I’m not easily drawn to reading non-fiction books. They have to tackle a super interesting OR useful topic in order to put aside my fiction stories and invest the time to read about reality 🙂 And the book I write about today ticks both reasons – it is super interesting AND super useful.
Before I get into the topic, I’d like to make transparent that Mário, the author, is a friend of mine. However, I purchased the book at my own cost, and then wrote the post based on my own interest and impression.
How to Invest in Index Funds – in a nutshell
The book is centered around investing in index funds, which is a very specific type of investment. So if you are interested in index funds investments or just curious to understand how it works, this book takes you from zero to hero! Super easy to understand, with lots of explanations and practical advice on how to decide on your strategy (if you decide to make this step).
Mário starts from the belief, based on his experience, that investment is simple. It’s not something that only rich people can do, it’s not time-consuming, and anyone can learn how to do it. So the book tackles a wide array of façades of index funds investment – from basics of investment, explaining what a diversified portfolio is, why he recommends index funds, to how to choose an index fund and what are the psychological aspects of long-term investing.
Only to manage your expectations, the book does not provide a magic recipe for getting rich (’cause there’s no magic recipe!), but gives you the tools to start investing and make your own decisions based on your personal profile.
If this sounds like a book you see yourself reading, it is available on Amazon – please consider using this link.
About risk and cognitive biases
Some of the parts I enjoyed the most were related to risk and cognitive biases.
Risk is always there when you’re investing, whether you invest in index funds or stocks or a tech startup 🙂 We usually focus on the risk of losing, but what if there’s another way of looking at risk? Mário says that he prefers to define risk as “the range of likely outcomes”. A smaller risk could be a variation from -10% to +10%, while a higher risk might be a variation from -50% to +200%.
In terms of cognitive biases, Mário points out that these shortcomings might lead to poor investment decisions if you are not aware of them. For example: Endowment Bias means that an investor values an asset more when they already own it; Self-Attribution Bias means that investors tend to credit their success to their skill, and their failure on outside factors.
If you are interested in read more about the cognitive biases that impact finance decisions, check out this paper about behavioral finance biases by Vrooman and Sarver.
About Mário Nzualo
Mário is a software engineer from Berlin, Germany, and the creator of the popular investing blog indexfundinvestor.eu. You might want to check his blog, to get a glimpse of what his insights are about. Mário’s writing has helped hundreds of thousands of European residents learn how to invest in index funds. I am super grateful that I know personally this amazing human being and that I can call him my friend! 🙏
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What books do you read about managing your finances? Let me know if you have any good recommendations!
‘Till next time … happy reading!
Georgiana
Readers' High Tea 
This book sounds useful, and I think the part on cognitive bias would be useful to anyone, even those not living in Europe.
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That’s true! The technicalities related to index funds are mostly related to Europe, otherwise there are many concepts and thought processes that could be applied worldwide 🙂
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