The books in this list will provide you with some of the most popular and highly regarded investment books of all times. They will give you must needed knowledge that will help you to invest with confidence. You will learn how Warren Buffett achieves his average annual returns of 20.9% versus the minuscule 9.9% for the market over the last 50 year period. You will also get to know how Benjamin Graham was able to achieve returns of 14.7% annually versus 12.2% for the market as a whole from 1936-1956 and much more.
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These books may be dated. However, their principles and strategies remain relevant because of there pedigree and track record. I have personally read all the books listed. I would not allow myself to provide you with a book recommendation without personally evaluating and assessing each book and the value contained within. We will begin with my favourite book, by Benjamin Graham.
#1: The Intelligent Investor: The Definitive Book On Value Investing
Author: Benjamin Graham
The Intelligent Investor is widely regarded as one of the best investing books of all time. Despite its original 1949 publish date, the information contained within is still relevant today. To quote Warren Buffett, it is “By far the best book on investing ever written.” This book covers the areas of investing including: The past century of stock market history, general portfolio policies to follow, how you should interpret market fluctuations and much more. It provided me with the knowledge needed to independently select stocks with confidence.
Value Investing Approach
As the name of the book would suggest, Graham employed a value investing approach. He pursued stocks which he believed were worth more than their current market quotation would suggest. Essentially, he would buy stocks trading at $0.50 that he believed had an intrinsic value of $1.00. This strategy awarded him with above average returns over his career (as discussed below), while providing safety of principle for himself and his clients.
Benjamin Graham, the author, was an extraordinary person. He attended Columbia Business School on a scholarship. (Columbia Business School currently holds the #7 position worldwide for its MBA program). Graham graduated from Colombia as the salutatorian of the class at the young age of 20.
As mentioned previously, he gained at least 14.7% annually for his clients versus 12.2% for the overall stock market. This became known as one of the best long-term track records in history. Warren Buffett, one of Graham’s most successful students, originally developed his investment philosophy around the principles Graham advised. Here is a resource for more information about how to invest like Graham.
Grab your copy here: The Intelligent Investor
#2: The Warren Buffett Way
Author: Robert G. Hagstrom
The Warren Buffett Way provides an insight into Buffett’s investment techniques and practices. It is a great read and if you would like to learn more about Warren Buffett and his investment methodology, there is no better place to look. Originally published in 1994, it contains updated accounts to ensure the contents remain relevant today.
Containing forewords from some of the greatest investors of all time, this is an essential book for new investors. That list includes Howard Marks, co-founder of Oaktree Capital Management (a global asset management firm with over $122 billion in assets under management) and Peter Lynch, former mutual fund manager and philanthropist who averaged returns of 29.2% annually between 1977 and 1990.
Legendary Track Record
The Warren Buffet Way is a comprehensive investment resource and Hagstrom has provided us with an in-depth insight into Buffett’s investment career. It details how he was able to turn $100 in 1957 into a personal net worth of over $80 billion today. Buffett is known for his impressive record of returns throughout his investment career. From 1964-2017, his holding company, Berkshire Hathaway, achieved average annual returns of 20.9%. Versus 9.9% (including dividends) for the S&P 500.
Hagstrom has provided us with an in-depth insight into some of Buffett’s largest and most significant investments and their outcomes. Companies such as Coca-Cola and The Washington Post are included. Hagstrom has also explored less common areas of investing, including behavioural finance and the mathematics of focus investing.
The Warren Buffett Way will give you an insight into the techniques and strategies employed by one of the most successful stock market investors of all time.
The author, Robert G. Hagstrom, is the chief investment strategist and managing director for Legg Mason Investment Counsel. He has also authored other investment books including “Investing: The Last Liberal Art” and “The Essential Buffett: Timeless Principles for the New Economy.” This is a great buy for value investors and belongs on every serious investors shelf at home.
Get it cheap with our discount link for Amazon: The Warren Buffett Way
#3: Common Stocks And Uncommon Profits
Author: Phillip A. Fisher
Common Stocks and Uncommon Profits, originally published in 1958 and much like The Intelligent Investor, it is a comprehensive investment resource. This book is a more compact guide on stock market investments. It contains topics including Fisher’s acclaimed “scuttlebutt” strategy, what stocks to buy, when to buy and when to sell. The book also outlines how to apply Fisher’s ideas to suit your own needs.
