One of the best ways to learn about anything is reading. Books about investing get a bad rap for being boring, but I am here to tell you that is just not true. Below is a list of my favorite books on investing. They range from beginners to more advanced books. They are all well written and very informative and have been a tremendous influence on me as well as countless others. Some of them are extremely well-known and are some of the best of investing classics. But they are still amazing and should be read by everyone.
Warren Buffett: If You Own A Good Business, Keep It
I have said this before, and I will repeat it again. Learning about investing is like learning a new language. Reading is one of the best ways to immerse yourself in that language. As you learn more you will want to find out more; it is very addicting in that way. As you learn the language and build your knowledge, these following books will help you create more blocks to continue your learning.
There are affiliate links for these recommendations and based my choices on my opinion and the influence they have had on me and my journey. I hope you enjoy them as much as I have and am confident that you will benefit from them as well.
One of my first books that I read about investing. Written by Guy Spier who is the manager of the Aquamarine Fund, which is a hedge fund that he runs out of Switzerland.
Guy takes us on a journey of his life from his beginnings at business school, where he graduates and takes the first job that comes along, looking for the quick buck. But he quickly becomes disenfranchised and starts to find another way.
He discovers the writings of Warren Buffet and immediately takes to his philosophy. He starts down the path to becoming a Value Investor and learns as much as he can from Buffett and his other followers.
During his journey, he becomes friends with Monish Pabrai, also a famed value investor, and together they donate money to have lunch with Warren Buffett, and this cements his views and changes his life forever.
The thing I like most about this book is the realism that he speaks to you from. You can tell he is talking from the heart and is not ashamed to admit his mistakes and faults. He lets you see his warts and all which is refreshing. I felt as if he was talking to me directly which touched me and made a significant impact on my thought processes.
This book is all about Guy’s journey to become a better investor as well as a better person. It is not a book filled with formulas or outlines of paths to becoming a better investor. Rather it is a deep look inside to see who you are and what you can become. He is a profound thinker, and it shows.
I enjoyed this book immensely and would recommend this to anyone who is looking to better themselves; it is not just about value investing.
This very easy to read and incredibly well thought out book written by Monish Pabrai. I recently did an in-depth review of this book on one of my posts. Check it out here.
3. The Little Book That Still Beats the Market
Another early favorite from Joel Greenblatt. This book is one of the first in the series of “The Little Book that.” For those of you not familiar with Joel, he is a value investor who is famous for a few things. First was his firm Gotham Capital which he managed from 1985 to 2006. During this time he averaged 40% returns!!! Crazy. Secondly, he is an author who has written several best-selling books. Thirdly he runs a website that helps investors find different ideas; it is called the Value Investors Club.
This straightforward to read and the warm book starts with the story of his son learning how the stock market works. He uses stories throughout the book to illustrate points, which makes it very easy to read and the points more memorable. In his first story, he talks about a boy selling gum in the school yard, and it goes from there.
Another story he uses is the one about Mr. Market to illustrate the point of how crazy the market can get. And how you can buy a company for a different price depending on the day. He borrowed this idea from Benjamin Graham, the famed value investor.
The two main points the book makes are:
- A higher earnings yield is better than a low one
- companies with high return on capital are better than companies with a low return on capital.
He uses these most important points to discuss his “Magic Formula” which is the formula he uses to beat the market. There is a very detailed breakdown of how the method works and all the testing that he has done to show how it works and the performance through the years.
Bottom line, this is a very easy to read book that is perfect for beginners or intermediates as it discusses how stocks work, to the market and finally a breakdown of his Magic Formula.
I enjoyed this book; I think I read it in one day. Couldn’t put it down. Joel has a straightforward style, and I like the stories he tells to make his points. I have also tested the Magic Formula for myself and for 2016 it had a return of 16.8% which is not too shabby.
The Power Of Compounding As Told By Buffett
4. The Most Important Thing
If Warren Buffett, Joel Greenblatt, and Seth Klarman recommend a book, that is a book that should be on my to-read list. And I was not disappointed by this one.
