Here are seven books every investor should read in order to get on the path to long-term investing success -- and it's never too late to start investing!
1. The Essays of Warren Buffett: Lessons for Corporate America by Warren Buffett & Lawrence A. Cunningham
If it's good enough for one of America's best-known investors, then it's good enough for us! What Cunningham did was essentially arrange and annotate Warren Buffett's lengthy writings according to a specific theme. The result is a beautifully insightful book containing Buffett's letters to shareholders discussing Berkshire Hathaway's results and growth. Even if you aren't too interested in the chronicles of the company's development throughout the decades, you'll want to read Buffett's thoughts on investment and business. Like they say, old is gold.
2. The Little Book of Common Sense Investing by John C. Bogle
Many investment books are written by know-it-alls in a pompous manner. And then there's this one. Not only is The Little Book of Common Sense Investing written with a sense of frankness that I appreciate, but it also prominently features Bogle's wit and charm as he regales us with business tales that tell us how the founder of the highly successful Vanguard Group became the man he is today
The book has in-depth information on index investing, and while a huge chunk is dedicated to that subject (with iconic gurus like Warren Buffett, Benjamin Graham, and Paul Samuelson offering their insights), wannabe investors can also learn the most sensible ways to deal to with investment costs, taxes, and inflation. They will also learn to weigh the pros and cons -- with a bias toward the latter -- of actively managed mutual funds. Ultimately, Bogle makes the case that index funds are the most sensible investment choice.
This pocket-sized guide has absolutely zero fluff, with beautifully designed pages featuring tidbits of information, making it a great gift for investment beginners.
3. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel
The number of sales recorded by this 1.5 million-copy best-seller, originally published in 1973 and now in its 11th edition, proves that the more times change, the more things remain the same. The ideas outlined here are still very much relevant today. Malkiel argues that rather than trying to "beat the system," investors should find ways to benefit from a market index fund that invests in everything under the sun. You can expect some good anecdotes on the history of investing starting from 1592, as well as tales of early investment bubbles (the tulip mania craze in the Netherlands is one truly incredible example). Apart from that, prepare to be wowed by the author's controversial thoughts on stock valuation and the flaws he sees in both technical analysis and fundamental analysis.
4. Investment Psychology Explained: Classic Strategies to Beat the Markets by Martin J. Pring
Martin J. Pring certainly had something going when he wrote that every investor's worst enemy is him- or herself, because we humans experience emotions like fear, greed, panic, and hope, rendering us unable to make wise and consistent decisions. The content is easy to get into -- leave it on a coffee table, and anyone could pick it up and enjoy it -- and serves as an introduction to the importance of being in the right state of mind when making investment decisions.
This is basically a story about the good guys, the bad guys, and one guy who stood by and said, "I told you so!"
Many of us may have heard about the controversy involving the author, Greenlight Capital founder David Einhorn. He predicted Allied Capital's downfall due to corrupt accounting and gave reasons why Greenlight sold short sold shares. Some people listened, but others did not -- including the SEC, which even accused Einhorn of stock manipulation. Over time, Einhorn's predictions would be known to all, and it was through this book that more people would come to know how Greenlight Capital's investment research unearthed Allied's misdeeds.
Trivia: Did you know that Einhorn is quite the poker player? He took third place in the 2012 World Series of Poker and donated his $4.35 million winnings to an education-focused nonprofit. Whoever said there's a gambler inside every investor was right -- but sometimes there's a philanthropist as well.
6. Street Smarts: Adventures on the Road and in the Markets by Jim Rogers
This book is frightfully honest and so entertaining that you won't be able to put it down once you start reading it. Part investment bible, part travel guide, Street Smarts: Adventures on the Road and in the Markets is a most appropriate title for a book that details Jim Rogers' humble childhood in Alabama, salad days at Yale and Oxford and on Wall Street, as well as his worldly sojourns from Africa to Chile to Ohio before he settled down in Singapore. Some revelations you'll find in this book:
- Western influences (i.e., the U.S. and Europe) are dwindling, while Asia is fast becoming the global powerhouse (Rogers fully endorses learning Mandarin for this reason).
- Asia holds the promise of exciting new investments.
- Rogers recommends taking steps to change America's education and health care system, among other things, in order to start rebuilding the country from the foundation up.
Through his adventures, Rogers pens down his thoughts on economic, political, investment, and social analysis.
Paul Merriman is one of the most articulate investment writers in the industry, and yet he effortlessly conveys interesting facts that will have you thinking, "That was right in front of my eyes -- why didn't I think of that?" This book also outlines human psychological vulnerabilities and helps investors conquer them. Most notably, Merriman reveals that investors shouldn't try to beat the market, but instead should be the market. Only then will they be able to generate returns to meet their needs. The take-home message in this book seems to be to invest in low-cost funds, as Merriman pinpoints why index funds are an investor's best bet.
Ultimately, this is a book that every layman and intermediate investor would appreciate.