Reading is extremely important! Knowledge is the key differentiator in many moments in life. By reading you can expand your knowledge and become a better investor. This will allow you to make precise and informed decisions. As investors we always strive for better returns. Focusing on reading can really help you achieve those higher returns. So we decided to put together this list of 5 books every investor should read:
The Intelligent Investor, by Benjamin Graham
Written by what is considered by many, the father of value investing. Ben Graham describes in this book the layout for what value investing would be. Published in 1949, it was described by Warren Buffett as the book that changed his life. While Warren was just 20 years old, he read the book for the first time. It led to him changing his view on the market, and his own investment strategy.
The value investment strategy laid out by Benjamin Graham is still widely practiced today. Its concepts and knowledge of markets, and how securities can be mispriced is spot on. The book refers to Mr. Market. A semi-fictional character that can be extremely irrational and misprice things. Not always the market price is the actual value of the business. The intelligent investor is a must read for every investor starting out. While the book is over 70 years old, much of the knowledge and wisdom is still applicable in today’s markets. Value investing has successfully evolved but the key concepts laid out in the intelligent investor are still very relevant today.
We have a big admiration for Peter Lynch. Not only was his investment strategy unique, but so were his results. One of the most successful mutual fund managers, grew his fund from . He was known for having an extensive portfolio and knowledge of multiple industries. His personal views on investments are incredibly insightful. He manages to immerse the reader in the fund management world. Peter Lynch will walk the reader through the most important initial aspects of stock analysis. With his help you will get a better understanding of how to look for stocks, and which ones to pick. You will learn his investment philosophy, and you should carefully read what he has to say.
Principles, by Ray Dalio
Investors shouldn’t read only books about stocks. There are more key aspects of investment. One of them is having the right set of principles to follow during your investment journey. This is exactly what Ray Dalio tries to provide readers of Principles. Ray, who has himself experienced hardships of failing and being unsuccessful in one endeavour. Advocates that failing is a natural part of life in the cycle of improvement. Each time by learning through your mistakes you start going in the right direction. Principles like these have allowed Ray Dalio to become extremely successful. So much so that he runs the largest hedge fund Bridgewater Associates. If you are interested in business and investments you should seriously consider grabbing this book.
Thinking Fast and Slow, by Daniel Kahneman
Once again this is not a stock focused book. Investors need a set of specific attributes to be successful. Not only that but they wide knowledge on various topics. Being on top of current market news, and analyzing companies is one step. But being able to control our emotions, and prevent lapses in our judgement is also essential. Thinking fast and slow is a masterpiece, the range of topics it covers, and the knowledge it offers readers is invaluable. Understanding how our decision process works and the numerous bias we can be susceptible to can help us avoid mistakes. As humans we have different tendencies that affect our reasoning. This book can help you avoid mistakes. Its lessons are precious and timeless. Daniel Kahneman was eventually awarded with a Nobel in economics.
Irrational Exuberance, by Robert J. Shiller
The term coined by Alan Greenspan to describe the market folly during the dot com bubble. Gave the title to this incredible book by Rober J. Shiller. The professor is incredibly astute, and immerses the reader in behavioral economics. In a time of over speculation, the book states that markets are not always rational. Instead of pricing companies perfectly, the book argues that the stock market is mainly driven by emotions. Fear, greed, these emotions drive stock prices up and down. Combine an overly emotional market with speculation and herd movement, and we got ourselves the dot com bubble.
The amount of online or web related companies that surfaced at the time, and today are nowhere to be seen. Not only that but the accounting scandals of Enron and Woldcom still loom in our minds. This book is a masterpiece that describes an era similar to what we are experiencing today. In fact the Shiller P/E ratio today is not far from the high during the dot com bubble. Robert J. Shiller gives the reader valuable insights on how the market works. It is incredible how today’s market resembles the early 2000’s dot com mania.
Books are an incredible source of knowledge. Investors should read extensively, as they accumulate knowledge they can make better decisions. I would still like to mention two books that are also great choices.
“Poor Charlie’s Almanack” is one of the most interesting books I have read. Charlie is a devoted value investor, who shares his wisdom, spreading knowledge with every sentence.
Another book that really impressed me was Howard Marks, “The Most Important Thing”. Although the book is fairly small, it is very well put together. Howard Marks goes through the most important things to consider when investing. The result is an outstanding book you should read.