10 Indispensable Books for Investing Better

Worldwide Invest Better Day 9/25/2012

This month, my Foolish colleagues and I are taking a step back to help you learn the basics of investing. One key to learning is making sure you have the best resources you can find.

Charlie Munger once said that he has known "no wise people who didn't read all the time -- none, zero." In fact he reads so much that his children would laugh, describing him as a "book with a couple of legs sticking out."

From what I've seen, reading appears to be the competitive advantage of great investors. So, I thought it might be helpful to put together an annotated list of some of the best investing books of all time. Here are ten to consider:

1. One Up On Wall Street by Peter Lynch
In this classic, Peter Lynch makes a very persuasive case that the individual investor can do very well by buying great companies for the long term. He even opens the book by saying that "any normal person using the customary three percent of the brain can pick stocks just as well [as], if not better than[,] the average Wall Street analyst."

Lynch then goes on to show how the ordinary investor can do this. The book is wildly entertaining, and is arguably the most engaging investment book ever written. If you've never read it before, stop everything and pick up a copy. It could change your life.

2. The Intelligent Investor by Benjamin Graham
Warren Buffett believes The Intelligent Investor is "by far the best book about investing ever written," and few value investors would disagree with that assessment. If the field of investing has a bible, this is it.

Graham's goal is to lay out a "positive program for common-stock investment," and he accomplishes his goal in an extremely thorough fashion. Chapter 20, which is titled "'Margin of Safety' as the Central Concept of Investment," should be required reading for all investors.

3. Margin of Safety by Seth Klarman
This book, by one of the most respected value investors in the world today, has become a cult classic. Currently out of print, the book sells for $1,700 on Amazon.com at the moment. Yep, that's not a misprint, and I wouldn't suggest that anyone pay that price for it.

If you can get a hold of a copy somehow, however, you won't be disappointed. I found this book to be extremely clear in laying out the most important tenets of value investing. The chapter on the "art of business valuation" is particularly helpful. Klarman is one of those rare breeds who is both smart and clear.

4. You Can Be a Stock Market Genius by Joel Greenblatt
This book is a very useful introduction to special situations investing. Greenblatt succeeds in making a highly complex subject accessible for novice investors.

Like Lynch, Greenblatt believes that the ordinary investor can succeed in the market. In fact, he argues that ordinary investors have the "power to beat the pants off the so-called market 'experts.'" His arguments supporting this view are very compelling, and challenge common assumptions about the market.

5. Buffett: The Making of an American Capitalist by Roger Lowenstein
All men need a well-made and versatile navy blazer that they can pull off the rack for any occasion. And all investors need an excellent biography of Warren Buffett on their shelves. This one remains the best, in my opinion.

6. Your Money and Your Brain by Jason Zweig
Why do smart people do dumb things? Jason Zweig, who writes for The Wall Street Journal, tries to answer that question, particularly in regard to investing.

This book is an excellent introduction to the emerging field of neuroeconomics. Perhaps best of all, it shows how investors can improve their financial performance by having a better understanding of the brain. Jason Zweig is one of the most fascinating writers out there at the moment, and his website provides a lot of great resources for investors. Be sure to visit his website, if you have a chance.

7. Money Masters of Our Time by John Train
This book may not be as famous as others on this list, but I've learned a lot from it. It's a great reference on many of the investing giants.

Each chapter is a short profile of an investing luminary like Buffett, Templeton, Graham, and Fisher. The book is packed with anecdotes, and is a pleasure to read. Be sure to have a look at the invaluable appendixes as well.

8. Common Stocks and Uncommon Profits by Philip Fisher
Fisher advocated buying outstanding companies for the long term, and was an early student of innovation. This book, published in 1958, is now a classic, particularly for growth investors.

His "Fifteen Points to Look for in a Common Stock" -- which are included in Common Stocks and Uncommon Profits -- are a must-read for investors. Buffett is one of Fisher's biggest fans, and we love him here at The Motley Fool as well.

