Summer Reading for Investors

By Dan Greenshields, ShareBuilder President

For many investors, summer is a time to lounge on the beach with the latest best-selling book. This year, however, those looking for investing ideas might consider venturing outside of the finance section of their favorite local or online bookstores.

Three recent titles, touching on topics as diverse as zebra psychology and child car seats, offer outside-the-box insights investors can put to good use.

“Simplexity,” by Jeffrey Kluger

What it’s all about: Many things that appear dazzlingly complex are actually quite simple, according to Time senior writer Jeffrey Kluger. And, as anyone who has struggled to decipher a cell phone instruction manual can attest, what should be simple often turns out to be unimaginably complex. Kluger’s idea of “simplexity” is one investors should become familiar with.

Kluger uses a variety of real-world examples — like traffic jams — to demonstrate how complexity can emerge from the simplest of situations. This is valuable information for an investor, since unexpected complexity can wreak havoc on investment portfolios.

To avoid being surprised by complexity, investors need to do their homework and keep their investments both diversified and as simple as possible. Also, determine a certain amount of your paycheck that can be diverted to an investment account on a regular basis. It is a great strategy for ensuring that the investment process remains streamlined and manageable.

“Why Zebras Don’t Get Ulcers,” by Robert Sapolsky

What it’s all about: So, why don’t zebras get ulcers? Simple: Because they don’t feel stress, at least not the way we do. Stanford University biologist Robert Sapolsky’s eye-opening account of how stress affects the body is a must-read for anyone who suffers heart palpitations every time the stock market drops.

Sapolsky gives a thorough explanation of the negative effects that stress can have on the heart, the digestive system and the immune system. Stress is often a key contributor to chronic illnesses like heart disease and — you guessed it — ulcers.

For investors who live and die with every dip and jump in the market, this book might motivate you to get serious about avoiding stress. Reducing stress will also make you a better investor. Stress often results in bad decisions, like prematurely yanking cash out of a promising investment.

Luckily, taking stress out of the investing process isn’t as impossible as it sounds. One simple way of doing so is to adopt a long-term attitude. Checking the Dow Jones every day is a prudent habit, but you should be more concerned about how well your portfolio is performing over years and decades, not days and hours.

“SuperFreakonomics,” by Steven Levitt and Stephen Dubner

What it’s all about: Economist Steven Levitt and New York Times reporter Stephen Dubner demonstrated that they have an uncanny talent for asking probing questions and getting revealing answers. How effective are child car seats? What’s safer: drunken driving or drunken walking? The answers will surprise you.

The kind of deep analysis the authors perform is transferable to investment decisions. Before putting money into the market, be sure you’ve asked yourself the right questions. How much risk are you willing to take? What are your reasons for investing? What should you do if the market makes a sudden swing? How you respond will help determine where and how you’re willing to invest your money in the stock market. Self-examination is critically important.

This summer, take a break from traditional investment literature and give these unexpected sources of financial wisdom a try.

The insights you gain may end up paying real dividends.

This article was originally published by AOL News on June 25, 2010.

Tags: Dan Greenshields, Summer Reading