For the past few years, I have been trying to find a comprehensive finance book for beginners – emphasis on comprehensive. There are many great finance books out there that talk about money management strategies, psychology towards money, certain investment vehicles, and broad financial concepts but I wanted a book that would teach me about all the basic fundamentals – like “what is a mortgage?” basic. Yes, I can find this information online, but it’s so spread out that I would have a million tabs open. Same applies for some books. Also, most of the resources available assume you have some financial background so they go right into conceptualizing and applying the basics. Sadly, our education system lacks in financial literacy education and therefore, not only did I not know the basics but I didn’t even know what finance topics I had to learn about. Enter Investing from Scratch by James Lowell. This book is very well structured in that it not only shows learners what constitutes a thorough financial knowledge base, but also explains everything in a relatable, simple, applicative manner.
I have included my notes for this book below. Reading these notes along with looking up terms in Investopedia will give you a great basic foundation of financial knowledge and take you one step closer to nailing this adulting thing. Like any book, after reading it there are certain points you want to keep in mind to apply in your life. Here are some of those points:
- 5% of your monthly pay should go to your savings account
- 5% of your monthly pay should go into your investment accounts (retirement-oriented and other)
- Within 1-2 years you should up your participation in investments to 10%
- Put money away regularly through the different strategies mentioned (ex. dollar-cost averaging) and do not try to time the market
- If you are young, stock mutual funds are the best
- Investing in 5 mutual funds should be more than enough
- Consider putting portion of your money, from 5% to 20% in an international or global stock fund
- Don't put any money you'll need in less than 3 years at risk in the stock market
- Max out your 401k each year
- When changing jobs, take the vesting money left behind into consideration in pay negotiations at the new job