The 7 Greatest Books For Investing & Money
Are you looking for the best books on investing and personal finance to help you take your stock portfolio to new heights? Over the past 2.5 years, I have read almost everything about personal finance and investing. This article will list 7 of my favourites. They will be ranked from easy to understand to more complex so that you can choose the right article for you, regardless of whether you are an intermediate, advanced, or experienced stock picker.
During the last 2.5 years, I’ve read many books on investing and personal finance, which I’ve summarized here in this article. Many of you have been asking: In this article, I will present the books about investing that I think will benefit your stock market journey the most. Moreover, I will rank them from simple to understand to more difficult to understand.
Bringing you the best tips and tools for reaching financial freedom, through stock market investing.
1.The Little Book that Beats the Market
Number 1 on the list, and the first book that I think a new investor should read, is a book called The Little Book that Beats the Market. It was first released in 2006, and the book’s author is Joel Greenblatt, the manager of Gotham Funds, a hedge fund with $5.6b in assets under management. At 112 pages, the book deserves its name, but don’tdon’t let that fool you!
The Little Book That Beats the Market reveals what is probably my favourite stock screening strategy
- the Magic Formula. The Magic Formula finds stock picks by looking at two important performance indicators
- returns on assets (or capital) and the price/earnings ratio (or earnings yield). Joel Greenblatt discusses why these two key performance indicators are essential for successful stock market investing, and he does so neat and humoristically.
The book is so over the top and blunt at times that I’veI’s been laughing out loud while reading it. And I tell you – that that’s quite uncommon for a book about investments. Just take this quote from the book which I’veI’s presented on the channel before. Choosing individual stocks without any idea what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.
This book is like 60% education and 40% humour, which makes it a really enjoyable read. As an extra resource, I should add that the Magic Formula screener can be found and used for free at magicformulainvesting.com.
2. One up on Wall Street
Number 2 is also a more easy-going book, One up on Wall Street, written by Peter Lynch. It was originally published in 1989. Peter Lynch is a legendary investor from Fidelity Investments, and he was the Magellan Fund manager there from 1977-1990. During this period, he averaged a 29.2% annual return and grew the fund from $18m to $14b.
That is insane, so it’s no wonder the book has sold more than 1 million copies worldwide. At 334 pages, the book is more extensive than the Little Book that Beats the Market for sure, but it’s still quite an easy read.
The book preaches that you should use what you already know to make money in the stock market, and for me, this excerption from the book was something of a wakeup call:
“In general, if you polled all the doctors, I’d bet only a small percentage would turn out to be invested in medical stocks, and more would be invested in oil; and if you polled the shoe-store owners, more would be invested in aerospace than in shoes, while the aerospace engineers are more likely to dabble in shoe stocks.
I’m not sure why stock certificates, like grasses, are always greener in somebody else’s pasture.”
The highlights of the book are chapters 8 & 9.
In chapter 8, Peter Lynch discusses the 13 traits of a “ten-bagger”, referring to stocks that have a chance to increase tenfold. In chapter 9, he discusses six traits of the reversed ten-bagger, referring to stocks heading straight for the dumpster.
Some of the characteristics of a ten-bagger which he lists in chapter 8 are quite funny and a bit counter-intuitive, such as:
- The institutions don’t own it, and the analysts don’t follow it
- It’s in a no-growth industry And best of all …
- Something is depressing about it After you’ve read and understood The Little Book that Beats the Market and One up on Wall Street
3. The University of Berkshire Hathaway
You’re probably ready for number 3 on this list – The University of Berkshire Hathaway. Berkshire Hathaway is, of course, Warren Buffett’s firm, and it’s one of the largest public companies existing.
This book has a very appropriate title because the author Daniel Pecaut has been attending the annual shareholder meetings of Berkshire Hathaway, where Warren Buffett and his right-hand man Charlie Munger perches about investing for about 30 years.
These 30 years are summed up in the book. The book’s length is 338 pages, almost exactly the same length as One up on Wall Street, and it is just a bit more advanced.
It’s also quite new, as it was first published in 2017. Warren Buffett and Charlie Munger are two great minds, truly. And they aren’t just smart. They are witty too.
Just consider what they have to say when they hear rich people in western countries complain about high taxes:
We think — at least I think
— this society extraordinarily well treats me, and I think most people with high incomes are.
If you transported most of them to Bangladesh or Peru, they would find out how much of it is them and how much is the society. Or sometimes they are just blunt, which is great too.
Such as when Charlie Munger is asked what he thinks about the GAP figure EBITDA, which appears in stock market companies’ income statements.
Yeah, I think you would understand any presentation using the word EBITDA if every time you saw that word, you just substituted the phrase, “bullsh*t earnings.” The University of Berkshire Hathaway includes notes from the highlights of the annual shareholder meetings of 1986-2017.
If you wish to see the meetings between 1994 and 2020, you can head over to CNBC’s Warren Buffett Archive.
This is a great resource, but the meetings are approximately 5 hours each, so that’s about 135 hours of watch-time. This book sums up the same information in about 10.
4. Common Stocks and Uncommon Profits
The 4th book that I would recommend anyone to read is Philip Fisher’s book Common Stocks and Uncommon Profits.
Warren Buffett is often said to have been 85% Benjamin Graham and 15% Philip Fisher, and Buffett was inspired especially by this book, originally from 1958. The book is quite short at about 200 pages, but it has a few more difficult learnings.
Not that they are technically or mathematically more difficult than anything you’ll find in the previous three books, but to apply them in practice is quite hard.
I’ll have Charlie Munger present to you the gist of the book: The basic idea of that it was hard to find good stocks, and it was hard to find good investments, and that you wanted to be in good investments.
And therefore, you find a few of them that you knew a lot about, and concentrate on those. It seemed to me such a good idea.
