Over the years, I’ve read many book reviews on investing, economics and business. When I believe I can learn something from a book, I will buy the book and study it.
This article reviews some of the best books for investors and traders that I’ve read and learned from that have made me a better investor.
The book reviews have a format as explained below:
Reader: Here I tell who the book is for: Novice, trader, or experienced investor.
What you will learn: Self-explanatory. After reading some of the books, you can apply the lessons, strategies, concepts that can help you with your investing after you’ve studied the book. I let you know in this section. Here is an example: This is one of those books that give you enough investment knowledge and tips that will allow you to start investing after you’ve studied the book.
About the author: Most of the books are either written by an academic, a journalist/writer, or a successful investor, practitioner (I prefer these books). I let you know what group the author falls into.
I also put the books in a certain order, sections. I list them below:
Section 1 Profiles of Best Investors, Traders, the first seven books are profiles of the best investors, traders from stocks, commodities, and hedge funds. If you’re a novice investor, these books are a great start. You may connect with some of these investors/traders styles and investment philosophies. All these investors and traders are very different. The common threads of these investors/traders are: they master and stick to a style of investing/trading; they have discipline; they manage risk in their own ways.
Section 2 books by Professional Investors, books 8 – 12 are books about or by well-known investors. Most are fundamental, value investors. You can learn a lot from these pros.
Section 3 books by Academics and Researchers, books 13 – 23 are books written by academics from the top business/investment schools in the world. Some of the books focus on how to value a company; similar to how Wall Street values a firm when it wants to be sold or a company is looking to acquire another. Some of the authors are investors, but they’ve spent most of their careers as academics.
Section 4 are books on price, technical analysis, books 24, 25
A Random Walk Down Wall Street explains fundamental and technical analysis, book 13.
Section 1: Profiles of the Best Investors and Traders
1)25 Investment Classics by Leo Gough
Reader – This book is for all beginner investors and traders.
What you will learn – The title reads “Investment Classics” which is true as most of the books recommended were written decades ago. I have read many of the books listed and have recommended a handful in our list. For beginners, I would stick to the books that teach you how to select stocks and skip the books on stock market history and behavior.
About the author– Mr. Gough is a financial journalist and a private investor in the UK. He is also the editor of Taipan, a newsletter on direct equity investments in emerging markets.
2)Classics an Investor’s Anthology edited by, Charles D. Ellis
Reader – This book is for the experienced investor
What You Will Learn - This book covers the evolution of investment thought and the important concepts that the serious investor should be familiar with. Authors include, Warren Buffet, Benjamin Graham, David Dreman, William Sharpe, Adam Smith, John Templeton, the great investment thinkers and practitioners.
About the author - Charles D. Ellis is a Managing Director of Greenwich Associates, a business research and consulting company. He received his PhD from Stern and an MBA from Harvard
3)The Money Masters, by John Train
Reader – This is a good beginner’s book
What you will learn – It’s important for each investor to develop their own investment philosophy and discipline. This book will expose you to great stock investors, and you will learn their philosophies, styles and you should connect with one, and then you should learn more about that particular philosophy, methodology, discipline. The common thread of each investor is that they have their own investment philosophy, methodology and they stick to it. The conclusion of the book gives some very good stock picking advice.
About the author - John Train founded Train, Smith investment counsel. He is an investor and author of many books and has contributed articles to many financial and investment publications.
4) Market Wizards, by Jack D. Schwager
Reader – For Beginners
What you will learn – Although I don’t agree with, or I have never heard of some of the investors, traders in this book it is always important to learn from successful investors and traders. The Money Masters includes only stock pickers who are mostly value, long-term investors while Market Wizards includes short-term traders, including commodity traders as well as stock investors. Again, the common thread of many successful traders and investors is they master a discipline and stick to it. As a new investor/trader learn about as many strategies and disciplines as you can and then focus in on one and master it. The book is written in an interview format.
About the author – Jack D. Schwager is the Managing Member of Market Wizards Funds, L.L.C. Prior to Market Wizards Funds, he did futures research for 22 years for some of Wall Street’s
5) Investment Titans, by Jonathan Burton
Reader – This book is for the beginner-intermediate, conservative, serious investors. Most of the strategies are for your serious, long-term money.
What you will learn - There are some very important, concepts, lessons and advice from this book such as diversify with stocks that don’t go up and down together, finding the right mix of risk and reward for yourself, asset allocation. Many of the “Titan’s” are from academia and their advice is grounded in rigorous research. We mentioned Modern Portfolio Theory in the “Random Walk.” recommendation and many of its concepts and applications are discussed in this book. There is lots of good advice for the conservative, long-term investor and for your serious money.
