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This list of investing books is based on meticulously researching the finest & most popular investing literature produced to date. The following are universally acknowledged to be the most respected, relevant and classic investing books of all time -
1 The Intelligent Investor - This is the Value Investing bible written by Warren Buffett's mentor Benjamin Graham.
For "enterprising" investors interested in picking and buying stocks as a [hopefully] small part of their portfolio, this book is the essential gateway to your stock picking journey. That said, Graham would himself have recommended majority of ("defensive") investors use index funds to form the core of their investment portfolios if these instruments were available during his time. [Please refer to Book 2 in this list for more on Indexing].
Other great books in this area include Rule #1 [capturing the essence of value investing in a simple format accessible to all], The Essays of Warren Buffett [no explanation needed] & the classic Security Analysis [for an indepth study of valuation techniques].
2 The Little Book of Common Sense Investing - Though very recent and very little; this is the finest book on Indexing written by the father of indexing himself (John Bogle). He presents a simple and unbeatable argument in favor of investing in entire market indices instead of trying and picking select stocks/funds.
3 Common Stocks and Uncommon Profits - This is the bible of Growth Investing by the pioneer of this stock picking approach (Philip Fisher). This is an approach to stock picking (incorrectly) contrasted with value investing that has found favor among several fund managers & a few successful investors mostly during bullish market conditions.
Even though this approach alone has not been as universally successful as value investing for the average stock picker, some of the common sense analysis involved in this approach is definitely useful to make more informed decisions when picking stocks. In fact, Buffett and several other noted investors consider value & growth complementary ("joined at the hip") rather than contradictory approaches to stock picking .
4 A Random Walk Down Wall Street - This is the best book on Long-term investing. This book contains the most practical & holistic advice applicable to investors who want to grow their wealth in the most efficient manner possible to attain their long term financial goals.
Another great book in this area is Stocks for the Long Run.
5 Poor Charlie's Almanack - This is one of the first books to introduce a Cross-Disciplinary approach to investing. It is written by Charlie Munger who is Warren Buffett's partner in Berkshire Hathaway. This book walks you through how Charlie arrives at the decisions that have made him a billionaire. This provides insights into how various seemingly unrelated disciplines [like Psychology, Physics, Chemistry, etc] can be leveraged in order to truly master the field of investing. This includes a superb set of insights by one of the smartest investors around today, so ignore this book at your own peril.
Another wonderful book in this area is More Than You Know .
6 Against the Gods - This is the best book on Risk Analysis. Though primarily a detailed history of efforts to understand risk and probability; this has some very relevant contrarian insights for every investor who has believed any of the investment forecasts & other "expert" commentary on investing regularly dished out by the mainstream financial media.
7 The Neatest Little Guide to Stock Market Investing - This is the best general Primer to the field of Stock Investing. This is a small but very informative guide to everything that you need to know to get started with stock market investing including insights from master investors and a simple strategy to begin.
Another highly respected primer on stock investing is The Five Rules for Successful Stock Investing: Morningstar's Guide.
8 Reminiscences of a Stock Operator - This is the classic book on Speculation. Written in the early 1920's, this book continues to be the most loved book ever written on the subject of trading and speculation.
I would strongly recommend anyone planning to engage in speculation [and/or trading/short term investing/charting/technical analysis/etc] to stop and read the other 9 books in this list first. However, this book is in the list as, whether I like it or not, this is still a very popular form of "investing" [though most of the authors of the other 9 books in this list would probably equate this to gambling].
If stock picking for the medium to long term is a very small percentage of an investor's portfolio, speculation should be an even smaller percentage [no more than 0.5%] and with only that portion of your wealth that you are willing to gamble away "for fun".
Other good books in this area include Technical Analysis of the Financial Markets by Murphy & Options, Futures and Other Derivatives by Hull. Apart from these "bibles" on trading; there are also several other extremely popular mainstream books peddling their variation of the quintessential Get Rich Quick Scheme including Rich Dad, Poor Dad [Real estate/Business speculation] & Jim Cramer's Real Money [Trading].
9 The Secrets of Economic Indicators - This is the most reliable book to understand Economic Indicators from an investing standpoint. This book is essential to grasp fully the real implications of the economic indicators referred to in business reports and by the media. This is particularly useful if you invest in entire economies using Indexing [see Book 2 on this list for more on Indexing]. This book provides insights on how best to forecast economic trends and capitalize on investment opportunities based on understanding these economic indicators.
10 All About Asset Allocation - This is the best book on Portfolio Management. Several independent studies have confirmed that your long-term asset allocation may account for more than 90% of your investment results. So, from a practical standpoint, this book is far more important than any of the other books on this list. This is as various approaches to picking or not picking stocks are nowhere as relevant as the distribution of your portfolio across various asset classes based on your risk tolerance. Hence, this is a book that is a must in every investor's bookshelf.
Next Up - In my future posts,
- I will elaborate in depth on each area of investing mentioned above, provide a list of the top books in that area [including the ones listed above], and the most valuable insights these books have to offer to an investor.
- I will finally combine the insights of the aforementioned posts into a sensible investing strategy that can be followed by any investor. This strategy should be reasonably sound as it will be based on the collective wisdom of the best minds in the field of investing through the ages.
So, don't forget to check back in a few weeks for my next post on Long Term Investing.