Reading books is an important step for anyone interested in becoming a successful investor. Indeed, most investors, including Warren Buffett, Bill Ackman, and Paul Tudor Jones, have credited books for their success in the market. In this article, we will look at some of the best investment books that all beginner investors should read.
The Intelligent Investor | Benjamin Graham
Written more than 70 years ago, The Intelligent Investor is one of the best books everyone interested in investing should consider reading. For one, it is the book that introduced Warren Buffett into the investing industry.
Benjamin Graham, who was a university professor, wrote the book after spending decades in the financial industry. He was a young person active in the stock market during the Great Depression.
The Intelligent Investor will guide you on several aspects of investing. The best-known components of the book are about valuation and the need to avoid overpaying for companies. He also talks about the role of inflation on investments, the importance of cash flow, portfolio management, and the role of dividends to investors.
The Intelligent Investor is a big book with some of the best examples and illustrations. It is also an excellent book that will take you from a novice to an experienced investor.
However, it is worth noting that the field of value investing has been under pressure lately. Indeed, Warren Buffett, who is famous for following recommendations from the book, has underperformed the market in the past decade. That’s because some of the principles advocated rarely work. Still, the book will help you learn about most concepts in the market.
Vanguard Value ETF has lagged Vanguard Growth ETF.
The Essays of Warren Buffett | Lawrence Cunningham
As mentioned above, Warren Buffett is beloved in the investing community because of his long-term track record in the investing world. He has managed to grow a small company into one of the biggest firms in the world. Today, Berkshire Hathaway has a market cap of more than $547 billion, and Buffett is worth close to $100 billion.
Every year, Buffett loyalists wait for the annual meeting of Berkshire Hathaway, where he and Charlie Munger share their investment advice. They also wait for his annual letter to shareholders, which he has published for decades. These letters are available for free on the company’s website.
In The Essays of Warren Buffett, Lawrence Cunningham has summarised all key lessons he has learned from years of studying the Oracle’s letters. As such, it will be an excellent read for any person who is beginning his investing journey.
In the book, he writes about issues like corporate governance, common stocks, mergers and acquisitions, accounting, valuations, and junk bonds.
Fooling Some of the People All of the Time | David Einhorn
David Einhorn is one of the leading activist investors in the industry today. He is well-known as the founder and Chief Investment Officer at Greenlight Capital, a hedge fund that has more than $5 billion in assets under management. He also runs Greenlight Re, a reinsurance company that is publicly traded and valued at more than $250 million. Einhorn has a net worth of about $700 million.
A few years ago, Einhorn published Fooling Some of the People All of the Time, his first book. The goal was to detail his long battle against Allied Capital, a company that he placed a short trade on. For starters, shorting a stock is a simple process in which an investor borrows shares, sells them, waits for the stock to fall, buys it again, and keeps the change. As such, short sellers benefit when the stock falls.
In this book, Einhorn writes about how he started Greenlight Capital with less than $1 million. A few years later, and after a lot of success, the firm had more than $10 billion in assets. He then goes on to write about how he identified Allied and how he pursued it to highlight its deceptions. Ultimately, after years of battle, the stock fell from more than $33 to less than $5.
This book is ideal for beginners for two main reasons. First, it will guide them on the journey successful hedge funds take to the top. Second, it will show them an excellent case study of shorting companies.
Common Sense on Mutual Funds | John Bogle
Most Americans know about the late John Bogle. Those who have not used his products. See, John was the founder of Vanguard, the second-biggest investment company in the world with more than $6.2 trillion in assets under management.
As influential as Jack was, he was not an extremely wealthy person because of the business model that vanguard took. For example, unlike Larry Fink, the founder of Blackrock, who is worth more than $5.5 trillion, John was worth about $25 million. That’s because Vanguard is well-known for its mutual funds that often cost little to investors.
In Common Sense on Mutual Funds, Bogle writes about the need for investing in mutual funds, having discipline in the financial market, asset allocation, simplicity in investing, and how costs can influence your returns. As such, it is an excellent book for any beginner investors because of the vast amount of resources that it contains.
Beat the Crowd | Kenneth Fisher
Ken Fisher is a well-known American investor who runs Fisher Investments, a company with more than $123 billion in assets under management. While he has written several books, Beat the Crowd is the overall favorite.
In this book, he talks about several important aspects of the stock market and how to spot the most opportunities. He also talks about going contrarian and the need to think differently in the market.
Most importantly, he talks about the macro factors that affect the stock market. For one, he dismisses the doomsayers who argue about the risks posed by the American debt. On this, he argues that for the debt to become an issue, the Federal Reserve will need to raise interest rates and leave them there for years.
Therefore, this is an excellent book for anyone who wants a good understanding of the intersection of the stock market and macro issues.
Other important books
Fortunately, these are not the only good books that you should read. There are thousands of them that we recommend. Some that we have not mentioned is A Random Walk in Wall Street, You Can Be a Stock Market Genius, Beating the Street, and Margin of Safety, etc.