9. The Innovator's Dilemma by Clayton Christensen
This one isn't an investing book per se. But its insights are critical for investors, nonetheless. Silicon Valley legend Andy Grove, former CEO of Intel (Nasdaq: INTC  ) , once told an audience that this was the most important book he had read in 10 years.

In this book, investors can learn why great companies can become disrupted almost overnight. Blockbuster, for example, once had remarkably solid profit margins. But then Netflix (Nasdaq: NFLX  ) disrupted its business, and Blockbuster never recovered. Best Buy (NYSE: BBY  ) , which has been mercilessly disrupted by Amazon.com (Nasdaq: AMZN  ) , is another, more recent example of this phenomenon. Christensen, who teaches at Harvard Business School, has developed a framework here that allows us to make sense of rapidly changing industries.

10. The Investor's Anthology: Original Ideas From the Industry's Greatest Minds by Charles D. Ellis, ed.
This book provides articles by Adam Smith, Ben Graham, Warren Buffett, John Maynard Keynes, and many, many others. As a former history teacher, I'm a big fan of returning to the sources when you want to learn more about a topic. Here, you'll have a nice collection of primary documents for your personal library.

So, what'd I miss? Chime in below if you know of additional books that are indispensable for investors.

Also, be sure to check back throughout the month for other informative articles covering a wide range of important topics. We've set up a special website at InvestBetterDay.com, and on Sept. 25, we're taking a day to celebrate the art of investing. We'd love to have you with us! Take a look at the site now and get on the path to personal prosperity.

 

John Reeves does not own shares in any of the companies mentioned in the article. You can follow him on Twitter @TenBaggers.

The Motley Fool owns shares of Netflix, Intel, Amazon.com, and Best Buy. Motley Fool newsletter services have recommended buying shares of Netflix, Amazon.com, and Intel. Motley Fool newsletter services have recommended creating a bear put ladder position in Netflix. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (38) | Recommend This Article (91)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 10, 2012, at 5:30 PM, dontgopoor wrote:

    SOLD: Don't Go Poor and Miserable Being Sold Happiness helps you understand how to not be sold to - a big part of knowing why you buy an investment.

  • Report this Comment On September 10, 2012, at 5:34 PM, theadamrodriguez wrote:

    Thanks!

  • Report this Comment On September 10, 2012, at 5:40 PM, REGINALDCIPRIANI wrote:

    I SUBSCRIBED TO INSIDE VALUE.PART OF THE OFFER WAS STOCK PICK OF THE MONTH.

    I HAVE NOT RECIEVED ANY COMMUNICATION ON THIS TO DATE.

  • Report this Comment On September 10, 2012, at 5:50 PM, TheDumbMoney2 wrote:

    Ben Graham's Securities Analysis is also great, though parts of it are not relevant to a tpical equities investor. Intelligent Investor contains most of what you need though. I'd also add that the edition of The Intelligent Investor edited by Jason Zweig is terrific, and I feel Zweig adds a lot of value in his introductions and analysis.. I own two editions, that one and the original editions.

    But I also HIGHLY recommend "Financial Shenanigans" by Howard M. Schilit. Goes through many of the ways in which companies manipulate financial statements, with step-by-step examples. It's a must for anyone who is not a full-blown CPA but is interested in going beyond the basics of business valuation. I would maybe bump #10 in favor of this one.

  • Report this Comment On September 10, 2012, at 5:53 PM, TMFBane wrote:

    @REGINALDCIPRIANI,

    Sorry for the problem with your subscription. This article is part of our free site.

    Here's a link to contact our premium services customer support team:

    http://www.fool.com/help/index.htm?display=EmailSupport&...

  • Report this Comment On September 10, 2012, at 7:06 PM, mpb0344 wrote:

    The Zweig book is okay, but "Why Smart People Make Big Money Mistakes..." by Belsky and Gilovich is more accessible and more useful to investors.

