My Top 10 Investment Books

 I have made a list of 10 investment books I recommend to read before starting to pick individual stocks and why not before investing in actively managed funds. For index fund investors, just do not stop investing when the market falls as historically the market has recovered (at least the recovery from Corona was very fast).

1. The Intelligent Investor by Benjamin Graham

Summary of what you need to be aware of when investing your money in stocks, funds or any other financial asset. The book is a easy to read version of Security Analysis (investor bible), however it contains a lot of information i.e. how to look at company per-share earnings and the importance of reading footnotes. Advice on stock picking, bonds and funds are indirectly given as well as information on the market and its history which is very useful. If you want to index or pick individual stock, bonds or funds this is a must read.

2. One Up On Wall Street by Peter Lynch

If you want some information about how to pick stocks this is a good book to begin with. Peter Lynch summarizes his investment success in this book as well as how the market has behaved during his years on Wall Street. The book is easy to read and gives you the fundamentals of how Peter Lynch made it and beat the market. Much of this book focuses indirectly on the psychological part of investing as you will face different scenarios where the stock has gone down or up and should you buy now, buy more, sell the stock, wait and sell later or hold it till you are at breakeven?

3. The Little Book On Common Sense Investing by John C. Bogle

John Bogle (1929-2019) founder of Vanguard writes about his views on saving for a better future and retirement. Bogles views have been to mainly focus on indexing as you hardly can beat the market many years in a row, pointing out the high management fees some funds take yet not being able to beat the market, eventually the price you pay is very high in the long run. A good book fore every beginner to understand that there is nothing wrong with indexing and taking the return of stock markets at a low cost. It is better to be "average" then to lose your money trying to time the market. 

4. The Little Book That Beats The Market by Joel Greenblatt

Joel Greenblatt, partner at Gotham Funds, tells his story of how he spotted a way to invest with limited risk and still gain huge returns over the long run (Magic Formula). Here you have to note that his way of investing can be very volatile and should only be implemented by people with a strong stomach. The book is a really good read for the rest of us and something to value as his advice might come in handy from time to time.

5. Security Analysis by Benjamin Graham & David Dodd

The "Investors bible" in my opinion and a must read for anyone who wants to pick individual stocks, bonds or funds. This book is for individuals who want to analyse companies, bonds and other investment instruments. Over 700 pages of information how to look at different situations, values assets and businesses. 

6. Margin of Safety by Seth Klarman

In Margin of Safety Seth Klarman summarizes his perspectives on investing, mentioning that a company with different businesses where one is using a lot of cash while the other is generating a lot of royalty income can be a good investment. The book reminds a bit of Security Analysis yet is not as detailed in analyzing a business. In summary could say that the book point out psychology and analysis as important values a investor needs to be successful.

7. The Devil's Financial Dictionary by Jason Zweig

Jason Zweig explains in a funny way what different words and expressions means from investment world perspective. The book is entertaining in every way as well as educating to be more sceptical of what you are told and what explanations are used in different market situations. If you want to have a bit of fun you should read this book, one of my favourite explanations relates to Basis Points:

"Our management fee is only 50 basis points, said Phil D. Hopper, a portfolio manager at the investment firm Tucker, Cash & Left in Grosse Point, Michigan. "That's a bargain for the services we provide." Asked why the license plate on his Maserati in the firm's parking lot read "50 BPS,"  Mr. Hopper cleared his throat and replied, "That stands for 50 bauds per second, the spead of my first modem."

8. Warren Buffett's Ground Rules by Jeremy Miller

If you want to read a short summary of Warren Buffet's letters to shareholders, this is a must read. Jeremy Miller summarizes in a successful way Mr Buffet's letters as well as ground rules of Buffet's successful investing. It jumps from topics like taxation to indexing and emotions when investing in stocks. 

9. Behavioral Finance and Wealth Management by Michael M. Pompian

"People in standard finance are rational. People in behavioral finance are normal" Meir Statman, is a good start to introduce Michael Pompians book. it focuses on behavioral perspectives of managing your money and describes everyday issues we might confront with in normal mathematics. It is fun to read the book and mostly does not even feel like you are reading a book on investing, instead it is like jokes and point to note when making decisions. Practical examples are given and also ways of maybe challenge your asset manager to see if they really are working for you or for their own bonus.

10. Financial Shenanigans by Howard M. Shilit and Jeremy Perler

For those who want to find accounting frauds and discrepancy in companies filings this is the book. Examples on how companies report earnings, revenue and balance sheet adjustments which might indicate fraud or creative accounting will be given in this book. Well equipped with many real life examples of companies who committed fraud or were fined for their reporting method are given. This book complements Security Analysis for those who are willing to invest in individual companies. I really enjoyed this book and go back to it from time to time to remind me of what pitfalls there are.

Should you read all of the books?

Depends, if you want to invest in individual stocks then definitely YES. You learn a lot from them and will be equipped with ability to analyse a company, have the stomach to resist temptation and be able to spot value at a good price. Note that someone might say that a company like Tesla would have passed by based on these books, however if you are invested in an index then you will eventually have a small investment in the company at the end. And as Buffet as said "you don't have to swing at every pitch". 

There are a lot of other investment books which are really good and could recommend. The books covered in this post have learned me lot (in addition to accounting and tax courser as well as working with accounting) and strongly recommed younger me to read before investing in individual stocks.

If I would be forced to choose only two books it would be The Intelligent Investor and Margin of Safety.