In this podcast, Motley Fool analyst Anand Chokkavelu mentions a couple of popular titles investors may want to skip before he recommends the following books:
- Liar’s Poker by Michael Lewis.
- The Big Short by Michael Lewis.
- (Shameless Plug Alert!) The Motley Fool Investment Guide by David and Tom Gardner.
- The Little Book That Beats The Market by Joel Greenblatt.
- One Up On Wall Street by Peter Lynch.
- Beating The Street by Peter Lynch.
Motley Fool host Alison Southwick and Motley Fool retirement expert Robert Brokamp talk with best-selling author Ron Lieber about how to help your kids be smarter about money (without looking like a jerk).
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on April 5, 2022.
Chris Hill: It’s Financial Literacy Month, and we’ve got some recommendations for your reading list. Motley Fool Money starts now. [MUSIC] I’m Chris Hill joined by Anand Chokkavelu, longtime Motley Fool editor-analyst and currently the live stream programming director. Thanks for being here.
Anand Chokkavelu: Thanks for having me, Chris, excited.
Chris Hill: I mentioned this the other day to David Gardner. April is Financial Literacy Month, and you’re one of the more voracious readers I know at the company, and I wanted to talk with you and provide for the dozens of listeners some book recommendations. I’ll just say upfront, the books we talk about, they’re going to be listed in the show notes for this episode. We’ll go through these books pretty quickly, but the full list will be in the show notes. You and I were talking earlier, and you brought something [laughs] up which I thought was a great point, and I’d like to start here, which is it might be helpful to start by a suggestion of what not to read because there are a lot of great books that you can read to become a better investor. But that doesn’t mean you should necessarily start with any book.
Anand Chokkavelu: If you do a Google search, and you look for lists of the best investment books, frequently, the Benjamin Graham books are one and two, The Intelligent Investor and Security Analysis. To be clear, he was Warren Buffett’s mentor. It’s a truly great set of books. But, one, it’s outdated. He used to update these every five years or 10 years. It’s been, like, 50 years since Intelligent Investor was updated by him. Things change, and it’s a very value-investing, deep-net type of stuff. The other thing is just it’s so dense. If you are a first-time investor, and you’re just trying to learn just some basics, you’ll get intimidated most likely, and you’ll just stop on page 3, and you might lose two years.
Chris Hill: No disrespect to Benjamin Graham, but yeah, probably not the place to start. Part of our conversation earlier was about how there are books out there that aren’t really how to get started in investing books, but they can still be enjoyable reads. Brad Stone, who we had on the show last year for his book, Amazon Unbound. Brad Stone is great writer. That’s a great book. It made it to a lot of best business books of 2021 list. Is that really going to help you be a better investor? It will make you a more informed Amazon shareholder, if you happen to be an Amazon shareholder. But in that same category, [laughs] you said, “There are books that are fun and looks at Wall Street too.
Anand Chokkavelu: The Michael Lewis books, which are actually useful like Moneyball and things like that, but the first one I read was Liars Poker, which was his first book. But as time at Salomon Brothers’, which I know, Chris, you were going to talk about The Big Short. This is a prequel because a lot of the mortgage stuff, the securitization and chopping up of mortgages was happening there with Lewis Ranieri and the other folks there, and Michael Lewis had a front-row seat there. So he recently got the audio book rights back, if I remember right. Because I just went through the audio book after I read it 20 years ago, and Michael Lewis actually narrates it. Then he has got a companion podcast on his Against the Rules podcasts. He’s got a little module called Other People’s Money, where he brings on folks like the Human Piranha from back in the day and reveals who they are and talks to them all these years later. So that combination is a really good interesting look at Wall Street and incentives. A lot of these things happened because of incentives, and that’s a through line of a lot of Michael Lewis’s books.
Chris Hill: For my money, probably the best nonfiction writer in America. The Big Short is not just great writing and brilliant storytelling of the very small number of people who saw the 2008 financial crisis coming and invested accordingly. But I do think that book also offers, for any investor, a clear-eyed look at how pervasive groupthink is on Wall Street, that even though there are smart people saying, “I really think the sky is falling,” there are so many people who are just like, “No, everything’s fine with [laughs] the housing markets. No, that’s totally fine.” I think for investors, one of the lessons there is sometimes you have to get comfortable with the idea that you’re really going to be swimming against the tide because there will be a lot of people swimming against you. In terms of investment books, a little bit of a shameless plug here, but I think there’s a reason the Motley Fool Investment Guide holds up overtime.