  • Report this Comment On September 10, 2012, at 9:41 PM, Molesto46 wrote:

    Motley Fool "You should be ashamed fofr the publicity u have in your blogs, unbeleivable garbage". I never thought u could do it. that´s called "deteroration".

  • Report this Comment On September 11, 2012, at 5:08 AM, snez wrote:

    "The Richest Man in Babylon" - should be required reading for all high schoolers.

    P.S. Thanks dfishman44

  • Report this Comment On September 11, 2012, at 7:25 AM, kayakmastr wrote:

    I am amazed. Even a piece providing useful information is met with negative responses.

  • Report this Comment On September 11, 2012, at 8:15 AM, ukgrande wrote:

    Thanks for the list. The Lynch and Graham books are both excellent recommendations. I would add Michael Porter's Competitive Strategy. I read it about 20 years ago (and need to read again) and found it to be very insightful and helpful in analyzing the strengths and weaknesses of a company's competitive advantages.

  • Report this Comment On September 11, 2012, at 9:13 AM, bigc4242 wrote:

    I am looking for investing books for teenagers - I teach a group of 8 teenage girls about finances and I've already had them read "The Motley Fool Investment Guide for Teens". Does anyone have any suggestions for a good, entertaining read for teenagers? I appreciate all the help.

    Thanks,

    Chad

    (chadlovesteph@gmail.com)

  • Report this Comment On September 11, 2012, at 9:49 AM, Threedollarbill wrote:

    I found The Motley Fool book, You Have More Than You Think at a garage sale, and it got me into investing back around 2000. It's clear, fun, and easy to understand. From there I read Peter Lynch's book, One Up on Wall St., and the follow up book to that. The above list is a good list to add to your library or books to find at the library to become a better investor. Thanks.

  • Report this Comment On September 11, 2012, at 9:58 AM, CromulentBrad wrote:

    chad, peter lynch also wrote "learn to earn," which i think would be appropriate for high school kids.

    it starts with a basic primer on business and how capitalism started. i hope your girls enjoy it.

  • Report this Comment On September 11, 2012, at 10:20 AM, peatyg wrote:

    I would add "A Random Walk Down Wall Street" by Burton Malkiel

  • Report this Comment On September 11, 2012, at 10:56 AM, abeeman924 wrote:

    ditto what peatyg said, you have to include "A Random Walk Down Wall Street" to appease to all those efficient market peeps

  • Report this Comment On September 11, 2012, at 4:34 PM, JadedFoolalex wrote:

    Add "The Four Pillars of Investing" by William Bernstein, "Contrarian Investing" by Davis Dreman, "The Little Book of Common Sense Investing" by John C, Bogle, " The Millionaire Next Door" by Thomas J. Stanley & William D. Stanko, "The Wealthy Barber" by David Chilton and "The Davis Dynasty" to your library and you won't be steered wrong!

    peatyg adds Random Walk which is also a good book!

  • Report this Comment On September 11, 2012, at 4:38 PM, JadedFoolalex wrote:

    Forgot to add "The Intelligent Asset Allocator" by William Bernstein!

  • Report this Comment On September 11, 2012, at 6:17 PM, 48ozhalfgallons wrote:

    RCA..... Kodak...... Blockbuster..... BestBuy...... Apple

  • Report this Comment On September 11, 2012, at 7:02 PM, jsn1080 wrote:

    These are all good recommendations. If you'd like a recommendation in which people can "invest" in themselves, I would suggest 'How to Win Friends and Influence People' by Dale Carnegie. Someone who reads this book and implements its rather common sense approach to interpersonal relationships, will reap substantial dividends (both financial and otherwise.)

    After all, Warren Buffet enrolled in Dale Carnegie classes and it helped him tremendously. I also read the book shortly after high school graduation and it served me well.

  • Report this Comment On September 12, 2012, at 9:03 AM, TMFBane wrote:

    Great suggestions, everyone! Keep ‘em coming.

