The best investment books

Professional investors troop to Wharton School to sit at the feet of professor Siegel and learn about why stocks – or shares – should be the bedrock of any investment strategy for the very obvious reason that it’s the best way to capitalise on the steady growth of the American economy. And by implication, other growing economies. If you haven’t got skin in the game, you’re on the sidelines. A dry book unless you have an intellectual interest in investment, it is nevertheless extremely thought-provoking and enlightening. It’s been through several editions and is routinely updated to reflect the latest developments such as exchange-traded funds, the phenomenon of the millennium.

Subtitled How to Use Right Brain Instinct & Left Brain Smarts to Become a Master Trader, this book is written by one of the original Turtle Traders and draws on Curtis' experience in developing a whole-brain approach to trading. As such, it is a quantum leap from the run-of-the-mill trading book, and very worthy of some study.

I was privileged to get a review copy which so impressed me that I provided inside and back cover endorsements. I've only done so with a couple of other books, which should show you how greatly I believe in what he is presenting.

Stephen Huxley and J. Brent Burns bring the topics of dedicated portfolio theory and asset-liability management to life by discussing how to think about retirement investments in a new manner.

They discuss how bonds can be used to meet upcoming expenses, while stocks and other growth investments are earmarked for longer term expenses. This allows each asset class to perform as it was meant. Bonds provide fixed income rather than being used in an asset allocation model that treats them as less risky versions of stocks.

In 2022, we were all reminded how both stocks and bonds can lose value. But when individual bonds are held to maturity, investors know what they will receive. 

Buffett is probably not thrilled with this book, written by his ex-daughter-in-law, but I think it provides the best insight into his investment process. Mary Buffett was married to Buffett’s son Peter, and David Clark is a Chartered Financial Analyst (CFA) that skillfully explains some of the more technical aspects of investing. For example, the book discussed how Buffett values a stock. He primarily considers companies with a “moat” so he has confidence in forecasting their cash flows. He then projects these cash flows out at least ten years and discounts them back to the present to estimate their value. He will only buy at a significant discount to this estimated or “intrinsic” value.

The book outlines an array of “special situations” that may offer very profitable opportunities, i.e. bankruptcies, restructurings, merger securities, and spinoffs, among others. Greenblatt underscores the importance of a set of basic ‘rules’ when delving into the universe of special situations: do your own work, don’t trust anyone, pick your spot and assess the downside, not the upside. The basic premise of the book is that it pays off to search for areas where there is a high probability of finding undervalued equities. You can make a lot of money sticking to the tried-and-true method of investing in and holding good companies for many years. However, if you are a more experienced investor looking for other areas to invest part of your portfolio in, this book will give you several new places to explore.

Warren Buffet, the famous investor, is also revered as a master communicator. His annual Letters to Berkshire Hathaway Shareholders are models of clear, transparent writing. They are the best showcases I know for the impact of presenting difficult material in “plain English.” Buffet makes financial information accessible and even interesting to the layperson with an unassuming colloquial tone, humor, anecdotes, and language based on the concrete short words of natural speech. He always delivers substance, even acknowledging his own poor decisions.

The enviable result: he generates trust, the critical ingredient of persuasion. I love introducing students to Buffet’s writing and seeing them analyze what works so well. The letters are available online, but this book usefully collects them along with other Buffet writings and commentary.

Very good book covering the full investment process from the valuation of a business, to identifying a mispricing, to recognizing potential biases, and finally adding a business into a portfolio.

The concepts the book is dealing with, are derived from the Value Investing School at Columbia University where both the authors teach. The main raison d'être somebody would like to build a financial model is to use it to value an asset or a company.

I highly recommend it for the practical tips it provides on the valuation process.

As head of the Yale University endowment fund, the late David Swensen was one of the foremost innovators and most successful practitioners of institutional investing. Remarkably, he also wrote one of the best books ever for individual investors. Unconventional Success shows why on average, mutual fund investors significantly underperform the funds they own: They trade excessively, buying at the highs and selling at the lows, creating tax inefficiencies in the process. Swensen also valuably details hazards to avoid in fund selection. 

Financial journalist Jason Zweig shows how the young field of neuroeconomics explains the biological factors underlying smart people’s irrational investment decisions. For example, brain scans show that the fear center lights up when investors consider putting money into foreign stocks, despite the demonstrated value of international diversification. Also to their detriment, investors perceive patterns of returns where none exist. It’s imperative to understand these cognitive errors to get proper control over investments.   

No one wrote about money better than Jerry Goodman (under the pseudonym Adam Smith), whom you know from PBS’s long-running weekly Adam Smith’s Money World. When I read The Money Game, the crazy Go-Go years of the late 1960s were just ending. Now, with Jerry having gone on to that great Securities Repository in the Sky, his book would be a fun way for you to absorb that whole era in just a few hours.

