luck".
Can you understand now why this is one of my best books on investing?
Clason also outlines "the five laws of gold" which, when put in modern terms could be described as ...
- saving at least one tenth of your earnings to create wealth for your future and that of your family
- investing your earnings wisely
- taking advice to protect your capital or have a plan to recoup any loans
- only investing within your circle of knowledge or competence
- not expecting too great a return on your investments and not taking advice from unscrupulous tricksters providing romantic visions of fast or exorbitant returns.
So while this investing book does not directly speak to the stock value investor, it is one of my best books on investing.
It holds the secrets on acquiring and keeping money, as well earning more money.
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