Investing is one of those skills
which take just a week to learn but a life time to perfect. And what’s better
than reading classic investment books to learn and perfect this skill to
nurture your life with returns and rewards. Here is a quick review of Top 5 All-time
best books published in the world of Investing, which are simple and easy enough
for a non-finance professional to read and understand the basics of investing.
With hundreds of new investment books appearing on shelves each year, a Top-5 short
list is very difficult to determine. But some books are just irreplaceable with
the sheer genius of writer and their marquee content. Here is a quick insight
into what is best at the investment book shelf:
The Warren Buffett Way: Investment Strategies of the World's Greatest
Investor
Robert Hagstrom (1997)
There is no dearth of good books
on the greatest investor of our times – Warren Buffett. And there is no
shortage of stories about this legend as well. Buffett, also known as “The Oracle
of Omaha”, is famous for his iconic investments –Coca Cola, Gillette, American
Express, Wal-Mart, The Washington Post, GEICO and so on. He purchased a
struggling textile mill early in his career, Berkshire Hathway, and turned the
firm around into an asset holding company. Last known assets of Berkshire Hathway
ran into $62 Billion, and he has been holding his stock investments for more
than decades now.
The book highlights the key
aspects of Warren Buffett value investment methodology. The company Buffett is
looking to invest should have simple-to-understand Business Model, Sustainable
competitive advantage or defendable “Moat” around the business and sufficient large
scale as well. Additionally, Buffett looks for honest and dedicated Management
team, Consistent Earning Power, and little or No Debt on Books. Finally,
Buffett looks for good value price to buy the stock.
Per Buffett, it’s most important
to get entry into a stock at a good value price, because you can never dictate the
exit price. So the Purchase price should have a margin of safety, so that even
if markets close down for the next 10 years, you should not repent or think
about exiting the company in haste.
One Up On Wall Street
Peter Lynch (1989)
Peter Lynch is the guru of Growth
Investing and gave a very simple mantra to investors – Invest in Names that you
know. i.e. Buy companies that you see everyday around you and admire for their
quality, trust and good brand name. Lynch was running one of the most successful
mutual funds of our times - Fidelity Investments ’ Magellan Fund - for over thirteen years. Over his thirteen
years of running the Magellan, the fund returned a phenomenal 29.2% return compounded
annually. That’s double that of S&P 15.8% return’s over the same period, and
is almost impossible for any equity mutual fund to surpass in modern history
for this long a timeframe. An investor having invested $ 10,000 into Magellan fund
the day Lynch began managing, would have a staggering $280,000 corpus 13 years
later when Lynch left the fund.
“One Up on Wall Street” is Lynch’s
own story, told by him and by co-author John Rothchild. Lynch believed that
everyday investor could do better than sophisticated Fund Managers, because of the
simple investment fundamentals Lynch explains in this book.
Lynch believed that as small
retail investors you can know the best companies because you interact with them
on daily basis, you can invest in upcoming smallcap companies which large funds
simply cannot because they have a mandate of investing in large, liquid companies
only. And as a retail investor, investing your own capital you don’t have the
pressure to deliver every quarter, so you can take a medium term or long term
view in a company which can emerge into a star tomorrow and buy that at today’s
value price.
Lynch believed in his own mantra,
and unlike a typical mutual fund, he invested in several smallcaps, some of them
later emerged to be “ten-baggers” – a phrase coined by Lynch himself. At one
point of time, his fund Magellan was invested into 1400 different companies,
and Magellan’s competition used to say that Magellan has actually invested in
the entire stock market itself! With his commonsense investing mantra and
keep-it-simple investing model, Lynch is guru and role-model for all modern day
retail investors.
Hot Commodities: How Anyone Can Invest Profitably in the World's Best
Market
Jim Rogers (2004)
Jim Rogers is the most colorful
of all investment gurus. He has travelled around the world on his motor-cycle, rode
through 116 countries, took his wife along with him and scouted for investment
opportunities in remotest areas such as Africa’s battle-torn regions, Asia,
Latin America, remotest parts of Australia and snow covered erstwhile USSR. In
his initial career years, Rogers worked as a partner with George Soros, who is
famous for taking a bet against GBP and known as the person who broke the bank
of England through his gigantic GBP trading call.
