Investing books that go above and beyond
- September 27th, 2012
This post originally appeared a couple of weeks ago at the new Amazon Money & Markets blog which also includes content from the likes of John Bogle and Ken Fisher. I hope you enjoy this take on some must-read investment books. My plan is to write another post (or two) on the topic. Please leave a comment with some additional investment books (and categories) you think are worth covering.
In the introduction to my recently published book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere I write: “Investing is hard.” In my day-to-day job as a blogger I have written this not altogether grammatically correct phrase any number of times. Now after having written a book on investing I should probably also note that: “Writing a book on investing is really hard.” That is why the vast majority of books on investing simply aren’t all that good.
Therefore investors, both novice and experienced, should be selective in their consumption of financial media, including finance and investing books. As much as well all need a continuing education in the ever-evolving world finance we also need to be sure that we don’t get sidetracked into strategies and tactics that do not help us meet our ultimate financial goals. Hopefully this list will help readers of the Amazon Money & Markets blog pick and choose among the many available finance books.
This list was inspired by an e-mail from an Abnormal Returns reader who was looking for a list of books that went above and beyond what was contained in my book. Many of these books appear in the bibliography to my book, but others, especially the recently published do not. So without any further here are some books that I think can help round out an investor’s education.
Finance: a first stop for investors should be an understanding of financial theory and practice.
- Justin Fox, The Myth of the Rational Markets: A History of Risk, Reward and Delusion on Wall Street is a sweeping history of academic finance and how in turn finance theory affected markets themselves.
- David Swensen, Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment is a look at how over the past two decades influential institutional investors went about investing their hundreds of billions of dollars. Swensen also published a book, Unconventional Success: A Fundamental Approach to Personal Investment, geared more towards individual investors.
- Antti Ilmanen; Expected Returns: An Investor’s Guide to Harvesting Market Rewards is the most technical book on this list but is a comprehensive look at the current state of academic finance.
Value investing: the world’s greatest investors are often best categorized as value investors, so an understanding of value investing is a must.
- Benjamin Graham, The Intelligent Investor: A Book of Practical Counsel is the oldest book on the list and is for many the best introduction to value investing.
- Alice Schroeder, The Snowball: Warren Buffett and the Business of Life is not strictly a book on investing but rather a biography of arguably the world’s greatest investor.
- Howard Marks, The Most Important Thing: Uncommon Sense for the Thoughtful Investor is chock full of wisdom and got blurbed by Warren Buffett himself. Need I say more.
Psychology: the hardest part of investing isn’t the markets, but understanding our own often irrational actions.
- Daniel Kahneman, Thinking Fast and Slow is not strictly an investment book but will help you think about how you think and where common cognitive pitfalls lie.
- Carl Richards, The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money is less a book about investing and more about our relationship with money which in many ways is far more important to understand.
- James Montier, The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy brings to bear behavioral finance research onto our investing decisions.
Narrative finance: the best way to learn about a topic is often through an interesting story, well told. These books take the reader on a journey through three recent, crucial periods in the markets.
- Roger Lowenstein, When Genius Failed: The Rise and Fall of Long Term Capital Management takes a look at how investing’s first ‘super group’ profited and then nearly brought down the financial system.
- Michael Lewis, The Big Short: Inside the Doomsday Machine is both a history of the financial crisis and a profile of those select investors who profited from the downfall of the housing market. See also Gregory Zuckerman’s The Greatest Trade Ever which covers some of the same territory.
- Scott Patterson, Dark Pools: High-Speed Traders, A.I. Bandits and The Threat to the Global Financial System is a history of electronic trading and how it rose from some very humble origins to dominate trading on Wall Street.
Recently published: here are some new (and forthcoming) books also worth noting.
- Jack Schwager, Hedge Fund Market Wizards extends the very popular Market Wizards franchise via in-depth interviews with some of the smartest hedge fund managers working today.
- Eric Falkenstein, The Missing Risk Premium: Why Low Volatility Investing Works has the potential to change the way you think about the fundamental relationship between risk and return.
- Michael Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports and Investing hasn’t come out yet but as a fan of Maouboussin’s prior books this one looks to be another must-read especially in light of the subject matter.
This list is by no means exhaustive, because I have left off entire categories, like hedge funds and portfolio management, that are worth further study. Nor should this list be static. The financial markets, and our relationship to them, are constantly changing. That is why so many of us are fascinated by the investing game and keep looking for a deeper understanding of finance in books and online.
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- Thursday links: understanding Wall Street
- 6 Essential Principles from Pragmatic Capitalism by Cullen Roche
- Wednesday links: the multiplier effect
- Tuesday links: knowledge alone
- To bond ETF or not: an excerpt from Rational Expectations by William Bernstein
- Monday links: excessive valuations
- Sunday links: paralyzed with fear
- Top clicks this week on Abnormal Returns
- Saturday links: ripe for disruption
- Friday links: investor class attentions