The best books to learn systematic stock market investing

Jason Kelly Author Of The 3% Signal: The Investing Technique That Will Change Your Life
By Jason Kelly

Who am I?

I am the author of The Neatest Little Guide to Stock Market Investing and The 3% Signal, among other financial books, and editor of The Kelly Letter. Despite having been ranked by CXO Advisory as one of the best stock-market forecasters, I gave up the practice in favor of price reaction. I realized that nobody knows where stocks are headed, myself included, and set out to find ways to beat the market without forecasting—and succeeded. My readers and I are now much happier and wealthier.

I wrote...

The 3% Signal: The Investing Technique That Will Change Your Life

By Jason Kelly,

Book cover of The 3% Signal: The Investing Technique That Will Change Your Life

What is my book about?

More than half of all stock-market forecasts are wrong, according to a CXO Advisory study. Even when a forecaster claims victory, it’s usually a coin-toss coincidence. What to do? Ignore forecasts in favor of rational price reaction. Instead of guessing the future, make your moves based on price change in relation to a growth target.

By targeting three percent quarterly growth and adjusting allocations to meet that goal, you can level the financial playing field and ensure a secure retirement free from the stress of noisy advice that doesn’t work. The plan’s simple technique cuts through the folly of human emotion by automatically buying low and selling high.

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The books I picked & why

Book cover of Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk

Why did I love this book?

I first encountered Gary Antonacci’s strategy in his paper “Risk Premia Harvesting Through Dual Momentum,” in which he called momentum “the premier market anomaly.” He found that combining absolute and relative momentum delivered optimal results. In this book, he shows how to boost performance with monthly switching among three asset classes in the following decision tree: Did the S&P 500 beat US bonds over the past 12 months? If no, own US bonds. If yes, did the S&P 500 beat global stocks over the past 12 months? If no, own global stocks. If yes, own the S&P 500. Just three funds could power this system: SPY (S&P 500), AGG (US bonds), VEU (global stocks ex US).

By Gary Antonacci,

Why should I read it?

1 author picked Dual Momentum Investing as one of their favorite books, and they share why you should read it.

What is this book about?

The strategy that consistently gets high returns with low risk--because it knows when to adapt

After examining more than two hundred years of data across dozens of markets and asset classes, the conclusion is clear: Momentum continually outperforms. However, most mainstream investors haven't had a way to fully discover and implement the benefits of momentum investing . . . until now! Whether you're an independent investor, investment professional, or money manager, Dual Momentum Investing enables you to consistently profit on major changes in relative strength and market trend.

Based on the award-winning work of Gary Antonacci, an expert in modern…

Book cover of The World's Simplest Stock Picking Strategy: How to make money investing in the companies in your life

Why did I love this book?

I liked this book enough to write a blurb for it, as follows: “Any plan that would have led investors to Amazon, Apple, and Google is fine by me—and this one would have. Edward Ryan has created a systematic framework for owning what you know, a tried-and-true tactic.” No less a luminary than Peter Lynch endorses the idea, and in this book you’ll learn five steps to systematize it: list your life activities, extract stock ideas from them, rank those stocks, invest, and manage the portfolio. The second step is the most interesting to me; it’s where you consider which products and services in your life are most likely to keep a stock moving higher.

By Edward W. Ryan,

Why should I read it?

1 author picked The World's Simplest Stock Picking Strategy as one of their favorite books, and they share why you should read it.

What is this book about?

Every investor needs an edge.

Professional investors on Wall Street have the best education, the deepest knowledge of company accounts, the latest technology, and teams of analysts at their disposal to help them identify the best stock investments. That is their edge. As a part-time, individual investor, you cannot compete on their turf.

What can you do? This is where The World's Simplest Stock Picking Strategy comes in.

As you go about your life, there are companies you interact with regularly as a consumer. Some companies will stand out to you as having remarkable products or services, which you use…

Book cover of The 12% Solution: Earn a 12% Average Annual Return on your Money

Why did I love this book?

This monthly approach uses three-month momentum to select two funds from a pool of four stock funds and two bond funds. The stock indexes are the S&P 500, S&P MidCap 400, Russell 2000, and Nasdaq, i.e. US large caps, mid caps, small caps, and tech. It’s not a revolutionary idea but provides a good introduction to major asset class switching, which runs circles around pundit guessing games. If you do nothing but swear off gut-guessing in favor of price reaction, you’ll beat almost everybody—including the supposed pros.

By David Alan Carter,

Why should I read it?

1 author picked The 12% Solution as one of their favorite books, and they share why you should read it.

What is this book about?

How to make money in stocks?

First step: don't trade stocks. In a radical departure from most investment books, a former day trader demonstrates how a simple asset allocation strategy that 'adapts' to changing market conditions has delivered a 12% average annual return over the past 10 years. What does 12% mean?

If you're familiar with investing basics, you'll know that figure comes close to doubling the average return of the benchmark S&P 500. It also outperforms 99% of all mutual funds.

But what's outperformance without protection? When the S&P 500 crashed in 2008 and lost 37% of its value,…

Book cover of Global Asset Allocation: A Survey of the World's Top Asset Allocation Strategies

Why did I love this book?

This book traverses the world to find asset allocation best practices, from master investors to lesser-known but equally helpful ones. The main takeaway is confirmation that basic asset classes are all you need, nothing exotic. All of the best systematic portfolios simply rearrange the basic asset classes in slightly different ways. The upshot for you? As long as you confine your portfolio management to these core building blocks, you probably won’t go wrong. It sure beats buying a penny stock everybody’s talking about.

By Mebane T. Faber,

Why should I read it?

1 author picked Global Asset Allocation as one of their favorite books, and they share why you should read it.

What is this book about?

With all of our focus on assets - and how much and when to allocate them - are we missing the bigger picture? Our book begins by reviewing the historical performance record of popular assets like stocks, bonds, and cash. We look at the impact inflation has on our money. We then start to examine how diversification through combining assets, in this case a simple stock and bond mix, works to mitigate the extreme drawdowns of risky asset classes. But we go beyond a limited stock/bond portfolio to consider a more global allocation that also takes into account real assets.…

Book cover of Quantitative Equity Portfolio Management: An Active Approach to Portfolio Construction and Management

Why did I love this book?

Ready to roll up your sleeves? This book takes work but is worth the mental energy. It’s a departure from most rules-based material in that it advocates applying objective odds when making subjective judgments. I prefer an all-algorithmic approach, but tip my hat to this hybrid strategy—far preferable to mainstream financial-media dart-tossing. Established patterns exist and are exploitable. Big-picture tactics trump lucky breaks. How much better the world would be if more people understood that bonds are less volatile than stocks. This book confirms that tweaking essential portfolio management factors to eke out a slight advantage runs circles around the casino mindset.

By Ludwig B. Chincarini, Daehwan Kim,

Why should I read it?

1 author picked Quantitative Equity Portfolio Management as one of their favorite books, and they share why you should read it.

What is this book about?

Praise for Quantitative Equity Portfolio Management

"A must-have reference for any equity portfolio manager or MBA student, this book is a comprehensive guide to all aspects of equity portfolio management, from factor models to tax management."ERIC ROSENFELD, Principal & Co-founder of JWM Partners

"This is an ambitious book that both develops the broad range of artillery employed in quantitative equity investment management and provides the reader with a host of relevant practical examples. The book excels in melding theory with practice."STEPHEN A. ROSS, Franco Modigliani Professor of Financial Economics, Massachusetts Institute of Technology

"The book is very comprehensive in its…

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