10 Indispensable Books for Investing Better
Sep 10th 2012 11:16AM
Updated Sep 10th 2012 11:42AM
This month, my Foolish colleagues and I are taking a step back to help you learn the basics of investing. One key to learning is making sure you have the best resources you can find.
Charlie Munger once said that he has known "no wise people who didn't read all the time -- none, zero." In fact he reads so much that his children would laugh, describing him as a "book with a couple of legs sticking out."
From what I've seen, reading appears to be the competitive advantage of great investors. So, I thought it might be helpful to put together an annotated list of some of the best investing books of all time. Here are ten to consider:
1. One Up On Wall Street by Peter Lynch
In this classic, Peter Lynch makes a very persuasive case that the individual investor can do very well by buying great companies for the long term. He even opens the book by saying that "any normal person using the customary three percent of the brain can pick stocks just as well [as], if not better than[,] the average Wall Street analyst."
Lynch then goes on to show how the ordinary investor can do this. The book is wildly entertaining, and is arguably the most engaging investment book ever written. If you've never read it before, stop everything and pick up a copy. It could change your life.
2. The Intelligent Investor by Benjamin Graham
Warren Buffett believes The Intelligent Investor is "by far the best book about investing ever written," and few value investors would disagree with that assessment. If the field of investing has a bible, this is it.
Graham's goal is to lay out a "positive program for common-stock investment," and he accomplishes his goal in an extremely thorough fashion. Chapter 20, which is titled "'Margin of Safety' as the Central Concept of Investment," should be required reading for all investors.
3. Margin of Safety by Seth Klarman
This book, by one of the most respected value investors in the world today, has become a cult classic. Currently out of print, the book sells for $1,700 on Amazon.com at the moment. Yep, that's not a misprint, and I wouldn't suggest that anyone pay that price for it.
If you can get a hold of a copy somehow, however, you won't be disappointed. I found this book to be extremely clear in laying out the most important tenets of value investing. The chapter on the "art of business valuation" is particularly helpful. Klarman is one of those rare breeds who is both smart and clear.
4. You Can Be a Stock Market Genius by Joel Greenblatt
This book is a very useful introduction to special situations investing. Greenblatt succeeds in making a highly complex subject accessible for novice investors.
Like Lynch, Greenblatt believes that the ordinary investor can succeed in the market. In fact, he argues that ordinary investors have the "power to beat the pants off the so-called market 'experts.'" His arguments supporting this view are very compelling, and challenge common assumptions about the market.
5. Buffett: The Making of an American Capitalist by Roger Lowenstein
All men need a well-made and versatile navy blazer that they can pull off the rack for any occasion. And all investors need an excellent biography of Warren Buffett on their shelves. This one remains the best, in my opinion.
6. Your Money and Your Brain by Jason Zweig
Why do smart people do dumb things? Jason Zweig, who writes for The Wall Street Journal, tries to answer that question, particularly in regard to investing.
This book is an excellent introduction to the emerging field of neuroeconomics. Perhaps best of all, it shows how investors can improve their financial performance by having a better understanding of the brain. Jason Zweig is one of the most fascinating writers out there at the moment, and his website provides a lot of great resources for investors. Be sure to visit his website, if you have a chance.
7. Money Masters of Our Time by John Train
This book may not be as famous as others on this list, but I've learned a lot from it. It's a great reference on many of the investing giants.
Each chapter is a short profile of an investing luminary like Buffett, Templeton, Graham, and Fisher. The book is packed with anecdotes, and is a pleasure to read. Be sure to have a look at the invaluable appendixes as well.
8. Common Stocks and Uncommon Profits by Philip Fisher
Fisher advocated buying outstanding companies for the long term, and was an early student of innovation. This book, published in 1958, is now a classic, particularly for growth investors.
His "Fifteen Points to Look for in a Common Stock" -- which are included in Common Stocks and Uncommon Profits -- are a must-read for investors. Buffett is one of Fisher's biggest fans, and we love him here at The Motley Fool as well.
9. The Innovator's Dilemma by Clayton Christensen
This one isn't an investing book per se. But its insights are critical for investors, nonetheless. Silicon Valley legend Andy Grove, former CEO of Intel (NAS: INTC) , once told an audience that this was the most important book he had read in 10 years.
In this book, investors can learn why great companies can become disrupted almost overnight. Blockbuster, for example, once had remarkably solid profit margins. But then Netflix (NAS: NFLX) disrupted its business, and Blockbuster never recovered. Best Buy (NYS: BBY) , which has been mercilessly disrupted by Amazon.com (NAS: AMZN) , is another, more recent example of this phenomenon. Christensen, who teaches at Harvard Business School, has developed a framework here that allows us to make sense of rapidly changing industries.
10. The Investor's Anthology: Original Ideas From the Industry's Greatest Minds by Charles D. Ellis, ed.
This book provides articles by Adam Smith, Ben Graham, Warren Buffett, John Maynard Keynes, and many, many others. As a former history teacher, I'm a big fan of returning to the sources when you want to learn more about a topic. Here, you'll have a nice collection of primary documents for your personal library.
So, what'd I miss? Chime in below if you know of additional books that are indispensable for investors.
Also, be sure to check back throughout the month for other informative articles covering a wide range of important topics. We've set up a special website at InvestBetterDay.com, and on Sept. 25, we're taking a day to celebrate the art of investing. We'd love to have you with us! Take a look at the site now and get on the path to personal prosperity.
The article 10 Indispensable Books for Investing Better originally appeared on Fool.com.John Reeves does not own shares in any of the companies mentioned in the article. You can follow him on Twitter @TenBaggers.The Motley Fool owns shares of Netflix, Intel, Amazon.com, and Best Buy. Motley Fool newsletter services have recommended buying shares of Netflix, Amazon.com, and Intel. Motley Fool newsletter services have recommended creating a bear put ladder position in Netflix. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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