The Great Crash: 1929 by John K. Galbraith tells the story and aftermath of the biggest stock market catastrophe of the past century. It is a slim, highly readable, and incredibly informative book. Parts of it read as if it could have been written yesterday. Much of it provides a background and context on the Crash that corrected a great many misunderstandings and holes in my own knowledge. Galbraith has a dry humor and is a strong (and often disliked by insiders) critic of much of the establishment. Fans of this book are recommended to view his video series The Age of Uncertainty.
And adding to Matt's advice: have savings. The flexibility offered by "fuck you money" as Humphrey Bogart and others have noted is tremendously valuable.
A Random Walk Down Wall Street by Burton G. Malkiel lays out the basics of portfolio diversification.
A Random Walk Down Wall Street is one of the best books I've ever read, and I'd only add that I think The Millionaire Next Door is also excellent. When most of us think about millionaires we think about Hollywood stars, tech company founders, and finance moguls. But most millionaires are actually normal people who spend below their means and invest what they can, usually in index funds and sometimes in a house. If they marry they don't divorce (divorce is very, very expensive and modern marriage is a high-risk endeavor).
Chances are good that most of the millionaires you know don't live like millionaires—which is why they can be millionaires!
While the conclusions in this book happen to be valid for the vast majority (i.e. somewhere between 95-99% of the population should stick to index investing), people often mis-apply the conclusions in this book to suggest that certain things are impossible, and that is clearly false and misleading.
There are people who invest and trade successfully, and they are not lucky outliers any more than a brain surgeon is a lucky outlier.
I once asked a guy who made his living off of trading stocks and futures how long would it take me to learn. His answer was sobering. If I made it my full time job for 3-5 years, I could learn to be marginally profitable, and with additional years of experience I could make enough to live off of. He guessed maybe 5-10 years of 40+ hours per week dedicated to trading, and even then, if I did not study the right things I could still fail. Contrast this with the average Joe trying his hand at investing, and of course they will fail. You can't dedicate 3-5 hours per week and expect to be a competent brain surgeon.
Using the same logic in this book, we could conclude that it's impossible for anyone to start a successful business. The message should be, it's really hard and takes a lot of work, and it takes a lot of knowledge about how to run a business, and it takes a high level of competency at some skill (coding, carpentry, whatever), and you have to be competent at communicating with others, and leading others, and not have personal baggage to draw your focus away from the business, and, well, you get the idea. It's hard, and it's not for everyone, but it's not impossible.
Unsystematic risk means risks tied to holding individual stocks. Notice the x-axis. Holding more stocks (diversifying) means removing individual stock risk.
Great list. Another book I've found helpful is "The Intelligent Asset Allocator" [0]. The concepts on modern portfolio theory it discusses seem to jive with Matt's article. Basically, when investing for the long term, focus more on balancing the asset classes in accordance with your risk profile than picking specific investments within an asset class. It was a very readable book for someone like me without investing experience but didn't feel like it oversimplified things.
Another great book is The Four Pillars of Investing by Bill Bernstein. If you're already sold on an index portfolio there isn't a ton of info there (although there are certainly some useful bits), but it's great for making the case.
Adding to the reading list, I'd very strongly recommend the following:
A Random Walk Down Wall Street by Burton G. Malkiel lays out the basics of portfolio diversification. http://www.powells.com/biblio/1-9780393340747-0
The Great Crash: 1929 by John K. Galbraith tells the story and aftermath of the biggest stock market catastrophe of the past century. It is a slim, highly readable, and incredibly informative book. Parts of it read as if it could have been written yesterday. Much of it provides a background and context on the Crash that corrected a great many misunderstandings and holes in my own knowledge. Galbraith has a dry humor and is a strong (and often disliked by insiders) critic of much of the establishment. Fans of this book are recommended to view his video series The Age of Uncertainty.
http://www.powells.com/biblio/1-9780395859995-9
http://www.powells.com/biblio/1-9780395259474-2
http://fixyt.com/watch?v=KGSID_Uyw7w
And adding to Matt's advice: have savings. The flexibility offered by "fuck you money" as Humphrey Bogart and others have noted is tremendously valuable.