This book was written by Howard Marks, for those of you not familiar with Howard. He is the co-founder and Chairman of Oaktree Capital Management, an investment firm with $77 billion assets under management.
This book isn’t a “how to invest” type book, rather it is a look into the insights of a man who struggles with his own daily investment choices. He doesn’t offer any shortcuts, easy formulas or how-to wisdom.
Instead, he gives us ideas on “second-level thinking,” which is his way of telling us that there are no real mechanical ways to invest, but rather that investing can get messy. By this, he meant that people and their emotions drive markets and trying to filter all that down to a mathematical formula is impossible and wrought with danger.
Instead, he offers that it is your decision making and lack of emotions that help you win in this game. Having a philosophy and understanding the psychology of the market and realizing how fragile it all can be makes for a more sound and reliable investor.
His main point of view as an investor is to a contrarian to the market. Buy when everyone else is panicking, and sell when everyone is greedy. This feeling is of course, contrary to most human emotions which are what makes this style of investing hard.
I enjoyed this book as well. It was a great view into the mind of another terrific investor. I have barely scratched the surface of all the great insights that this book has to offer. You need to pick up your copy and have a look for yourself.
I can guarantee that this will be reviewed shortly by yours truly.
Years ago, a group of highly respected investors and admirers got together and created a collection of essays, memoirs, interviews, and speeches regarding Warren Buffett’s sidekick and friend, Charlie Munger.
This book the author modeled after Poor Richard’s Almanack, which was written by Benjamin Franklin. It was a collection of calendars, weather-related and astrological material that Franklin published between 1733 to 1758. Munger is a huge fan of Franklin and has worked to model his life after Franklin’s
The beginning of the book includes introductions by a multitude of legendary investors and thinkers of today, and he has a brief outline of Munger and his life growing up and who some of his influences have been.
The next chapter is an outline of his thinking, in particular, his approaches to investing. This section is where I first encountered his “Lollapalooza Effects” and his other mental models that utilize multiple disciplines such as mathematics and psychology to determine if investments are in one’s favor.
The majority of the book is devoted to ten talks that Munger is most famous for. The one that I have found the most interesting and useful was Talk Ten. This speech is a collection of three talks from 1992 to 1995 and revision from Munger that he wrote for the book. These discussions Munger refers to as the “Psychology of Human Misjudgement.” In the talk, Munger covers 25 tendencies that can apply to understanding pitfalls in investing. These include the doubt-avoidance tendency of the mind to jump to a conclusion to remove doubt, even if the decision to do so is irrational.
In Munger’s words, the work of Talk Ten became his way “to get rid of the most dysfunctional part of my psychological ignorance.”
Blunt, to the end. But that is part of his charm and his way of communicating his ideas. Munger spends quite a bit of time discussing psychology and how it affects our decision making, this is quite amazing since he has no background in this field, save for a few textbooks he has read.
This book is a great collection of Munger’s thoughts and view points. I enjoyed the Talks portion of the book, and to me, that is the most important section where I gleaned the most value from.
Of all the books that I have read this one has the most controversy surrounding it. There are solid opinions on both like and dislike side. I see both sides of the coin and have to say that I land somewhere in the middle on this one.
Phil Fisher, the author of the book, who was a financial analyst in the San Francisco area. He became a famous writer and was a pioneer in the growth-style of investing. Warren Buffett was quoted once as saying he was “85 percent Benjamin Graham and 15 percent Philip Fisher.” Which of course is pretty high praise indeed, I would say this quote has done wonders for the book’s sales through the years. I hope Warren received some royalties along the way.,
Fisher was an active proponent of buying the right companies and holding them forever. His primary source of investment ideas was what he called “scuttlebutt.” This strategy was his way of conducting detailed interviews with stockholders, suppliers, customers, employees and management about the companies prospects. He also interviewed competitors of said company to gather additional information on the company he was interested in.
One of the key chapters titled “What to Buy” he outlines his 15 point checklist that he uses to investigate each company that he intends to invest in. These points are a great starting place to start to create your checklist. It is not as relevant today as it would have been in 1958, but it is very extensive and has some excellent points.
