The Best Investing Books Ever Written (2017 Edition)
I’ve read over 100 books on investing. To be frank, most of them were a complete waste of time.
Most investment books will not stand the test of time, they are gimmicky, empty, or simply looking at historical data and inferring (incorrectly) that these strategies will work in the future. So called “back-testing”.
Any such book is written by authors who’ve fallen victim to both the hindsight and confirmation fallacies, which is a real psychological phenomenon.
After being an investor for over 15 years and reading the popular literature, I’ve narrowed down my list of the best books on investment ever written.
The top investment books usually share common wisdom that the average investor can understand and apply.
- Focus on safety and reducing risk;
- Acknowledge the role of psychology;
- Achieve a reasonable return;
- Minimize cost;
- Buy and hold;
- High Quality Issues; and
I can say with confidence that as of 2017, if you only read these books on investing and apply their lessons, you will be miles ahead of the average investor in the long run.
John Bogle, the founder of Vanguard, makes an irrefutable case that trying to “outperform the market” is statistically highly unlikely. Since every trade is simply a buyer and a seller, that in aggregate for every winner there is a loser.
Except that most transactions also have a third party, the [broker/investment advisor/fund manager/parasite] gets paid no matter what.
This creates the effect that the best you can expect, on average, is the performance of the market, minus fees.
In addition, as time passes, the more actively you/your fund trades, the more the impact of fees have on your compounding effect.
Bogle’s solution? Buy an ETF that tracks the market performance and aims to minimize fees. (Some are as low as 0.05%. Compared with 1% and higher for many mutual funds, and 2% and higher with hedge funds)
Warren Buffett endorses not only this idea, and not only John Bogle, but Vanguard’s ETFs as well. I also agree it’s a fool’s game to try to outperform the market.
At Berkshire Hathaway’s annual shareholder meeting in 2017, Warren Buffett acknowledged John Bogle and said he “has done a great service to the American investor”.
If the world’s greatest investor says this is “by far, the great book on investing ever written”, anything further I can say is redundant.
What I can say is this: The advice in this book, written in the 70s, is still just as relevant today as it was then. The lessons in this book are timeless and will always be true.
The only reason this goes below John Bogle’s book is that, in the 70s, there was no such thing a low-fee ETF. A large part of the book is describing the activities an investor would need to undertake to create their own ETF-like portfolio. (The defensive investor).
For what Graham calls “The Enterprising Investor”, he does offer a stock picking method that is proven to be able to beat the market while preserving your capital, known as value investing.
While Warren Buffett may say that his mentor’s book “The Intelligent Investor” is the best book, it seems to me that Phil Fisher’s book “Common Stocks and Uncommon Profits” most resembles Berkshire Hathaway’s current investment philosophy.
The wisdom in this book is echoed in Charlie Munger and Warren Buffett’s most famous quotes.
While this book does advocate stock picking, I love the emphasis on the underlying business, and virtually nothing about the stock market itself.
He talks about what makes a great business and what kinds of businesses stand the test of time. Businesses that last forever (or extremely long) can be worth extremely high prices. As such, there isn’t a large emphasis on ensuring your price is a “bargain”.
Concepts such as an economic moat, an inherently good business, long term prospects and good management are all explained in detail, and it’s very easy to understand.
Brandon Turner’s book on rental property investing, one of the easiest to understand, and aligned with the great wisdom of top investors, is the best book a prospective real-estate investor can buy.
This book focuses on true investment, unlike the majority of real-estate books which focus on speculation. The main theme of this book is how to find undervalued properties that generate positive cash flow on the rental income, after taxes and expenses.
Since you can compare this discount cash flow to risk free assets such as treasuries, stocks and corporate bonds, you can make intelligent decisions about price.
Many other real-estate books encourage you to take out massive leverage and risk by purchasing houses, renovating them and flipping them. This of course, is speculation that someone in the future will purchase the property for more than it’s worth. Of course this can work, but it is still a speculation.
This book is very easy to understand, even a high school student could easily apply the learning (of course, they might not have the credit and income to execute).
The foremost books on understanding and valuating all types of securities, from stocks, bonds, preferred shares, convertible issues and more.
This book, written by Benjamin Graham and David Dodd is the most in depth text on the analysis and valuation of securities.
It is not an easy read; by no means should the average investor read this. If you do find that security analysis is your passion, it makes good sense to read this book. Primarily, I think many people will find that security analysis is not for everyone.
While the mathematics are not impossible, you likely do need above average skills with numbers. In addition, it’s not the most exciting line of work. You really have to have a passion for it, and if you can get through this holy grail of a book, being an enterprising investor might be right up your alley.
This book focuses primarily on value investing, but does have very relevant information for investors looking into growth companies as well.