Financial education is an often overlooked area in the lives of many individuals. Lots of people grow up without ever receiving any formal education in the financial arena. The educational system even neglects to train students so that they can become financially responsible adults. One of the best ways to learn more about financial topics is by reading personal finance books. Personal finance books can teach you a lot about money management, investing, and other personal finance topics. Today, I would like to take a look at my all time favorite financial book and the worst financial book that I have ever read.
Best Financial Book
My favorite book on finance hands down is, The Intelligent Investor by Benjamin Graham. Graham is one of the greatest investors that ever lived and shares his strategy for selecting investment opportunities. Graham is widely regarded as the father of value investing and has mentored numerous successful investors. Warren Buffett calls, The Intelligent Investor, “by far the best book ever written on investing”.
Graham gives specific criteria on what to look for when investing and explains how to properly value a stock. This is not a get rich quick book. Graham’s primary focus is the preservation of capital and secondarily to earn an adequate return. He introduces investors to a fictional character known as Mr. Market. Everyday Mr. Market knocks at your door and makes you an offer for your investments. The offer should only be accepted when you feel that your investment has reached its true value.
Graham breaks investors into two distinct classes. There is the enterprising investor and the defensive investor. The enterprising investor is willing to take on additional risk whereas the defensive investor is much more risk averse. The book teaches how to take advantage of market inefficiencies and buy securities that are trading below their true value.
I like the fact that Graham gives investors specific criteria to look for when investing. He explains the importance of ignoring the day to day irrational behavior of the stock market and focusing on the fundamentals of investing. The Intelligent Investor was published in 1949 and is still a classic to this day.
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Worst Financial Book
The worst financial book that I have ever read is Rich Dad, Poor Dad by Robert Kiyosaki. The book was disappointing because I had heard so many good things about the book from a couple of friends. This book is severely overhyped.
My problem with the book is that the author does not give any practical actionable advice. The book did not contain any information that would help you implement the author’s ideas. It’s easy to say buy income generating assets but how do you do that? Where do you go to buy these assets and what particular assets should you buy? How do you value these assets to know whether you are getting a good deal or not?
I prefer to read books where the author actually accrued wealth by following his own advice. Kiyosaki appears to have gotten rich selling books, tapes, courses, board games, business plans, and workshops. He should be selling books on multilevel marketing and not financial self-help.
Kiyosaki’s information is dangerous because he deemphasizes the importance of hard work and education. You are not going to become a multimillionaire working a few hours a week unless you win the lottery. I would be curious to know how many people have actually gotten rich following his advice. If I followed all of the advice that Kiyosaki gives in his book; I would be a whole lot poorer today.
Have you read either of these books? What was your opinion of them?
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I agree completely with your assessment of Kiyosaki’s source of wealth. I made the same observation. Every business he had before writing the book went bust! His advice regarding self-incorporating is very suspect. Write off an expensive wrist watch???
That said, the one concept I learned from his book is that of the definition of an asset. Most people see their cars and house as assets. K points out correctly that they are actually expenses. The definition of an asset as that which is producing an income was very eye-opening to me and really stuck with me.
I consider Graham’s book as still too advanced for me. I’m working my way up to it by self-education. Far more impactful for the majority of the population IMHO would be Ramsey’s “Financial Peace” or “Total Money Makeover”.
Until I read the original “Financial Peace” in early 1999, I was deep in debt, getting worse, and what made it particularly egregious is that I didn’t even realize what was going on until I read that book.
The Total Money Makeover is a great book. I love the fact that Dave Ramsey gives easy to follow strategies that readers can utilize in their own lives. I have never read Financial Peace. I may need to add it to my reading list.
Although I’m sure I’ll get some grief for this, I have to say that I somewhat disagree with your assessment of “Rich Dad, Poor Dad”.
I agree that the book is mostly fluff, and the important information can be condensed into 1 paragraph. I have also concluded, through my own research, that he made his money from his book empire, rather than from the real estate / businesses he claims.
With that said, that book completely changed my life. Before it, I only knew about paychecks, and was unaware of assets and liabilities (i was also about 17, but still…). It was the first time someone told me to be wealthy, you need multiple assets, not just one big paycheck.