Again, this book has some great ideas and is considered a classic in the investing field by some and undoubtedly gained some traction because of Buffett’s comments but some of the ideas are outdated and hard for us average investors to implement.
I enjoyed the book and gathered some great ideas from it and would reread it to see what other gems it reveals to me.
The Manual of Ideas is a popular investing newsletter that focuses on creating investing ideas by looking at a few ideas each month. The author, John Mihaljevic has interviewed some of the biggest investment managers through the years he has published the newsletter. During this time he has come across all different methods of investing that you can dream up.
His book is a collection of those ideas and developing them. Each chapter is an outline of one of these ideas. An example of some of the chapters:
- Deep Value
- Sum of parts
- Good and cheap stocks
- Following the super investors
One of the many things I enjoyed about this book is that it is a broad scope of the investing world. Mihaljivec’s experience with his own investing and his contact with some of the brightest minds in the investing world give him a unique perspective to delve into many different facets of investing.
Each chapter in the book gives you a flavor or taste of each style or method of investing. Each category has libraries full of books detailing each in more depth if you wish to delve further into those areas.
It is a great book to give you a start to develop ideas of your own. You won’t find lots of formulas and graphs. Nor will you find a detailed list of this is how you do it kind of thing but what it does is give you a framework of different philosophies to help you find your voice. So you can become a better investor and thinker.
Enjoyed the book and the podcast immensely. Check both of them out.
This book is one of the biggies in the investing world; some might argue that it’s the biggest. Too me it a classic that I want to read over and over again. I have read it twice in two years and listened to it once on Audible. It ranks up there to me with the Illiad, Odyssey, Aeneid, and Shakespeare that I read every year because they are that great.
Everyone knows that Warren Buffett is considered our generations greatest investor and he state that this book had the most significant impact on his life. In fact, it drew him to attend the school where Benjamin Graham taught so that he could learn more from the man.
Benjamin Graham was the father of value investing, and this is one of his greatest epistles in which he set forth his ideas. This book is a wide-ranging book that covers many topics like diversification, asset allocation, dividends, market fluctuations and of course, a margin of safety.
In my mind, this is the most important principle that he sets forth in the book. If you are interested in investing in all then you must read the last chapter in the book, it is must read. I won’t divulge too much, but let’s just say that learning this lesson of a margin of safety is the one that will make you the most money in the stock market.
The twin disciplines that Graham teaches are patience and valuation. These are the factors needed to be a value investor, without them you will fail.
There are four simple points to value investing that Graham covered in this book.
- Estimate a fair value for a company
- buy only when the price is safely below that value
- look for a strong dividend policy as that is a strong indicator of financial strength
- diversify appropriately to spread the risks
Simple yes, hard to master, yes.
This book is not a simple, light book to read. It is a textbook on the value investing method and is full of numbers, formulas, and charts to help illustrate his points. But it is worth every word, and if you are serious about making money in the stock market, you must read this book.
If it is good enough for Warren Buffett, then count me in too.
Another Benjamin Graham book that is also considered a classic and must read, like the Intelligent Investor. This book pre-dates the Investor and is dedicated much more to the how of value investing, whereas the Investor is much more in the vein of the why of value investing.
The books cover many topics like interest coverage, calculating an appropriate Margin of Safety, and the interpretations of the income statements and balance sheets. These are dissected and discussed at length. Keep in mind that cash flow statements were very hard to come by during the 1930s.
In addition to all the great material on investing in common stocks, the book also discusses bond investing and preferred issues as well. There is tons of in-depth analysis of bonds and how to invest with them. This theory is an underutilized aspect of most investors education and is a part of the book that I found fascinating, as I was not as familiar with bonds as I should be.
You could think of this book as the “nuts and bolts” of value investing and the Intelligent Investor as the “heart” of value investing.
Again this is not an easy book to read; you will not want to sit by the fire with a glass of wine and read this. You will be asleep in minutes. It deserves to be studied from front to back as a textbook, as it was meant to be.
It is a classic as such should be studied to grasp all the points Graham was trying to instill in us. I have read this several times as well, and I enjoyed it thoroughly. Along with the Intelligent Investor, a must read.
