Say you want a crash course on everything you need to know about investing. It boils down to save a lot and buy low-cost index funds.

Most of us, though, live somewhere between those poles: If that sounds like you, then the two volumes you need are A Random Walk Down Wall Street by Burton Malkiel and Irrational Exuberance by Robert Shiller. Now, I should admit here that this recommendation is a little devious, because these two books disagree on a pretty fundamental point.

Frustratingly, both books make powerful cases. But learning to wrestle with ambiguity and uncertainty is good mental training for owning stocks, which is never going to be a comfortable experience.

Taken together, their insights can help you craft a smarter, safer financial plan. Malkiel is an emeritus professor at Princeton, but his book, first published in , is not an academic tome.

Along the way, however, he popularizes some big, hairy ideas.

The other way Malkiel is instructive is a little paradoxical: By showing how hard it is for anyone to get a trading edge, he also shows that anyone can invest and do reasonably well—just by buying an index fund. If the market is efficient, you might reason, who am I to fret when prices keep climbing higher? Still, the inherent wisdom of financial crowds is a beguiling idea that deserves a strong counter-narrative.

Shiller, who won a Nobel Prize for economics in , devotes a chapter of Irrational Exuberance to dismantling the orthodox versions of efficient-market theory and random walks. He reasons that if stock prices really are efficient, you ought to be able to see that in the historical record. For example, share prices would rise in anticipation of companies doing well and paying investors higher dividends. In fact, Shiller found that prices were far more volatile than future dividends would justify.

In the first edition of Irrational Exuberance noted that stock prices looked, well, exuberant, just in time for the tech stock bubble to burst.

In the second edition, published in , Shiller showed that housing prices were wildly above historical norms.

And we all know what happened next. It does, however, offer some quantitative guidance. Fundamentally, a stock is worth the profits the company will earn for investors. Earnings jump around from quarter to quarter, of course, but if you average them over a decade, you can smooth out the market cycles.

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And often these signals are more ambiguous. So what do you do with these two competing doctrines? One answer is to take them together as a warning against overconfidence. Efficient-markets theory tells you to think twice, and then a third time, before betting that you or your fund manager can best an index.

Shiller, meanwhile, is reminding you not to be too confident that the stock market will always deliver the returns you hope for. But in the decade after —a fairly long run for most people—stocks lost 1. Malkiel points to dividend yields, the amount investors literally are paid for owning company stocks. Today it averages 1.

The dividend yield plus the long-run growth rate of earnings is a classic formula for the expected return on stocks. Planning with a margin of safety will mean different things at different times in your life. In retirement, an expected lower return on stocks suggests you may need to be more conservative about pulling funds from your savings. Whether the stock market is efficient or exuberant or somewhere in between, it will never be easily tamed.

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Investing stocks The Only Two Investing Books You Really Need to Read Pat Regnier PatRegnier. All products and services featured are based solely on editorial selection. TIME may receive compensation for some links to products and services on this website.

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