The invention relates to a composite magnetic material which comprises the following components: 50 to 70% of iron powder, 20 to 40% of carbonyl iron powder and 5 to 15% of iron-silicon alloy powder, wherein silicon content of the iron-silicon alloy powder is 6 to 7%. A surface of the composite magnetic material is phosphatized to form a phosphate conversion coating, and an inorganic coating layer protects the outer surface of the phosphate conversion coating. A preparation method of the composite magnetic material, which is disclosed by the invention, comprises the following steps of: (1) material taking and mixing; (2) baking and stir-frying; (3) phosphorization; (4) inorganic coating; (5) cooling and screening; and (6) baking. According to the invention, the preparation method is optimized, and the obtained composite magnetic material has excellent performance of balancing high conductivity and high saturation.