Rogers is a renowned commodities
guru and is often featured on television channels speaking his mind on investment
in Agro commodities, investment in Gold, his affection for China and his famous
apathy for currencies. His book, “Hot Commodities: How Anyone Can Invest
Profitably in the World's Best Market” is one of the best commodity guide for
common investor looking to learn the seemingly complex world of commodities
such as Crude Oil, Precious Metals, Agro Commodities and Base Metals.
Rogers defines the fundamental
need for investors to realize that although currencies can be printed ad
infinitum, natural commodities cannot be made artificially. So an obvious bet
for long term investor is to invest in commodities because they will appreciate
due to asset bubbles, growing demand and limited supply of agricultural land, oil
wells and metal mines. Through his lucid and entertaining approach, Rogers
explains the myriad methods of commodity world in arguably the best book
written on commodity investing till date.
The Intelligent Investor
Benjamin Graham (1949)
No discussion on Investing or a
List of Investment Books would be ever complete without mentioning the guru who
started it all. Graham is known as the father of Value investing. Before Graham
laid down the basic principles of how to value a stock, stock investments were
just looked upon as speculative instruments bought and sold for immediate short
term profits. Graham is also famous for his most well known pupil, Warren
Buffett, who describes Graham as the fundamental influence on his investing
methods.
Graham in his book “The
Intelligent Investor’ lays down the framework on how to value a stock and what
is the best value price to buy a stock. Value
investing differs from the proponents of “efficient markets” who think that stock
market is an efficient judge of stock prices at all times. Value investing
believes in investing when the market is poorly valuing a good company and
getting out when market is richly valuing a company with average fundamentals.
“Mr. Market”, a phrase coined by
Graham is the most apt description of stock markets, which are often swayed by panic
attacks into the depth of crashes or buoyed into crazy valuations during the heights
of optimism. Mr. Market, per Graham, is manic depressive and is either too
happy or too depressive, and hence at most times offers an opportunity to
either buy at value price or sell at costly prices and hence make profit for value
investors.
Graham has made immense
contribution to the field of Stock Investing and this book is a must read for
serious investors. Only issue the reader might face is that the case studies
and companies described would not be recent as this volume was published decades
earlier, however the investing principles would be applicable today as well as
they were applicable half century ago.
Reminiscences of a Stock Operator
Edwin Lefèvre (1923)
“Reminiscences of a Stock
Operator” is the odd one out of this reading list. This is not your typical
investment bible, but story of biggest ever stock speculator of our times –
Jesse Livermore. This novel was described as a “font of investment wisdom” by Alan
Greespan, for bringing to life, the very nature of stock markets, stock investments
and human behavior. Livermore started his journey through bucket shop stock trading
when he was just a kid, and soon enough all bucket shop owners knew which
customer to avoid! The kid on the block used to make a clean sweep by his
acumen, his tape reading skills and his understanding of human sentiment, which
plays an equally strong role at a bucket shop as it does in oak paneled board
rooms of billion dollar investment houses.
The oldest and most apt pearls of
investment wisdom come routinely from this book, such as this: “It never was my thinking that made the big
money for me. It always was my sitting. You always find lots of early bulls in
bull markets and early bears in bear markets. I've known many men who were
right at exactly the right time, and began buying or selling stocks when prices
were at the very level which should show the greatest profit. Men who can both
be right and sit tight are uncommon” – Jesse Livermore
Livermore made his fortunes
several times on Wall Street and lost it one time too many. He died a death of
penury, but taught so many valuable skills to generations of stock market
investors as to how to recognize human sentiment in markets, how to spot a bull
run and bear rampage early on, how to sit tight through the bull-run to
maximize your profits and finally how to exit when the going is still good. For
these reasons and many more, this book always finds a place in any top 5 List of
investment classics.
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