Common Stocks and Uncommon Profits is by no means a simple guide to stock market investment. More advanced stock selection strategies are explored within this content. The book alone has provided me with the knowledge needed to begin investing in the stock market employing a growth stock approach, which will be explored further below.
Fisher’s Investment Philosophy
Fisher’s investment philosophy was quite different to Graham’s. Fisher took what I call a growth stock approach. He purchased companies with a strong likelihood of increasing their earnings in the future. Consequently, increasing their market quotation. Typically, “growth stocks” that pay minimal if any dividend but gross huge returns on sale of the shares.
Fisher’s “scuttlebutt” strategy was based on the belief that every piece of information about a company should be exploited. This is to provide you with the highest level of knowledge about a stock before making a purchase.
Fisher would go to great lengths to learn more about a company before making an investment. He is known to have contacted current and former employees, suppliers and even top-level management of the company under consideration. To quote Fisher: “When it comes to selecting growth stocks, the rewards for proper action are so huge and the penalty for poor judgement is so great that it is hard to see why anyone would want to select a growth stock on the basis of superficial knowledge.”
Grab a copy with 30% off on Amazon: Common Stocks And Uncommon Profits here!
#4: Unshakeable: Your Financial Freedom Playbook
Author: Tony Robbins
Unshakeable, published on February 28, 2017, is one of my favourite personal finance books. Not only is it a New York Times best seller, 100% of the profits from the book are donated by Tony Robbins to Feeding America.
The stock market is not the primary focus of this book, however there are certainly chapters directed towards stock market investment. Tony will teach you how to properly allocate your assets, explain why index funds are preferable over managed funds and teach you how to navigate through crashes and corrections in the market.
This is more than just a finance book. You will also learn how human behaviour and psychology can negatively affect your investment returns, as well as how to combat those innate vulnerabilities that have been hardwired in all of us as humans. Seen on the back cover of Unshakeable: “No matter your salary, your stage of life or when you started, this book will provide the tools to help you achieve your financial goals more rapidly than you ever thought possible.”
Tony is an American author, entrepreneur, philanthropist and life coach. He is known for his infomercials, seminars and self-help books including Unlimited Power and Money: Master the Game. He is the founder of several companies that earn approximately $6 billion in annual sales. If you are looking for a book that encompasses more than just the field of investing, but the financial industry, this is a must buy.
Get your copy: Unshakeable: Your Financial Freedom Playbook
#5: Rich Dad's Guide to Investing: What the Rich Invest In, That the Poor and Middle Class Do Not!
Author: Robert T. Kiyosaki
Personal finance author and lecturer Robert T. Kiyosaki developed his unique economic outlook from two very different influences - his two fathers. One father (Robert's real father) was a highly educated man but financially poor. The other was the father of Robert's best friend, that dad was a college drop-out who became a self-made multi-millionaire. In this follow-up to the bestselling Rich Dad, Poor Dad, he reveals the secret of how the wealthiest people become wealthier by presenting some simple investing secrets and explaining how anyone can enjoy cash benefits merely by knowing where and how best to invest their money.
One of the important points Robert talks about is that investments are not risky, but investors are, because they handle money and investments without being financially literate. Financial literacy should be the #1 priority of those who want to grow rich. For this, they must study about how money works and stop listening to hot tips and seasonal flavours on how to grow money quickly.
Robert reminds us that investing is not a race and how you should not compare your net worth with someone else’s, also how you should never feel anxious about how well you are doing. You should invest based on your personal financial goals and if your investment grows in accordance with that goal, you don’t need to worry about others success.
His best lesson in this book is how to understand financial statements. He talks about a simple way to make financial statements before acting on any investment, the statement shows him, income, expenditure, assets and liabilities. As a rich person, he always looks to use the expenses section of the report to put things inside the assets section so they give him a regular income. To break it down quickly, assets are things that put money back into the cash flow and liabilities are things that take it away. He encourages us to read multiple statements so we get the full picture of how money is flowing in and out of the company. For example, a house is only an asset if the rental income from your tenant covers the expense of the mortgage loan, maintenance, and property tax. Alternatively if you can sell the house for a higher price than you bought it for.
Finally, Robert teaches the types of income and types of investment. The types of income are earned, portfolio and passive, all self explanatory. The types of investment are much more helpful, the first one is for safety. This is the money you can’t afford to loss, investments for this money includes bank deposits or government bonds. Number two is for comfort. Once your basic needs are taken care of, you can increase your income to give yourself a more comfortable lifestyle, this investment is generally more risky and will mostly be made up of portfolio income instruments. Finally there is an instrumental investment, this is high risk and you need to invest time as well as money to build an asset, but once the asset is complete you can leave it to earn you money.
