Investors who want learn more about investing, but don't have endless hours to spend reading every book ever written on the subject, might want to focus on these investing gems, which are recommended by three of our top Motley Fool contributors.
Jordan Wathen: I thought I liked investing, then I read Security Analysis by Benjamin Graham and learned I loved it.
Security Analysis is no easy read. It can be as sleep-inducing as a company's regulatory filings. And although it predates such innovations like the cash flow statement, and is full of lengthy prose fit only for an older book, it provides a timeless investment framework that all investors can benefit from. In particular, the concept of a margin of safety (building in room for error in your analysis) is what really stuck with me.
It also has a way of shaping the reader's thinking. Stocks aren't just tickers to be bought and sold. Stocks represent ownership in businesses, many of which have lived on for decades and centuries, and which will continue to produce earnings for their owners for years to come. Thus, investors have to look at a business as if they are part owner, because they are. That important lesson alone is reason enough I'm glad that this book is still on my shelf.
Todd Campbell: How I Made $2,000,000 in the Stock Market by Nicolas Darvas isn't as well known as some of the other investing books available, but it still rates must-read status.
Written in 1960, the book journals Darvas' experience as he navigates the world of investing during the 1950s. Darvas chronicles various attempts at successful investing until he finally settles upon a strategy that focuses on adding to winning stocks, rather than hunting for beaten up value plays.
His strategy contrasts sharply with the "buy-low, sell-high" conventional wisdom that permeates Wall Street and that's why it's an especially intriguing and worthwhile read. Darvas' approach is likely best suited to bull markets, and admittedly, investors interested in learning about risk control may be better off reading other books, such as Jack Schwager's Market Wizards series. But Darvas' advice to stick with winners is one that shouldn't be ignored.
After all, it's been found time and time again that investing in great companies for the long term is a more successful strategy than short-term trading, and a good argument could be made that investors who continually added to great stocks like Apple (NASDAQ:AAPL) over the past decade have been significantly rewarded.
Matt Frankel: Jordan and Todd already chose two of my favorites, but I'm going to go with One Up on Wall Street by Peter Lynch.
Before this book, I had read several books about how to value stocks, explaining things like P/E multiples, earnings growth, and other metrics. However, Lynch does a great job of introducing one concept all investors should know: that it's not all about the numbers.
Basically, the book shows how observations of the world around you combined with a basic knowledge of financial statements can allow the layperson to pick stocks as successfully as any Wall Street professional.
For instance, someone who goes to the mall often wouldn't have needed complex financial analysis to predict that teen clothing retailers like American Eagle (NYSE:AEO) and Aeropostale (OTC:AROPQ) haven't been doing as well as they used to. Conversely, by spotting growing trends, casual investors can figure out potential multi-baggers before Wall Street analysts can.
In a nutshell, this book teaches you how to become an excellent long-term investor by using Peter Lynch's time-tested methods. And, it is an excellent introduction to a complicated subject (stock investing) that pretty much anyone can understand and apply to their own portfolio.