    I must admit that I thought long and hard about putting “Random Walk Down Wall Street” on there. It’s excellent for beginning investors. I also think anything by John Bogle is helpful. His “Little Book of Common Sense Investing” is another good introductory book.

    Finally, if you haven’t read Buffett’s “The Superinvestors of Graham-and-Doddsville” you must stop everything right now, and read it. It’s not a book, so it won’t take very long. You can find it here:

    http://www.tilsonfunds.com/superinvestors.pdf

  • Report this Comment On September 12, 2012, at 9:35 AM, Truth2Power wrote:

    QUALITY OF EARNINGS by Thornton O'Glove is a must-read.

  • Report this Comment On September 12, 2012, at 11:29 AM, jsn1080 wrote:

    Although these are not necessarily "books", someone might as well mention Warren Buffet's letters to Berkshire owners. Talk about "common sense" investing, Warren Buffet explains the fundamentals in an easy to understand manner. I liked his most recent letter in which he discusses the speculation with gold prices. His letters dating back to 1977 can be found using the following link:

    http://www.berkshirehathaway.com/letters/letters.html

  • Report this Comment On September 12, 2012, at 4:54 PM, SunDevilDon wrote:

    "Warren Buffett and the Interpretation of Financial Statements" Mary Buffett & David Clark. It helped me first of all, with better understanding what I should be looking for in evaluating companies. It also explained for me what many of the entries really meant and which were more important and why.

  • Report this Comment On September 14, 2012, at 1:06 PM, JadedFoolalex wrote:

    "RCA..... Kodak...... Blockbuster..... BestBuy...... Apple" by 48ozhalfGallons...

    Sorry dude, yes, bad picks these, but even Warren Buffett has picked losers! Berkshire Hathaway was a dieing fabric mill when he bought it, but rather than admit he F'd up, he converted it into a holding company! The mills were all sold off and he took a huge loss on them! Lesson is "you got break a few eggs to make an omelet"!

  • Report this Comment On September 14, 2012, at 2:34 PM, TMFTheDoctor wrote:

    Seconding the Bernstein books. I've only read The Intelligent Asset Allocator, but it really helped shape my early knowledge of portfolio theory. The Four Pillars of Investing is supposed to be a more beginner-friendly version of the same ideas.

  • Report this Comment On September 14, 2012, at 8:36 PM, sidehiller wrote:

    I liked All About Dividend Investing, by Don Schreiber.

  • Report this Comment On September 14, 2012, at 9:27 PM, Lobachevsky3 wrote:

    The four that I have read from this list certainly deserve to be there: Ben Graham, Roger Lowenstein, John Train, Charles Ellis.

    "The Only Investment Guide You'll Ever Need" by Andrew Tobias is very readable -- short, entertaining, and full of excellent advice for beginners about what you can do and what you should not even consider (like futures and options). Its advice remains excellent when I reread it (getting the most recently updated version), and 30 years have passed since I was a beginner. Of course it's not really the only investment guide you'll ever need, but it's one of the best and it will prepare anyone for understanding the more advanced books cited in this article and by its commenters.

    I also recommend "Supermoney" by "Adam Smith" (nom de plume of George Goodman), published in 1973, bought by me for $1 off a remainder counter around 1980. This turned out to be my first value investment, because of its in-depth chapter about a then little known money master out in Omaha.

    To get some degree of understanding of our recent great meltdown via deregulation married to obscene greed married to stupidity and magnified by 30 to 1 leverage, don't miss "The Big Short" by Michael Lewis.

  • Report this Comment On September 16, 2012, at 12:00 AM, ggk189 wrote:

    very rarely the comments are as compelling as the good information summarized in the article.

  • Report this Comment On September 16, 2012, at 2:05 PM, CorralSpain wrote:

    Peter Lynch's book makes the top in most lists about the best books on investing. I agree it is a well written book; I enjoyed it. I would recommend it as an easy reading and entertaining book, with many gems inside, but not as a guide for novice investors. And the reason is that the inexperienced reader may extract some wrong conclusions.