Needless to say, Rich Dad Poor Dad holds a special place in my heart. But I understand where you’re coming from. Maybe it should only be recommended to teenagers…
I agree with you on the The Intelligent Investor, although it’s probably worth asking the question “best for whom?”. Depending on sohpistication and inclination of the investor, books like “The Four Pillars of Investing” may be better for some people.
As far as Rich Dad Poor Dad is concerned, I agree 100%. Not only is it a bad book for the reasons you state but it is dangerous – encouraging people to (i) waste money on his seminars or other books in the hope of learning something useful (ii) use leverage (iii) use legally questionable tactics and (iv) erroneously believe that a house is a liability (which rates as the silliest financial claim I have ever come accross).
I have no idea why people think that this man is some sort of financial guru.
Agreed – did NOT see what all the Kiyosaki hype was about. I recall my mum reading it when I was younger, so I did too (granted was a teen, living at home, knew nothing about money nor did I care about it at that stage). It was wholly unhelpful.
That is exactly what I thought as well!
Rich Dad Poor Dad is one of the most influential business books that I ever read. Sure, it does not give specific ways to make money…like do this and then do that. However, for someone who grew up in a working class family, who never had any exposure to business, Rich Dad Poor Dad opened my eyes to a whole new way of making a living. The value in the content is to expose the reader to the benefits of owning a business. My parents worked 50 years in a 9-5 job…because they thought there was security in this type of structure. They are still working. Alas, I learned there is another way. Owning a business or finding ways to generate passive income. Although the concept of owning a business may be second nature to some, for many it is a foreign concept. I thank Kiyosaki for making the ideas of owning a business and developing a career based on passive income available to mainstream people. His writing is simple to understand and has inspired millions. There is no cookbook way to become rich. Even if I follow Ben Graham exactly, there is no guarantee that I will become rich. His philosophy is useful knowledge, but is not the end all, be all…otherwise there would be thousands of billionaires like Warren Buffet (who has stated that he does not always follow Graham’s rules)
I never read neither of the books but I did hear a lot of hype about Rich Dad , Poor Dad. Very good reviews. Thank you!
I’ve read a lot of books, technical and personal finance’ish type of books. Kiyosaki’s best book would have to be ‘The Cashflow Quandrant’….it can change your life if you haven’t got anyone to show you the way. His ‘Rich Dad, Poor Dad’ book is a great starting point for someone who considers themselves a newbie in the personal finance/investing world.
While he may have made his fortunes from publishing the books, that shouldn’t discount the fact that:
a) he’s made millions and have learnt to invest his millions
b) he’s built a business from scratch and has learnt to manage and grow that business
c) his successive books have a lot of worthy points that everyone can learn from
A house is an asset and is not a liability, despite not being an income producing asset. That’s probably the only annoying bit of his book – from an accounting p.o.v.
Cheers x
I just think that the knowledge is so generalized that it’s hard to put it into action. You are the 2nd person that has said that they found it somewhat beneficial. Maybe I am a bit too hard on Kiyosaki.
Robert kiyosaki is the new financial guru. his books, tapes and board games sell like hot cakes. his seminars always draw large crowds and people spend a lot of money to listen to this financial expert.
regarding robert, i would like to say only one thing. motivation and how-to-do-things are completely different issue. robert kiyosaki is a financial motivator, if i am not wrong in using the word in its authentic meaning. he motivates people about taking control of their own lives by being financially smart. he alwz confesses that he never gives any exact direction/advice on how to acquire great wealth. he just motivates people to become business owners and thus develop passive income to set themselves financially free.
so kiyosaki is actually a motivator and his books and tapes doesn’t deal with specific steps/measures one should take if they want to be financially free.
I think he is a motivational salesmen not a guru.
I would like to share with you my favorite list:
The intelligent investor by Benjamin Graham
One up with Wall Street by Peter Lynch
You can be a stock market genius by Joel Greenblatt
Security analysis by Benjamin Graham and David Dodd
Quality of earnings by O’Oglove
The Essays of Warren Buffett by Lawrence Cunningham
Contrarian Investment strategies by David Dreman
nodes at Your Portfolio 101