This book presents common-sense stock investing in a highly readable style. Peter Lynch’s Beating the Street is a perfect book for the beginning investor. There are no formula’s and math here at all. It is not a how-to book in the textbook style. Rather it is a journey into the mind of a man who did this job very well and gives you some insight into how he thought.
Peter Lynch, who managed the Fidelity Magellan fund that at one time was the largest mutual fund in the world. He spent thirteen years at the Magellan fund, so he knows of what he speaks. His returns during those 13 years was a whopping 29%!
Lynch is probably most famous for his “invest in what you know” strategy, and he advocates that you remember that when you buy a stock, you are buying a piece of a company. Sound familiar. Lynch shows you how to become an expert at the business you are buying and how you can build an investment portfolio on this knowledge.
This is a straightforward book to read and written in a very engaging style. Lynch’s style is very homey and funny. He has tons of great stories and illustrations to help make his points. Peter is very direct with his ideas and helps you understand that picking stocks is hard but doable.
He states that you should explain any company you are interested in so that a ten-year-old can understand it. Plus he also spends some time talking about smaller companies because he feels that these offer bigger opportunities to grow than say an Apple or Amazon, which is already huge.
One of the cons of the book is that quite a few of the companies that he discusses are not doing well now or have sold/bought out. In this, the book is a little dated but the ideas that generated those ideas all those years ago are still valid, which makes the book compelling today.
Effortless read and ideal for beginners. One of the first books I read on investing.
Seth Klarman, the author, who is the managing director of the Baupost Group. A hedge fund that he has managed since its inception in 1983. During that time he has averaged over 20% returns! I think it would be worth our time to hear what he has to say.
This book which was originally published in 1991 was instantly recognized as value investing classic. Unfortunately, it is currently out of print. But it is available on Amazon for a cool $1200! I was lucky enough to find a copy at the local university library, which the finance professor was kind enough to allow me to borrow.
Klarman divides the book into three sections.
The first section discusses the ways that investors beat themselves and how Wall Street takes advantage of that. The second section talks about value investing and the all important Margin of Safety.
The second section talks about value investing and the all important Margin of Safety. He doesn’t like intangible assets as he doesn’t think they offer up much margin of safety, as he says about 7-up, tastes can change. He also warns against overly precise valuations in that he thinks to more you focus on being precise the farther you get from precision. Another factor to guard against is making to aggressive valuations which can lead you astray. He feels that these stray too far from value investing basic principles.
The third section describes investment opportunities that are off the beaten path. Such as thrift conversions, companies that are in bankruptcy or financial distress, stocks with no analytical coverage, corporate liquidations, spin-offs, etc.
All in all, this is a great book and very easy to read. It is a great book to teach you the basic principles of value investing and give you some ideas to search for investment opportunities in areas less mined than others.
I am including a link here to an article I discovered recently that covers a review of this book. There are some great quotes and it is very well written. Check it out here.
Meb Faber, who is the manager of Cambria Capital wrote this very captivating and interesting book. The topic of following investors is nothing new, following Warren Buffett is almost a religion.
People devote a lot of time and effort to study, create screeners, and more just trying to decipher how the best investors do what they do.
But what if you just copied them?
What Faber does with his book is analysis this style of investing. Besides Buffett, there are others that have been able to beat the market as well. Faber takes a look at twenty successful hedge fund managers, most of these managers fall into the value investing camp, each with their own little twist. He clones their picks and then compares them to the performance against the S&P 500. And then provides an easy process to follow them.
As he has stated before the results are impressive. For example, a cloned Buffett portfolio had 10.5% annual return compared to the S&P 500’s 4.3% from 2000 to 2014.
Can it really be that easy? Well, yes it can, but it is not everyone’s cup of tea. This is just another style of investing that is out there and what Faber is trying to illustrate is that style and how it can work.
Like any other strategy it comes down to the user and if you stray from the strategy you can run into trouble. The hardest part is picking a manager and following their picks religiously. Even when the picks are down or not going well for a few years you need to stick to the plan. Where the strategy starts to fail is when we deviate from it.
