Absolute must reads before you begin to invest↓
Everybody has to start somewhere, and oftentimes people find the idea of investing their hard-earned money by themselves to be a bit intimidating. Sorting out a starting place can be difficult as well with the overwhelming amount of information out there today. Well look no further, these books have got you covered.
Perfect for the beginner investor, but valuable for all investors, these resources will leave you confident and eager. Note that this list has a value investing lean to it. Remember, it is our mission to not lose money first, and then compound our earnings year after year. Value investing, in my opinion, is the safest and most time-proven strategy available to accomplish this.
If you really have no clue about investing and want to start from ground zero, then this should be your starting point. Mr. Kelly walks you through the very basic definitions, explains almost every metric, and even highlights some investing gurus, and their strategies, along the way.
This book should be used as a reference guide by every new investor for the amount of definitions and groundwork it contains. When you inevitably stumble upon a concept you don't understand or forgot, this book is a helpful and informative crutch to lean on.
When it comes down to it, investing is like anything else in life, practice makes you better. And this series, which includes 3 books (How to Get Started in Stocks, How to Select Winning Stocks, and How to Refine Your Stock Strategy), offers explanations, plenty of practice, and quizzes to help you understand and retain key investing concepts.
There are several workbooks out there, but I recommend this series because of its added coverage on personal finance and financial statements. The books seem to have a value investing philosophy embedded in them as well.
The main reason I included this book is because of the simple and effective groundwork it lays out. Joel Greenblatt, founder of Gotham Capital, has had great success using the formula he details here. Basically built on earnings and return on capital, Greenblatt's strategy is easy to understand, easy to calculate, and, most importantly, easy to follow.
If you are looking for a plan without getting too involved, then this is for you. While not one of my favorites for building your own investing framework, it does provide some of the more simple and straightforward explanations regarding value investing.
Reading The Dhandho Investor, by Mohnish Pabrai, will be a light-bulb moment for many investors. If the following books somehow don't light a fire under you then Pabrai's low-risk, high-reward strategy will. And judging by his success using value investing principles, he certainly knows what he's talking about.
Pabrai excellently details several value investing principles such as "Heads I win! Tails, I don't lose that much" and portfolio allocation that are vital to the individual investor. His unique insight into utilizing an offshoot of the Kelly Criterion is worth the read alone. I highly recommend this book.
So far this has been the best book I have found detailing Warren Buffett's strategy in a clear and understandable manner (besides his own letters, see below). Buffettology surprised me with the intricate descriptions of Mr. Buffett's proven approach to investing as well as some of his more basic valuation techniques. It just seems to have more meat than a lot of other books.
All-in-all, one of the best "Buffett" books out there and one of my favorites. As a bonus, there is also a Buffettology workbook that can assist with understanding certain concepts.
Investing wisdom brought to you by none other than the Oracle of Omaha himself. These letters are full of great information, educating the reader on topics such as financial statements, economics, general business, and investing.
There are several books out there claiming knowledge of Buffett's strategies, but why go anywhere else. This book has organized, categorized, and visualized Mr. Buffett's personal letters for your educational purposes. Basically mandatory for every investor, not just the beginner. Also available in website form here.
The Father of Value Investing. The Dean of Wall Street. Warren Buffett's Mentor. Call Benjamin Graham what you may, but put simply, he was a very smart man. The Intelligent Investor is the bible of value investors for many reasons. It introduced margin of safety, the idea of buying great companies at discounted prices, and Mr. Market, your manic-depressive partner who sells stocks.
As Buffet states about Graham's book, "Chapters 8 and 20 have been the bedrock of my investing activities for more than 60 years... he taught me how to think about a stock and how to think about a stock market." Pretty strong sales pitch.
Seth Klarman, manager of The Baupost Group, has made very successful career using the tenants of value investing and we should all listen to what he has to say. Warren Buffett once said, "The three most important words in investing are margin of safety." And quite simply, nobody can so eloquently and simply explain this concept better than Mr. Klarman.
Brilliant descriptions of value investing strategies and concepts are packed into the first sections of this book with more advanced techniques to finish up. I know, this book is very hard to find and super expensive, but I have heard there are PDFs floating around...
Probably the most thorough, simple, and enjoyable book on this list. Honestly, if you only read one book on this list, make it this one. Mr. Lynch was one of the most successful mutual fund managers of all time averaging almost 30% returns for over 13 years!
The reason I love this book is because it teaches the individual not only why, but how to invest yourself. He provides the reader with detailed information about how he invests and what he looks for in companies. I can't stress enough how valuable this resource is for the individual investor. I use several of Mr. Lynch's tactics everyday and in the YourPortfolio Software.
George S. Clason
While this may seem like an upset for the #1 spot, let me explain. The MOST important thing before you begin investing is to have your personal finances in order. This tiny and easy-to-read book sums up just about every personal finance resource out there through entertaining and ancient parables.
Topics from getting out of debt, saving more than what you spend, and building wealth are explained with incredible simplicity. Start here and I guarantee you will not be disappointed.
Never has the Efficient Market Theory (EMT) been so eloquently and so thoroughly dismantled than in this 1984 article (based on a speech to Columbia Business School) from Warren Buffett. Buffett dismisses the idea that it's impossible to beat the stock market, that the only way to have incredible returns is through luck. And he does so by using cold, hard facts.
The article highlights several successful portfolios and funds that have all used some form of the "Graham and Doddsville" value investing strategy. The message is simple, all of these investors used separate tactics, while following value investing principles, and still had incredible results. A succinct blow to the EMT.