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Amy Fry
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My name is Amy Fry, I worked as a financial adviser for over ten years, I recently decided to stay at home and take care of my son. I still provide valuable financial advice through my writings and I also work as a freelancer for a financial organisation.
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  • Top Five Investment Books For The Absolute Beginner

    The news that the Bank of England intend to continue with their policy of quantitative easing, keeping interest rates at rock bottom, has dismayed many savers. They face the prospect of inflation continuing to rise at 3.3%^, while even the best high street savings accounts struggle to offer more than 2% interest.

    Back in 2009, many hoped that low interest rates would be a temporary measure. Now it seems this strategy is set to continue for the foreseeable future.

    This may well cause a seismic shift as savers attempt to identify ways to gain acceptable levels of income, or risk substantial losses by leaving funds adrift in low yield accounts.

    Speculator or Investor?

    Stocks and shares continue to perform attractively, particularly as part of a long-term investment strategy. Despite periodic downturns they present real opportunities for income, especially when the alternative is having to watch savings diminish in value.

    Risk = Returns?

    If you are turning your attention away from bank or building society savings accounts to previously uncharted waters of the stockmarket, some essential reading is required.

    Get the best advice possible - then think for yourself

    There are always golden rules of investment. Once you know the rules, you can start to apply them to your personal investment strategy. A good starting place is to immerse yourself in advice penned by some of the best investment minds in history.

    1) The Intelligent Investor - Benjamin Graham

    There is no one better to start with than the man who taught Warren Buffett all he knows. If you are new to investing then it is wise to begin with the fundamentals. Although this was published in 1949, it remains a bible for most investors and deserves to have top spot on our reading list.

    If it is good enough for Warren Buffett, who are we to argue?

    Graham starts by introducing the device of characterising the stockmarket as a persona - the emotional Mr Market or the irrational Mr Market, etc. This teaches the reader how the actions of Mr Market can impact on stocks and shares and how the investor can use the information to their advantage.

    While the investor is encouraged to view downturns in the market as opportunities, the advice of Benjamin Graham is to err on the side of caution. He demonstrates methods of determining the value of stocks and buying them within the criteria called Margin of Safety.

    Step one on the ladder to investing enlightenment

    Other writers here will suggest that you invest in what you know. Benjamin Graham was one of the original proponents of this principle. He states that the investor must study the company's financial and management structure before selecting it for their portfolio. If possible, the company must possess qualities that the investor values. When the company structure changes, the nature of the investor's interest in the company may also be open to change.

    2) Anthony Bolton - Investing Against the Tide

    Once you have immersed yourself in the finer points of twentieth century investment principles, you may be ready to see how modern managers apply science to the business of fund management.

    There are few people more adept at information gathering and processing historical data than the immensely successful Fidelity Fund Manager, Anthony Bolton.

    The Quiet Assassin

    Nicknamed the Quiet Assassin, his book Investing Against the Tide might well be termed a 'quick read', but it is also hugely valued by both novice and experienced investor alike. His mantra advises taking the emotion out of investing and not becoming overly attached to any particular holding.

    Unassuming Mr Bolton

    Bolton presents his findings in a concisely written book, in which he comes across as a moderate who remains preternaturally upbeat, despite gloomy forecasts. He should know. Although the start to 2013 has been positive, his Fidelity China Special Situations fund has under-performed, causing some to wonder whether he has lost his midas touch.

    Yet the measured style of these clearly laid out chapters assure the reader that his contrarian method of investing (hence the title of the book) has worked and will continue to profit far into the future.

    The Moderator

    His pedigree is undeniable. Bolton ran the successful Fidelity Special Situations Fund for 28 years turning £1,000 investments into £147,000* over this duration (1979-2007). The term 'legendary' has been applied to his name so often it might gain him a mention in the Oxford English Dictionary.

    Investment guru

    Although the unassuming Mr Bolton may appear unflappable, he remains elusive too. Obviously, he does not wish to give away too many company secrets. He stresses the need for common sense: keep it simple, walk your own line and investigate as many companies as possible.

    Anthony Bolton quietly goes about his business with the minimum of fuss. However, it is well to remember that he also produced eye-watering returns for his clients consistently for nearly three decades. That is quite an achievement; something rarely achieved by any fund manager.

    3) A Random Walk Along Wall Street - Burton Malkiel

    By now you have tested vintage modes of operation and studied contemporary, technology-based text. Your next step is to be educated in the classics. Written in 1973, A Random Walk Along Wall Street is widely acclaimed as one of the cornerstones of fiscal wisdom.