The numbers that Faber uses illustrates that the strategy can work but only if you stick to the plan.
This is a fun, easy to read book that does a great job showing us how this strategy works and how it can make you a lot of money.
This is a compilation of all the masters works in one place. 50 years of Warren Buffett’s words altogether for you to peruse.
When Warren Buffett took control of Berkshire Hathaway, a dying textile company in 1965. A share of the company traded for $18 a share, 50 shareholder letters later it now trades for $226,000 a share. Which is a compounded annual rate of 21% for 50 years!
If you want to learn how to invest there is no better place than to start with Buffett’s letters. They are full of his wisdom, guidance, wit, and thoughts on all of his business decisions. He has generously revealed everything to you in these letters and it is up to do us to do the work to unearth all his gems.
True, you can download all of these letters for free from his website, from 1977 to current. But this book compiles all of them for you in one convenient place. It also allows you to search by year, person, company, and topics.
There are hundreds of books out there about Buffet and his methods but these are his words and his “lesson plan” for his success in business and investing.
Plus they are super easy to read and incredibly entertaining. Buffett’s writing style is very open, honest and witty. One day his writing will be as revered as his investing. As you read more shareholder letters from other CEOs. You will start to appreciate these letters and come to look forward to them like I do.
Aswath Damodaran, a professor of finance and NYU’s Stern School of Business, has written extensively on valuation. In the “Little Book of Valuation,” he has made the process accessible to the individual investor.
The math in the book is pretty basic, no more than high school algebra and a calculator needed. But the concepts are much more complex. He discusses the two main valuations, intrinsic and relative. In the book, he breaks them both down so that you can easily understand.
The second part of the book he breaks the valuations of companies in different stages of the life cycle.
- young companies
- growth companies
- mature companies
- declining companies
The third part of the book looks at valuations in different sectors such as financials, commodities, technology, cyclical, and pharmaceutical companies.
Valuation is an imperfect art and Damodaran cautions that all valuations are biased, most of them are wrong and the simpler, the better. He states in the book “that success in investing comes from not being right but not being wrong less often than everyone else.”
Damodaran has a great way of explaining very complicated concepts in a way that I can understand. I am a huge fan of his newsletter and his classes. I took his MBA-level valuation class that he teaches thru iTunes U, which is free. A great thing about that is it can be done at your own pace, which is very helpful. Frankly, at first, quite a bit of what he teaches was above me. But I studied hard and was able to finish the class.
As I have said before learning investing is like learning a language. And Damodaran is one of my favorite teachers.
The book is short, only 233 pages but it packs a wallop. If you are serious about discovering the analytical side of investing. This is a great place to start learning the math behind valuing a company.
In this book, Vitaliy Katsenelson makes the case that a long-term buy and hold strategy is dead. And in today’s markets, you need to be a buy and sell investor. He argues that this is the way to long-term success. And significant gains in the market today.
Vitaliy is not a day-trader by any stretch. Rather he is a value investor who is taking a different approach on when to sell your stocks, something that is rarely discussed in depth.
He uses the book to make a strong arguement that having a buy and sell strategy is the key to succeeding in the market today. By looking at historical data. Katsenelson concludes that cyclical bull markets will be succeeded by cyclical bear markets, which will end in long sideways markets.
As he states “in these environments, a proper sell discipline will make the difference between great or mediocre returns for even the best crafted buy decisions.”
This book is not all about selling. Not in the least. Katsenelson focuses a great deal on the importance of buying high-quality, growth companies with large margins of safety. He refers to this as the QVG, or Quality, Value, Growth.
One of the things I enjoy about Katsenelson’s writing is his use of humor and analogies to make his points. He has a great way of relating very complex ideas using stories that make it very easy to understand. And enjoyable at the same time.
He has a newsletter where he shares his love of investing as well as music. This is a must read for anyone interested in value investing.
This is just a small sampling of the amazing books out there. There is no way I could list all of the ones that have had an impact on me.
This list above are all great books written by some very smart people. Reading them you just can’t help but pick up some guidance.
I hope you enjoy them as much as I have had. And that they help you in your investment journey.