How to Start Investing For Beginners

By Larry Swedroe, on March 25, 2009

In this Ask the Expert with Larry Swedroe article, Lynnae from Being Frugal wants to know how someone who’s completely new to investing can learn more about the stock market. Here’s the question from Lynnae:

What’s the best way for someone who doesn’t know anything about investing to get started?

Answer From Larry Swedroe

One of the great sins is that our education system has failed the public. Unless you get an MBA in finance or go to an undergraduate business school it is likely that you have never taken any courses in investing. That is despite the fact that outside of your health and your family there is nothing more important than money. Not money itself, but what it buys you. Yet so many people begin investing without taking the time to learn anything about investing. It would be like taking a trip to a place you have never been without a road map or directions. No sane person would do that.

One of my favorite sayings is: If you think education is expensive, try ignorance. This is especially important because there are so many wolves out there (in the form of unscrupulous stock brokers, investment advisors and Wall Street firms waiting to sheer the unsuspecting sheep — who lack the knowledge to protect themselves. So the first thing I recommend you do is get educated. That means reading several good books on investing before you begin investing.

You might start with my book, Wise Investing Made Simple. It is a collection of 27 simple stories that uses analogies to help explain complex situations. The book also provides a check list of eleven items that you can use to help you identify a good financial advisor you can trust.

Then you might read The Only Guide to a Winning Investment Strategy You’ll Ever Need and Rational Investing in Irrational Times. I have also written three other books that are designed to help investors understand how markets really work (not how Wall Street and the media want you to think they work) and how to put that knowledge to work for you. The advice is all based on what the academic research and the American Law Institute say is the prudent investment strategy. So it is not based on my opinions.

Other good authors you might read are John Bogle and William Bernstein. Unfortunately the vast majority of investment books are nothing more than what Jane Bryant Quinn called investment pornography.

I hope that is helpful.

Best wishes,

Larry

Disclaimer

• Mr. Swedroe’s opinions and comments expressed are his own, and may not accurately reflect those of the firm, nor Moolanomy and its owner.
• Not all questions will be answered
• By submitting a question, you grant us the right to publish your question.
• The answer is given based on the information provided in your question. Please seek professional assistance for more personalized advice.

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Larry Swedroe is a principal and director of research at Buckingham Asset Management, LLC, an SEC Registered Investment Advisor firm in St. Louis, Missouri. He is also principal of BAM Advisor Services, LLC, a service provider to investment advisors across the country, most of whom are affiliated with CPA firms. However, his opinions and comments expressed within this column are his own, and may not accurately reflect those of Buckingham Asset Management or BAM Advisor Services. Before joining Buckingham in 1996, Larry served as senior vice president and regional treasurer at Citicorp and vice chairman of Prudential Home Mortgage. Larry is author of The Only Guide to a Winning Investment Strategy You'll Ever Need (updated and re-released in 2005), as well as six other books. Most recently, he authored The Only Guide to Alternative Investments You'll Ever Need (2008). Larry has started his own blog called Wise Investing at CBS Money Watch. Please check it out!

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