Anand Chokkavelu: It’s written about 20 years ago, and now the third edition was 2017. That’s the one you want because it’s updated. We were debating whether to put this on because it is a shameless plug, but it really is the answer that I give people. Some of our older books, it just doesn’t resonate as well right now or they might be on specific topics. This investment guide gives a really good broad view, not just a Foolish investing but just the different kinds and the different things you can do. It really is what we used to teach new Fools. We’ve had book clubs and things like that to help teach people the Motley Fool investing strategies.
Chris Hill: You and I have been at the company long enough. I think we are both, among other things, disappointed when we encounter people in life, who when we talk about where we work, and we talk about stock market investing, it’s disappointing when you meet someone who’s like, “It’s a big casino. Buying a stock is like buying a lottery ticket.” There are books out there that really do try and teach around the idea that you’re actually becoming a part owner of a business, and you had a book that I think does a very good job of that.
Anand Chokkavelu: The best book for the old “buy businesses, is not lottery tickets” is Joel Greenblatt’s The Little Book That Beats The Market. It really is a little book. It’s super tiny, super quick read. You can read it in like I think two hours. It’s been a while. But it just lays down the simple ways of exactly how you can evaluate a business using just a couple of metrics.
Chris Hill: It’s pretty incredible what Joel Greenblatt did with that book and the way it caught fire because you have to believe, at least for a lot of people. We started by talking about Benjamin Graham. If you’re just starting out, and maybe your intimidated about investing on your own for the first time, then there is something very attractive [laughs] about just literally a small book.
Anand Chokkavelu: Yeah. What you don’t want to read is Joel Greenblatt’s, I will give you the title, You Can Be a Stock Market Genius, which definitely sounds more appealing. But it’s a lot about special situations investing. It’s definitely a worthwhile read, but definitely, after you’ve had a few years in the game.
Chris Hill: Along those lines, when you’ve been investing a little bit on your own, you’ve got a bit more experience, I was pleasantly surprised that when we were chatting back and forth earlier today, you mentioned Peter Lynch.
Anand Chokkavelu: A lot of people use Peter Lynch’s, “That’s the first book you should read.” I remember reading him years ago. Frankly, a lot of the things, upon rereading, you are, like, “Oh, I didn’t catch that nuance.” The fundamental thing you learned from him is, “Look, anyone can do this.” A lot of times it’s just, “I went to the store at the mall, and it’s really doing amazing business. Maybe I should start researching that business. Not just buy it, but just as a thing to research.” But so his two books that are really good for this are One Up on Wall Street and Beating the Street. I’d recommend, after you’ve been in the game for a few years, start reading those. For example, he’s got just great ways to how to evaluate a bank stock. For a first time investor, that’s a little rough, but after you’ve done it for a while, it’s just great tips.
Chris Hill: Thank you for making the distinction because there are times when I hear people reference Peter Lynch, and they don’t make the distinction that you just made, which is a very important one, which is they brush off Peter Lynch as, “I went to the mall, and I went by the store, and there were a lot of people shopping at it, so I bought the stock.” No, [laughs] that’s not at all what Peter Lynch was trying to teach people. He is trying to teach you that that can be a point for generating an idea. But then you got to go do the research. You can’t just be, like, “I shop there, so therefore everyone shops there.”
Anand Chokkavelu: No, so easy. [laughs]
Chris Hill: Anand Chokkavelu, thank you so much for being here.
Anand Chokkavelu: Thank you, Chris. [MUSIC]
Chris Hill: In keeping with the financial literacy theme, we’re going to check in with best-selling author Ron Lieber. He writes the Your Money column for the New York Times. He has written several books about personal finance. Allison Southwick and Robert Brokamp recently caught up with him to talk about some of the toughest financial questions that kids ask. Fortunately, Ron’s given a lot of thought to helping kids be smarter with money.
Allison Southwick: Before we get into the tough questions to answer, I want to read a quote from your book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. So you’re talking to the reader, explaining the big takeaway for teaching your kids about money. This isn’t a huge spoiler, don’t worry. You write, “Every conversation about money is also about values. Allowance is about patience. Giving is about generosity. Work is about perseverance.” You go on from there. As a parent, when you get tough questions from your kids about money, you might want to bumble through them as quickly as possible because talking about money can be complicated. But your point is that money conversations give you an opportunity to actually instill or reinforce bigger values for how to live a good life. Can I just get you to react to that? How did you come up with this?
Ron Lieber: This was the thing. For some authors, an idea will hit you perfectly formed like a bolt from the blue. The money books that I’ve written haven’t been like that at all because there’s a lot of money books out there, and there’s a lot of basic personal finance, as we all know. But if I’ve been good at anything in the last decade, it’s been trying to tap into the emotional wellspring and the complicated feelings around money. For this one, kids and money, and allowance, and spending, and saving, it felt due to fall. But I know every parent wants their kids to have good values. After thinking about it for years after I first thought that there was space for another approach on kids and money, what I finally realized is, like the basics of saving, and spending, and giving, saving is about patience and perseverance, spending is about modesty, and prudence, and thrift, giving money away, charity, that’s about generosity and gratitude that you have more than enough, and hanging over it all is curiosity, not just about money but about how the world works and a perspective on your place in the world and how you arrived there. It turns out that all of these things are things that kids are wrestling with the moment that they first ask about money, and it was making those connections that really put some fire behind my tail.
