The 4 Cornerstones of Financial Literacy

DIY Investor? Here are the key books of each of the 4 cornerstones you must read to do it right and to not mess it up.

Cornerstone 1: Understand Economics (Don’t skip!). In order for you to put any investments into context, you must understand the basics of economics. Naked Economics explains it painlessly. You may even become an Econ geek after reading it!

Cornerstone 2: Understand Investing. Now you are ready to learn about the key concepts of investing. The Investment Answer is a compact book that you can quickly read so you can get on your way. It covers the cornerstones you must have before you make investment decisions. DISCLOSURE: This book starts with the question of DIY vs. professional management. Don’t worry, I am not trying to get you to change your mind. It starts with that decision because it’s the universal starting point.

Cornerstone 3: Understand Asset Allocation. The opposite of randomness is patterns. So, how to go about starting to confidently and competently engage with your portfolio from a strategic point of view? The Intelligent Asset Allocator will help you as you further your understanding of the principles of DIY investing.

Cornerstone 4: Understand Behavioral Finance. Congratulations! You have gotten through the toughest ‘thinking’ parts of being a DIY investor. But now comes the most dangerous part…keeping yourself from misbehaving. Protect yourself from getting distracted or making bad decisions by knowing why you do what you do when it comes to money. Misbehaving is the ‘biggest’ book of the 4, but don’t let that fool you: It’s the most entertaining book of the 4.

There are many great books out there to further equip you.

But these are the cornerstones to getting started, so don’t take shortcuts.

After reading these 4, you will be less confused.

You will also protect yourself from overconfidence or it’s counterpart: Feeling overwhelmed.