When I started investing, I mostly learned by reading articles on the internet. The online articles were good but lacked the depth I expected. That’s when I turned to investment books – especially classic books whose principles have stood the test of time.
Here are my favorites. A few of them are high level and philosophical while others get into the nitty-gritty of investing. I enjoyed reading these books and re-visit them at least once a year. I also gift these books to friends and family every year.
The Richest Man in Babylon By George S. Clason
This classic book does a fantastic job of emphasizing the importance of living below your means and, saving (at least 10%) and investing the rest. The author also advises readers to avoid debt. The book also stresses the importance of improving your skills and avoiding procrastination.
The book makes its point stick with the reader through tales from ancient Babylon. The author George S. Clason was a businessman and writer. The book was written in 1926, yet the timeless advice and principles from this book are relevant even today.
This book had a great impact on me and I recommend it to everyone. It is a short book that is easy to read. So even if you are a reluctant reader, you will get through it easily.
Four Pillars of Investing By William Bernstein
Author William Bernstein’s “Four pillars of investing” are Theory, History, Psychology, and Business.
Markets fluctuate every day but a good investor knows know that it is impossible to time the stock market. But when the investor takes the long term view of the market (think decades), returns are more predictable.
To be a good investor, you must study the history of the stock market. Markets can go to extremes in both directions. The stock market bubbles of the 1990 and the underperformance of the 1970s should remind investors that extremes can last for years. Investors make mistakes by trying to get in and out of the market at the wrong time.
The author says, “The biggest obstacle to your investment success is staring out at you from your mirror”. Investors should focus on indexing and asset allocation. It is boring investing this way but will pay off in the long run.
The author warns investors to be wary of “the business of investing”. Your advisor (if you still have one) doesn’t have an incentive to steer you to good investments. He or she is more concerned about collecting fees. Financial publications and TV personalities are not financial experts either.
Random Walk Down Wall Street By Burton G. Malkiel
This is a classic book on investing written by Burton G. Malkiel. The book states that though the market may not be perfectly efficient at all times, it is very difficult for an investor to beat the market. An investor should simply own a market index fund. Instead of trying to pick stocks, the author encourages investors to focus on asset allocation.
The book was written in 1973 and refreshed multiple times since then with new editions. The book is known for saying that monkeys throwing darts can beat professional Wall Street managers.
The author eloquently addresses fundamental vs technical analysis question and concludes both techniques producer inferior returns compared to investing in index funds.
I found the book an easy read but people new to investing may find the book heavy with investing jargon. The book is easy to read and has nuggets of wisdom for every investor.
The Intelligent Investor by Benjamin Graham
This is a classic book on value investing. Graham was Warren Buffet’s professor and mentor. Naturally, there is a lot of overlap in their investing styles.
The book teaches the importance of analyzing the business and investing for the long haul. It is also important to invest with a margin of safety and not to overpay for stocks.
Steer clear of investment advisors and brokers as they make money in fees and commissions, and do no increase portfolio returns. The book covers a wide variety of topics including asset allocation, diversification, market fluctuation, and many more.
The Intelligent Investor is a classic book on value investing every investor should read. The principles covered in this book have stood the test of time and will add value to your investment analysis.