And indeed, it’s proved to be a good idea. Yet, 98 per cent of the investing world doesn’t follow it. That’s been good for us. It’s been good for you. Phil Fisher introduced Warren Buffett to buying great companies and holding on to them forever.
And Fisher practised what he preached. His and his clients’ investment in Motorola allegedly became a 2000-bagger after he had held on to it for many decades. With a 2000-bagger, you only need $500 invested in becoming a millionaire.
One of the book’s highlights is when Phil Fisher presents how individual investors can use main street resources to beat Wall Street.
He advises serious investors to investigate companies by talking to their suppliers, customers, employees, ex-employees, and, best of all – competitors. He says that if you talk to the top 5 companies within a specific industry and ask each company about the other 4, you’d have a good picture afterwards of who the strongest player in the business is.
5. The Intelligent Investor
Number 5 on this list is The Intelligent Investor by Benjamin Graham. I know, everyone knows – this list could never have been without it.
After all, I’m not exactly unbiased. Benjamin Graham is “the father of value investing” and was the teacher of Warren Buffett. The Intelligent Investor is his most famous work, even though I would argue that it’s not the complete one.
The book is more technical than the previous books on this list, but it has stood the test of time,
considering that it was first published in 1949. You’ll probably not get the most out of it if you aren’t at least a bit experienced in the investing field.
It’s also 640 pages long. The book has three core messages:
- Intrinsic value: A stock is a piece of a business, which means that it has an intrinsic (or real) value
- Mr Market: The stock market swings from too pessimistic to too optimistic.
Mr Market’s unpredictable moods do not sway a true investor; he merely sees rising and falling prices as an opportunity, not as a conveyor of information.
- Margin of Safety: Decisions in the stock market must always be made with a built-in margin of safety.
This means you should insist on buying stocks with a large discount on their intrinsic (or real) business value. So those are the key takeaways. And I wouldn’t want to argue with Warren Buffett about which chapters
that is the most important from the book:
Chapters 8 and 20 are all you need to do to get rich in this world. If you could say that Warren Buffett has written any of the books on this list, it would be this one.
6. The Essays of Warren Buffett
Number 6 is “The Essays of Warren Buffett“, a book where Lawrence Cunningham has rearranged and structured the most important takeaways from all of Berkshire Hathaway’s annual shareholder letters into a book.
Buffett wrote these letters himself, and the book was published in 1997. The book is 328 pages long, but there’s so much meat here.
Buffett covers everything from the activity required to become a great investor to mergers & acquisitions, to what a shitty place Wall Street is, to the evolution of the newspaper business to human psychology, to the failure of academics in finance, to the importance of contrarianism, and back to what a shitty place Wall Street is again.
Buffett is an exceptional writer, teacher and investor, and it shows in this book. Sometimes, even though he is trying his best to explain his thinking to a lesser experienced audience, it just shows how far ahead his mind is, and it can be quite difficult to grasp some of the concepts. An exceptional book nonetheless.
Almost Berkshire Hathaway’s annual shareholders letters can be found can find almost all of Berkshire Hathaway’s annual shareholder letters at berkshirehathaway.com/letters for free. Still, Lawrence Cunningham does a great job of distilling the information.
7. Security Analysis
And for the final pick among my seven favourite books about investing, we have Security Analysis, also written by Benjamin Graham.
I’d say that Security Analysis is Graham’s magnum opus, even though the Intelligent Investor has gained more popularity. It just covers a lot more information. And at a massive 851 pages divided into 52 chapters, that makes sense.
You’ll learn everything from the psychology of investing to different types of securities, financial statements, portfolio structure, and stock market movements.
I recommend you get the 2nd edition of the book from 1940 if you decide to buy it. This edition has a lot of great examples, and a few of the later versions of the book have distorted Graham’s words a bit.
Here, I’ll highlight three of my favourite chapters from Security Analysis: Chapter 2, which covers the importance of studying qualitative and quantitative data in your search for excellent returns.
How these two differ in their value and correctness is discussed—in chapter 43, which is about the significance of current-asset values in listed market companies.
This is the key ingredient for screening for ultimately stocks like Benjamin Graham was famous for doing. And chapter 50 is about the discrepancies which sometimes occur between the price and the value of stocks.
The chapter is about where you are most likely to find discrepancies, how you can be more certain once you think you’ve found them, and about an alternative approach to stock market investing, which I haven’t investigated too much myself.
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What is the number 1 personal finance book of all time?
The Automatic Millionaire by David Bach
Out of 12 books by David Bach on personal finance, 11 are national bestsellers. Two, including “The Automatic Millionaire”: A Powerful One Step Plan to Live and Finish Rich, have reached the No. The New York Times Bestsellers List, No. 1.
What book should I read to understand money?
Benjamin Graham published The Intelligent investor: The Definitive Guide to Value Investing. This book is a classic. Graham, an economist and professor, published it in 1949.
What is a good book to read about financial success?
Rich Dad Poor Dad by Robert T. …
Money: Master The Game by Tony Robbins.
The Barefoot Investor by Scott Pape. …
The One-Page Financial Plan by Carl Richards. …
The Intelligent Investor by Benjamin Graham. …
The Little Book That Beats The Market by Joel Greenblatt. …
The Millionaire Fastlane by MJ DeMarco.
What is the best book to understand stock market and world economics?
The Intelligent Investor – Benjamin Graham
This book is the holy grail for stock market investors and must-read for all. Benjamin Graham, the mentor to Warren Buffett, wrote this book.
Is stocks to riches a good book?
It received high praises for its valuable content and clear presentation. Parag Parikh, an Indian entrepreneur and author. He has published two books: Value Investing and Behavioral Finance as of October 2012. Stocks To Riches is an insight into investor behavior.