    Some readers may conclude that the goal on stock investments is to chase 10-baggers. The author warns about the difficulties of jumping on one, but he is so enthusiastic about the cases he got that the reader may could think this is the central message of the book.

    Lynch explains the requirement of a proper due diligence but, again, his examples tend to transmit the opposite idea, that you know everything if you know the basics of the business. For instance, if you are a frequent visitor of the mall and a fashion expert, then you may predict the success of a new store chain without looking at its statements.

  • Report this Comment On September 17, 2012, at 4:48 PM, mikecart1 wrote:

    I don't see the following books listed:

    1) Jim Cramer's Real Money: Sane Investing in an Insane World

    2) Jim Cramer's Mad Money: Watch TV, Get Rich

    3) Jim Cramer's Getting Back to Even

    :)

  • Report this Comment On September 17, 2012, at 7:42 PM, TMFBane wrote:

    @mikecart1,

    Nice! I knew I was forgetting something...

  • Report this Comment On September 18, 2012, at 1:31 PM, Jedaharris0851 wrote:

    My takeaways from Peter Lynch's books are different than I've read from others readings of it. #1) The average investor can beat the mutual funds if they buy the best companies they can find and hold for 10 - 15 years. #2) Lynch couldn't successfully time the market so for us to try is a fool's errand. #3) Understand the businesses you invest in (and you can learn about some new industries). #4) Don't ignore the businesses that your wife and kids like (not invest in them to the exclusion of others, but put them on your list to research). This book changed my investment results completely - matched only by subscribing to The Motely Fool services.

  • Report this Comment On September 22, 2012, at 11:45 PM, traderjames1011 wrote:

    Just finished Chris Beanie's The Best Trading System. Great read. And it's not all about trading.

  • Report this Comment On October 03, 2012, at 8:48 AM, rpl3000 wrote:

    I've read MS and Intelligent Investor. Rarely do I see articles that reflect their content. Most financial news is severly short-sighted. Who has a portfolio that reflects the advice of The Intelligent Investor? My vanguard target fund is way off the mark according to that book.

    I think this is a clear example of everyone agreeing that these are great books and preach to follow their advice. Then the moment something pops or some statement is released everyone runs to their computer or e-trade app and sees what they can do about it.

  • Report this Comment On October 03, 2012, at 2:01 PM, NickD wrote:

    The Intelligent Investor is the only book you need its a College education for about $20 dollars

  • Report this Comment On October 10, 2012, at 9:59 PM, NextStep99 wrote:

    If your looking for a straightforward and easily understood book to help you get into investing, you really can't go past Andrew Hallam's -- Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned at School

    Andrew is a teacher with a million dollar+ portfolio and you really won't find an easier or safer way to do it -- especially if you'd prefer to keep the adviser fees for yourself.

    He has some great reviews on Amazon, where it topped the best seller list and is a favourite for gifting to teenagers just starting out.

    He is also writing regular columns for the Globe & Mail, as well as AssetBuilder.

    But rather than flog you the book...

    Visit his web site and check him out. His perspective is not necessarily unique, but his humour and the way he goes about it is.

    I hope the mods will allow the URL below, if not, Google " Andrew Hallam " You will be so glad you did!

    http://andrewhallam.com

  • Report this Comment On May 04, 2013, at 10:49 AM, Jouns wrote:

    Stocks and Exchange - the only Book you need

    Edition 2013

    Author: Ladis Konecny

    ISBN 9783848220656

    http://nr1a.com/STOCKS

  • Report this Comment On January 10, 2014, at 10:02 PM, investinglegend wrote:

    I'd say Invest Your Way To Riches (ASIN:B00EBZHEWW) and The Warren Buffet Way (ISBN:0471743674). Both are really great reads!

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