    However, if you would rather your investment advice came from those who operate at the coal face, like Anthony Bolton, then you may not be ready for this book, which sits firmly in the academic essays camp.

    Yet, it is from this studious root that Burton Malkiel sets out his stall, and he does so using empirical data, in-depth analysis and research. Malkiel is a Princeton economist who delivers the theory that, although the market may not perform perfectly efficiently at all times, it remains largely consistent, and trying to beat it is difficult.

    Burton Malkiel warns that investors who treat the stockmarket as a state lottery on steroids, consistently fall foul to more pragmatic, long-term investment strategists.

    Firm foundations or Castles in the Air

    The book dissects historical data to outline its view, such as the Great Crash in 1929, the vagaries of the 60's and 70's stockmarkets and then all the way to the bursting of the dot-com bubble in the 90's.

    Yet, this genre-hopping book also give practical tips on insurance, tax deferred accounts, saving for college, different vehicles for cash reserves, bonds, real estate, and stock mutual funds. It also lists specific portfolio and fund recommendations for people of different ages.

    Good Research

    This is a lengthy read at over 400 pages, but then the details are never to be underestimated. Alternately there is a 200 page edition for those with less time on their hands. This is no get-rich-quick scheme. The purpose of this book is to educate by taking part in the debate. You can see where this Ivy League economist derives his technique. Burton Malkiel raises the questions. The answers are ultimately left for the reader to decide.

    4) Rich Dad Poor Dad - Robert Kiyosaki

    The narrative of Kiyosaki's book explores the theme of two fathers who go about their business in opposing fashion. Both fathers instruct the narrator/author how to achieve success using two opposing financial mantras. While the author compares the methods of each father, the reader is left in little doubt as to which father has the most successful premise.

    Compare and Contrast

    This is a book rich in insights - it asks the reader to examine their own up-bringing. It discusses ideas of the need for financial astuteness in the education of the young. Kiyosaki deliberates on entrepreneurial concepts, such as how the wealthy get corporations to work for them, while the less well off have no choice but to work for the corporations.

    The Poor Dad is entrenched in conservative attitudes in his approach to work. His belief is that a good education that leads to a good job and a steady rise up the ladder. He also believes in job longevity and a commitment to saving steadily for the future.

    Financial Intelligence

    Kiyosaki opines that our educational institutions are bereft of good financial acumen and that the young are never taught the value of money.

    The point is made that, although Poor Dad works extremely hard and is loyal to his company and puts away money for a rainy day, he is still trapped on the treadmill with very little to show for his efforts.

    The Rich Dad, by comparison, possesses an outlook which appears more savvy. The Rich Dad states that you get money to work for you and not the other way round.

    Financial Management

    Rich Dad also suggests we should never accept 'not having enough money' but should always ask 'how we can get more money.'

    Whether you agree with the writer or not, there is no denying this book is invaluable to the investor trying to understand their own motives. There are some pertinent snatches of advice that should help to refresh you view of how you treat your finances.

    You may not agree with every premise, some of the dictates are brutally capitalist in their outlook. However, the real skill of Kiyosaki's book is to help the reader ascertain what it is they truly want from life.

    Either you believe 'money is the root of all evil' or you prefer 'the lack of money is the root of all evil.' The choice is yours.

    5) Competitive Strategy - Michael Porter

    This book is written by another Ivy League academic - Harvard Business School Professor Michael Porter.

    Published in 1980, it may not have up-to-date market insights into recent events, yet the reader may struggle to realise the book is over three decades old. The contemporary nature of Porter's narrative bears particular relevance to today's market. It is considered one of the finest competitive strategy books ever penned.

    Keep your friends close....

    The focus is on how to stay a step ahead of the competition and Michael Porter stresses the need to perfect your own dealings, rather than too much focus on studying the competition.

    Now in its sixtieth edition and translated into 19 languages, it is broken down into three parts: General Analytical Techniques, Generic Industry Environments, and Strategic Decisions.

    Minding your own business

    Porter's ability to be able to break down his work into three theories is extremely valuable. Even though his background is academic, the book is quick and simple to digest and will undoubtedly provide a useful framework for the modern investor. The book raises debate in order to improve the way you think and act as an investor and provides a comprehensive operational framework going forward.

    Never underestimate the opposition

    If playing the stockmarket is a simple procedure complicated by fools, then Professor Porter, in this well-crafted essay, allows the reader to access the information in easy to understand segments. The details are beautifully crafted. What you do with it is your business.

    ^Source - www.bankofengland.co.uk/publications/pag....aspx

    *Source - www.telegraph.co.uk/finance/newsbysector....html

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 25 9:08 AM | Link | 2 Comments
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