Finance doesn’t easily lend itself to humor, but Richards will make you laugh. His insights into the human mind, and human frailties are pure gold. In The Behavior Gap he examines the bad decisions that nearly all investors seem to make before they become good investors. You will recognize yourself in Richards’ words and in his whimsical and thought-provoking illustrations. This book is not so much about the optimal strategies of investing, but rather it focuses on the mindset needed to carry out those strategies. Yes, even we professionals can sometimes fall prey to portfolio-destroying greed, fears, and pie-in-the-sky thinking. I have read Richards's book a number of times to help keep my head screwed on straight, and it works its magic every time!

The late Jack Bogle, founder of Vanguard Group, published this excellent book in 2009.

Consider the following apophyrical tale related in Chapter 10 of Enough: “Too Much Success, Not Enough Character.” It concerns an old greyhound who spent his days at a race track chasing a mechanical rabbit. Over the years, the dog had won over a million dollars for his owner but ultimately decided to quit: not because he was mistreated or had become disabled but because “I found out that the rabbit I was chasing wasn’t even real.”

Those who accumulate more money than they need in life and end up as the richest denizen in the cemetery would do well to reflect on the main premises of Enough. Remember, financial independence is about having income exceed expenses, no matter how modest those expenses might be. It’s about working only because you want to, not because you… show more.

This book has been the bible for technical analysts since its first iteration in 1985 and is a comprehensive guide to the established knowledge of the markets. It covers chart structure, trends, moving averages, oscillators, technical indicators, and all types of charts in the 542 pages of the 1999 edition, which added candlestick patterns to the older version, and is a great reference guide for all the traditional charting.

However, that is the latest edition, so it contains nothing on Ichimoku (cloud) charting, an incredibly interesting if esoteric development, which is one of the reasons I felt that I should write my book including these latest advances.

While Graham is the pioneer of value investing, there’s no question that his student, employee, and, ultimately, close friend Warren Buffett is its most successful practitioner. Although the essence of their respective approaches is similar, there are some important differences to understand. As the best book about Buffett’s investing style that I’ve encountered thus far, Hagstrom’s The Warren Buffett Way highlights some of Buffett’s most astonishing investment coups and the logic behind them. Upon reading both of those books, the reader will have gained a nuanced understanding of how Buffett took the Graham approach to business valuation/security selection and improved upon it. 

Forget bromides such as buying a stock because your experience with the company’s product has been good. The hugely successful money manager Howard Marks makes the essential point that the goal is not to find good companies but to make good purchases. “It’s not what you buy,” he says, “it’s what you pay for it.”  Investors who are interested in good outcomes rather than thrills will find many more sound principles in this book.

I had the pleasure of interviewing Charley for our book.

He’s a great storyteller. He was probably the first practitioner to advocate for passive index investing. He’s a tennis enthusiast, and his book was inspired by a book he read aimed at amateur tennis players. Ellis learned that to win at tennis, the best strategy is to simply try to not lose, and to not try to act like professional players.

He realized that the same strategy worked for investors as well. That means that investors shouldn’t try to beat the market.

This book is a powerful guide to creating a fulfilling and satisfying life.

Stoltz draws on his years of experience as a coach and mentor to provide readers with practical tools and strategies for achieving their goals and realizing their full potential. His insights into the power of positive thinking, the importance of setting goals, and the value of taking risks have inspired me to pursue my dreams with greater confidence and determination.

I highly recommend this book to anyone seeking to improve their outlook on life and create a better future for themselves.

Some people love to make successful investing seem more complicated than it really is. In this anthology of essays and letters written between 2010–20, Terry Smith makes the case for simply buying the best companies in the world. These are businesses that generate large amounts of cash and know what to do with it in the form of sound capital allocation. The result is a powerful compounding of returns for the long term.

This book serves as a good reiteration of the thinking and principles underpinning Smith’s investing approach, including his three-step investment mantra: “Buy good companies. Don’t overpay. Do nothing.” It also highlights the nuances of the process, including why Smith favors return on capital employed (ROCE) and free cash flow (FCF) yield as metrics for assessing companies and why Smith is less enamored of measures such as earnings per share (EPS).

This was one of the first investment books I read, and it has become a classic.

At the time I was a PhD student learning about concepts such as Modern Portfolio Theory and the Capital Asset Pricing Model. Malkiel explains in plain English what these concepts mean for investors. Before it was fashionable, he promoted index or passive investing versus actively selecting securities. Malkiel presents a practical life-cycle approach to investing.

The classic from 1972 is the book that inspired me to write 100 Baggers. Phelps studied all the stocks that returned at least 100 to 1 from 1932 to 1971. You’ll learn where to look for 100 to 1 stocks and what key traits to focus on. Phelps writes in a folksy and quotable manner as he expounds on his philosophy of buying right and holding on. He writes, “When I was a boy a carpenter working for my father made this sage observation: ‘A lot of shavings don’t make a good workman.’” Let Phelps show you the power of patient, long-term investing.