Allison Southwick: Through the lens of instilling values when you’re having money conversations with your kids, you’re here to help us answer a few common and tough questions that every parent is going to be asked at some point by their child. Let’s start with one of the first questions about money from your kiddo that initially stumped you. I believe your kid was three years old at the time, and you just visited some friends who had rented a house for a vacation. I’ll let you finish the story.
Ron Lieber: So we’re in the car one day, and literally apropos of nothing, or you know how these non sequiturs come up if you have kids, or nieces, or nephews, or you’re a teacher. I was just, like, I didn’t know where she asks, and of course she’s addressing me even though her mother’s in the car, somehow she sensed that I’m the person who plays Dr. Money in the newspaper on the weekend. She says, “Daddy, why don’t we have a summer house?” I was just stopped cold because we couldn’t afford a summer house. The point at which it should begin to be something we might even think about, it was clear that we were going to make different choices with our money for a long time to come, so we haven’t been talking about this. So how did she even know that such a thing existed? But the other thing about it was that it cut to the core of not just our own curiosity about the world, but specifically about her parents who are like economic players in the larger marketplace. “Who are these people that I have been born to? How do they make decisions? What’s important to them? What trade-offs are they making? Why are there some people that have these thing that I would like to have or that it seems fun, and these people who are in charge, they have made this choice and maybe I don’t agree with it.” I think all of that was swirling around her 42-month old brain, and that question was her way of articulating it, and the fact that I couldn’t answer her was not only personally embarrassing to me in front of my spouse who thought the whole thing was hysterical [laughs], but I felt I was failing her and, ultimately, failing the world to the extent that I hold myself out as any money expert, not to have a script to react to that, so I had to build one.
Allison Southwick: So then how do you answer that question? How did you answer that question when you had a chance to think about it?
Ron Lieber: I was stunned into silence. I’m not sure what I said, but it was right after that that I started thinking about the fact that I needed to build the scripts for myself, and my parents, and for other parents. The first thing that I came up with, which I now suggest to everybody is just to answer any such question with another question. Which is, why do you ask? It’s not meant to be an accusation, as if there’s something wrong with expressing your child like or actually child curiosity [laughs] in that way to make them feel like they’re inquiry is, in fact, welcome because not only may the question really ultimately be about something else entirely, and this is just their way of articulating it, but by responding to your question with a question, it’s a stalling mechanism that gives you time to get your act together to respond in a way that’s age-appropriate and also values-driven.
Allison Southwick: So now that you know what to say, how would you answer that question? Why don’t we have a vacation home?
Ron Lieber: I guess I would say this. There are lots of different kinds of homes. Some cost more than others, and some people have more than one, if they’re really lucky, or if that’s a choice that they’ve made. Some day, we may be able to or may want to make a choice like that. But right now, we’ve chosen to spend the extra money that we have on other things. Then just see if they follow up. One of the tricks here is not trying to answer other questions that they’re not asking. In our nervousness about the fact that we’ve been called out or asked things that we’re not quite sure we know how to handle and know the answer to, so keep it short and simple. If they have other questions, they’ll ask them. But often short and simple is enough to satisfy them.
Allison Southwick: Here is our next question. I believe this is one that I have bungled. My daughter asked me, mum, how much do you make? She was, let’s say, six years old at the time, and I just flat out told her, I don’t know. I think that was maybe wrong. [laughs]
Ron Lieber: I don’t think it’s wrong to tell them the answer at a teenage age. The risk that you take when you’re talking to a kid with a single-digit age is they might go and repeat that information, and maybe they’ll bungle it and get it wrong. Now, the concern there is that other kids or other parents might feel you’re bragging if you earn a lot of money or that you’re just weird. Kids will share that information at inopportune moments, in inappropriate ways, because they’re kids. So that’s the risk. To my mind, the right answer to the question is this, “That is a great question. Why do you ask?” Then give them an opportunity to say where the inquiry came from because it could be because they’re scared. Maybe they overheard a conversation on the phone or conversation with your spouse, if you have one, or your ex, if you have one of those, and they just misconstrue, or maybe they overheard something crazy on the playground, and now their brains are all scrupled so give them a chance to explain themselves. But I think the right answer is, “I’m so glad you asked that question. I,” or we, if it’s two of you, “intend to tell you the answer when you’re 16, or 17, 18, but first there’s a whole bunch of stuff you have to learn, so let’s start now.” This is the beginning of the process. It begins with the allowance, and savings, and spending, and giving, and trade-offs. Then you want to introduce them to all manners of household budgetary, the grocery bill, and you can put them in charge of the electric bill for a year and teach them about insurance. If that doesn’t bore them to death, then there’s a whole high school-long conversation you can have about discretion, about not telling your siblings’ secrets or your friends secrets on social media, not repeating things that your parents say in an inappropriate way, and then and only then you have the conversation with them where you say, “We’re ready, but you should know that if you repeat this out in the world, there’s a pretty good chance of people are going to think you’re an [inaudible] , [laughs] and no teenager wants to flunk the [inaudible] test. So at that point they’re ready, but only that.
