As any Amazon.com lover knows, there are a ton of books out
there covering every subject known to man. Same goes for investing books. I
mean, I am amazed at the number of books on investing exist, not even counting
the ones that speak about personal finance more generally.
Despite the number of pickings, you definitely shouldn’t
cast them all aside – investing greats learned everything they know from the
best books written on the topic. So which ones are worthwhile?
The most famous, and arguably the best, book ever written on
investing is The Intelligent Investor by Benjamin Graham. Graham was Warren Buffett’s (arguably the greatest investor that ever lived) teacher at Columbia
University and investing guru. Graham strongly believed in buying stocks that are
undervalued, or selling for less than their assets are worth. The Intelligent
Investor breaks down this philosophy in excruciating detail. It’s actually the
layman’s version of Graham’s investing textbook, Security Analysis. That said,
I’ll admit that it is a bit dry; in fact, one of my best professors in college
gave me the book during my senior year (2006) and I’m only just now (2013)
getting past chapter 1. Yes, it is dense and academic, but if you’re super
serious about investing, it’s a must-read.
The next most famous, in my opinion, is A Random Walk Down Wall Street by Burton Malkiel, a gem that was first published in the 1970s. I’d
recommend this to ordinary investors because it covers an exhaustive range of
information, but is so well-written and easy to digest. I gobbled it up like a
novel. Malkiel purports that there is no point in trying to select individual
stocks in order to “beat” the market because, ultimately, the market is going
to outperform any manager. That being said, he advises investors to stick to
index-based mutual funds. I found his argument very convincing and changed the
way I thought about my (well, my husband’s, for right now) 401K allocation.
One that I encountered recently and found very helpful was
the Motley Fool’s Million Dollar Portfolio by David and Tom Gardner. The Motley Fool is an
excellent website, exploding with investing information, and is very well
respected in the industry. Tom and David, the brothers who founded the site, explain
portfolio building and management in clear, entertaining terms in MDP. It’s definitely
not as long as the Intelligent Investor or A Random Walk, so if you want the
juicy bits in a short amount of time, go for it! The tone is friendly and
approachable, but it doesn’t just stick to giving basic information. The best part is the corresponding website, which keeps the book current -- definitely a plus among books that recommend specific stocks in this crazy, volatile world. (Unfortunately, the website is not accepting new members, but will soon, hopefully.)
Last, for the risk-averse among us, I’d recommend Zvi Bodie’s
Worry-Free Investing. The book is smaller than it looks since the print is
humongous and it has lots of graphics to make complex points perfectly clear.
It lays out the simplest investment portfolio recommendations I’ve ever
encountered in a book, but still covers next-step-up topics like derivatives
and Treasury Inflation-Protected Securities. Great for investors who are really only interested in saving for retirement.
Since sometimes you’ll probably want to invest in a single
stock, it’s good to know how to read financial statements. While my blogposts
(here, here, and here) gave some information, you should become more familiar. For a brief, but
in-depth overview of accounting concepts, try Financial Intelligence by Karen Berman. It
says it’s for managers who do not work in financial services, but it is simple
enough for someone with no business experience to understand.
As you all know, we
recently weathered the worst financial crisis since the Great Depression. While
there’s plenty of theories out there about who to blame for it, there are some
clear sequences of events that led up to it. A great recounting and explanation
can be found in Roger Lowenstein’s The End of Wall Street. Lowenstein’s writing
style is unintimidating, but can be a little Wall Street-bashing, if you don’t
mind that. If you do, I think you’d love Michael Lewis’s Liar’s Poker, the
tell-all that reads like a novel and is supposed to be a cautionary tale, but
only excites undergrads around the world about joining the ranks of the Street.
Well, those are my picks. What are some investing reads you
all have found helpful or even entertaining?