Get your's on Amazon today: Rich Dad's Guide to Investing: What the Rich Invest In, That the Poor and Middle Class Do Not!
#6: The Behavioural Investor
Author: Daniel Crosby
From the New York Times bestselling author of the book named the best investment book of 2017 comes The Behavioural Investor, an applied look at how psychology ought to inform the art and science of investment management.
In The Behavioural Investor, psychologist and asset manager Dr. Daniel Crosby examines the sociological, neurological and psychological factors that influence our investment decisions and sets forth practical solutions for improving both returns and behaviour. Readers will be treated to the most comprehensive examination of investor behaviour to date and will leave with concrete solutions for refining decision-making processes, increasing self-awareness and constraining the fatal flaws to which most investors are prone.
The Behavioural Investor takes a tour of human nature before arriving at the specifics of portfolio construction, embedded in the belief that it is only as we come to a deep understanding of "why" that we are left with any clue as to "how" we ought to invest. The book is comprised of three parts, which are as follows:
- An explanation of the sociological, neurological and physiological barriers to sound investment decision-making. Readers will leave with an improved understanding of how externalizes impact choices in nearly undetectable ways and begin to understand the impact of these pressures on investment selection.
- Coverage of the four primary psychological tendencies that impact investment behaviour. Although human behaviour is undoubtedly complex, in an investment context our choices are largely driven by one of the four factors discussed herein. Readers will emerge with an improved understanding of their own behaviour, increased humility and a lens through which to vet decisions of all types.
- Illuminates the "so what" of Parts One and Two and provides a framework for managing wealth in a manner consistent with the realities of our contextual and behavioural shortcomings. Readers will leave with a deeper understanding of the psychological underpinnings of popular investment approaches such as value and momentum and appreciate why all types of successful investing have psychology at their core.
Wealth, truly considered, has at least as much to do with psychological as financial well-being. The Behavioural Investor aims to enrich readers in the most holistic sense of the word, leaving them with tools for compounding both wealth and knowledge.
Click this link to see the current price on Amazon: The Behavioural Investor
#7: The Four Pillars of Investing: Lessons for Building a Winning Portfolio
Author: William Bernstein
Dr. William Bernstein is more than just a neurologist. He's also a top rated investor and innovative financial thinker, and he brings these skills to The Four Pillars of Investing to create an initial education for those curious about the world of investing. Combining the four pillars - the Theory, History, Psychology, and Business of investing - Bernstein creates a well-rounded strategy to help you in creating a sound investment plan. Parts of this book delve into asset allocation, wealth management, and the human aspect of decision making when investing.
By learning these four pillars an independent investor can construct a superior investment portfolio to grow and manage. To create the perfect portfolio you need to believe these main points.
Firstly, no guts, no glory, you need to focus on risk over reward to judge whether or not the investment is worth your time and money. However, you can’t let fear of losing worry you out of an investment.
Secondly, measuring the beast. In a nutshell, Bernstein shows that anything you buy will increase in value in only one of two ways: it pays you for holding it (in the form of dividends), or the demand for it increases. This goes for stocks, but it also goes for any other investment – gold, for example, doesn’t pay any dividends, so it’s entirely based on demand.
Next on the list is, the market is smarter than you. This is basically a thirty page compression of the material found in A Random Walk Down Wall Street, and it comes to much the same conclusion as Malkiel’s book. The stock market is too random to effectively manage and time in the short term. In effect, if you take all of the mutual fund managers out there and average their returns, you get the same return as the broad stock market. Then subtract their pay, and you get an overall return significantly below the broad stock market. So, why not just bypass all of this and invest in the broad stock market as a whole without the managers? That’s what it means to invest in an index fund.
Finally, the perfect portfolio. These percentages outline how you should divide your investment to best protect your money.
- 40% Vanguard total stock market index
- 30% Vanguard total international stock index
- 20% Vanguard total bond market index
- 10% Vanguard REIT index fund
Given the overall recommendation of indexing, I tried to create a Bernstein-approved portfolio based on Vanguard index funds. This is a four-fund strategy that matches the ideas that Bernstein delivers in the first four chapters of the book.
Grab your copy here: The Four Pillars of Investing: Lessons for Building a Winning Portfolio
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