Allison Southwick: When they’re old enough for you to say the word [inaudible] in front of them, that’s [laughs] when you know you can tell them. Are we bleeping that, is that what we’re doing?
Ron Lieber: Insert more appropriate word there, if you wish.
Chris Hill: One of the keys from your book, Ron, is that money shouldn’t be a taboo subject. So any questions that they have, just answer them and have good open discussions about it. I am curious, this question about how much do you make. We’re a couple of years from a recession where some people lost their jobs. How much do you talk about that with your kids because, on the one hand, they should be aware of the financial situation. On the other hand, you don’t want to burden them with anxiety that they may not be old enough to really handle and understand.
Ron Lieber: It’s a tough one. I think, first of all, we need to honor and respect the fact that they almost always know more than we think they do. If you’ve lost a lot of income or lost all of your income, there’s a pretty good chance that you’re talking about it more than you think, and even if your kids maybe reading over your shoulder, or picking up your phone, or there maybe documents laying around that give them a sense of it. Obviously, if you’re food-insecure, housing-insecure, they know that or they’re sensing. If you have to move some place cheaper or change what you eat, that’s something they’d be changing. The fact is that they are aware, and I think not addressing it head-on can have the effect of creating more anxiety, not less, which is not what we want to do as parents. So to the extent that you think that they are aware or if they are older and ready to have this conversation, you can say different age-appropriate versions to the following. “I know that you are aware of what’s going on here. I’m almost or we are almost positive that things are going to end up OK, and you don’t need to worry about the basics, and here’s why. We may have less money than we used to, we may have less money right now, but we continue to be rich in health, in friendships, in family, in community support, in terrific teachers and administrators at your schools who can help if we need it. We are not worried, and we don’t want you to be worried either, and we want you to know that it’s OK to talk about it, to ask questions, to be sad, or to be mad at us, that all of that is OK, and that you shouldn’t keep it to yourself.
Allison Southwick: It is crazy how much kids will absorb and their brains just keep working on it. I’m reminded of a story my mom tells. She is a woman who is now on in years. Since I am on in years, it follows that she is as well. She still tells this story several times. You can tell she is still emotionally very turned around over it. When she a little girl, they’re at the store, and her mom just happened to mention, “This is my last $20.” Her mom meant, ‘This is my last $20 in my wallet. I’m going to need to go to the bank. Don’t worry about it,” but all she said was this is my last $20. My mom as a little girl thought, “This is our last $20 in the world.” I’m not sure if it’s because of this exact moment, but to this day, my mom remains an extremely frugal person. [LAUGHTER] But if her mom would have had like this longer, “This is not my last $20 in the world, darling. We have more in the bank, but this is my last $20 in my purse.” How different would that have stressed out this poor little girl. It’s so funny how kids’ little brains work and how it sticks with them, those conversations at that young of an age. Many decades later, my mom is still remembering the fear that she felt.
Ron Lieber: It’s totally true. I think the thing that we have to remember because, particularly for older parents were in the process of like forgetting stuff, [LAUGHTER] even more than we’re learning stuff, is that they’re just little sponges, and it is their job to puzzle out how the world works, and money is not a small part of how the world works, whether we like it or not. Of course, they’re going to have hundreds of questions, and some of their confusion may go inarticulated for years. So we just have to be watching for that. It’s not something we should be obsessed with. Maybe we should think about it a couple of times a week. That’s the appropriate moments come up to interject the 15 second lesson or explanation or whatever.
Allison Southwick: Ron, we have run out of time for this week. This has [MUSIC] all been great, but we actually have way more questions that we want your help answering. Could you come back next week?
Ron Lieber: I can come back next week.
Allison Southwick: Wonderful. We’ll see you back next week with maybe even harder questions to answer.
Chris Hill: [MUSIC] That’s all for today. But coming up tomorrow, we’ve got a bull versus bear debate on a retail business that has defied expectations. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. I’m Chris Hill, thanks for listening. We’ll see you tomorrow.