This week had more ups and downs than the roller coasters my ten year old gets me on each summer.
At such times, I find it more fruitful to pick up an investing book than at peak at my brokerage accounts. Here are just a few of my favorites, classics of the investment genre that I recommend as balm for the frazzled investor.
The Snowball: Warren Buffet and The Business of Life by Alice Schroeder. This work on one of the greatest buy and hold investors of all time adds another volume to the Buffet canon. For times of great volatility, it is especially soothing to know Buffet's ideal holding periods for good companies is--well--forever. But you can also read how the young Buffet sold Coke as a child and delivered the Washington Post as a paperboy--companies he'd later invest heavily in. Buffet builds relationships with both companies and friends for life, a fact putting a week of folly in perspective. (Note: Roger Lowenstein's Buffet: The Making of American Capitalist is a shorter alternative with many of the same themes and biographical information; it may fit better in the beach bag, too).
Stocks for the Long Run by Jeremy Siegel. This is still one of the most readable and well-researched books on the stock market for the popular audience. Siegel makes the rock solid case that over the long term (albeit sometimes the very long term: ten and twenty year rolling periods) stocks are tough to beat. This highly educational text also reaches back over a hundred years to examine actual stock market data, letting you see investors have been through this type of volatility (and even worse) before. Another buy and hold anthem for a wild week, Siegel's book reveals the folly of market timing and the value of staying the course with common stocks (oh, and reinvest the dividends, too--a key part of performance).
The Little Book of Common Sense Investing by John Bogle. While primarily touting the benefits of indexing, Bogle offers his wisdom from a lifetime in the markets: primarily noting that you can't control them. This is a major reason he advocates index funds religiously. But the Vanguard founder has a hopeful message for troubled times in telling investors there are things they can control: their saving and investment rates, their asset allocation, and most importantly their investment fees and transaction costs. Indeed, the deepest plunges of the past week would pale in comparison to the slow but steady losses a long-term investor would face from not investing, from very high cost mutual funds, poor allocation, or excessive transaction costs. Now may be the time to look at what we as investors can control. These really matter the most over the long term.
One Up On Wall Street by Peter Lynch. This classic book that brought many of today's investors into the stock market and initiated them into the analysis of individual stocks. Perusing this one again is not just a trip down memory lane or mere nostalgia, it can remind you why you are in the stock market in the first place. Readers can recall how they way it felt to study and buy your first stock, to walk into a store you actually owned (even if a minute fractional share). Following stocks is also a calling to ownership of corporate America and ultimately empowerment--no matter the erratic closing numbers this week. Investing is a mechanism that allows you to drive down the highway and see your stores, you vehicles, eat food from your companies, it can offer a deeper knowledge and connection to the world around you as well as yield profits.
Michael L. Boyer is an Associate Professor at the University of Alaska-Southeast and is long all of these books and more.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: All in the piece.