About the Author: Jonathan Burton – The author is a journalist and author.
6) Investment Gurus, by Peter J. Tanous
Reader – This book is for the beginner-intermediate investor.
What you will learn – Again, more exposure to some of the best investment minds and money managers. Peter Tanous is an investment consultant who analyzes and recommends moneymanagers for institutions and wealthy individuals. He conducts interviews some of the best equity money managers and also academics who shape investment strategies and thought. The money managers include value, growth and momentum investors. The conclusion of the book discusses devising a personal investment plan.
About the author – Peter J. Tanous is President of Lynx Investment Advisory, Inc., a registered investment advisor. Mr. Tanous was formerly with Smith Barney as a Director and member of the Executive Committee.
7) The New Investment Superstars, by Lois Pelz
Reader – This book is for all investors and traders
What you will learn – What makes this book different than, Wizards and Money Masters is that it includes a more diverse group of investors and traders which includes alternative asset and hedge money managers as well as the traditional equity portfolio managers. What you can learn, especially now is to diversify your portfolio with non-correlated assets using market neutral strategies. Investors learn that there are other strategies besides a buy and hold
About the author – Lois Pelz is President of Infovest21, an information services company serving the alternative asset management industry.
Section 2: Books Written by Some of the Most Successful Money Managers
8) One Up on Wall Street, by Peter Lynch
Reader – This book is for long-term, serious investors. Advice would be appropriate for IRA accounts and other serious money.
What you will learn – One of the main points of this book is that the average investor has an advantage over big money managers because the individual investor can be more nimble. Another thesis that Mr. Lynch makes is that most individuals work in industries where you should have a competitive advantage of knowledge over investment professionals and investors should use that competitive knowledge in their investing. Mr. Lynch also gives lots of good stock picking advice. This is one of those books that gives you enough investment knowledge and tips that will allow to start investing after you’ve studied the book.
About the author – Peter Lynch is the legendary mutual fund manager of the multi-billion Magellan fund from 1977 to 1990. He is considered one of the best money managers in our generation and he also had one of the best track records. These are the type of books that I personally like to read, books written by professional investors who share their experience and knowledge on how they became a successful investor.
Investment philosophy of book and author – Buy stocks that you know from the products and services you use and from the industry you work in. Don’t be afraid to take lots of chances to nail the “multiple-bagger”.
9) John Neff on Investing, by John Neff
Reader – This book is for long-term, serious investors. Advice would be appropriate for IRA accounts and other serious money.
What you will learn – This book was written by the very successful mutual fund manager, John Neff. He shares his stock picking knowledge and experience with his readers. Mr. Neff is essentially a value, contrarian investor and he describes his approach. He goes over many of his successful picks chronologically. Personally, I think this is a very good way to learn about investing by learning from the legends.
About the author - John Neff managed the stellar Vanguard Windsor and Gemini funds for 31 years. During his tenure Mr. Neff was able to increase the fund nearly 56-fold and beat the S & P 500 Index by more than 2 to 1. Mr. Neff was not only very good, he was consistent which ranks him in the top tier of money managers of all time. John Neff retired in 1995 and readers are lucky that he wrote about his thoughts and experiences regarding investing in this book.
Investment philosophy of book and author – Mr. Neff is a value, contrarian investor and avoids fad stocks. He essentially tries to buy low and sell high.
10) Contrarian Investment Strategies, by David Dreman
Reader – This book is for the long-term, investors. Advice would be appropriate for IRA accounts and other serious money.
What you will learn – All investors should eventually adopt and formalize an investment philosophy that makes sense to them. This book explains the contrarian philosophy, strategies and its valuation metrics. Contrarian investing is buying stocks that are cheap and out of favor. I was surprised that the author also covers the psychology of contrarian investing and why it works. Most books do not cover the psychological aspects of investing, this one does. You will be able to start investing using the contrarian approach after reading and understanding this book.
About the author – David Dreman is the Chairman and Chief Investment Manager of the Dreman Value Management which has approximately $7.6 billion under management. Mr. Dreman is also writes a column for Forbes magazine. Mr. Dreman’s long-term track record is impressive. Mr. Dreman epitomizes contrarian investing.
Investment philosophy of book and author – Mr. Dreman does not believe that the markets are efficient and that, in particular, behavioral finance plays a considerable role in investor actions and over-reactions. When stocks get oversold investors should focus on cheap, fundamentally strong companies with historic earnings growth to outperform the market. Essentially buy low, sell high.
11) The Warren Buffet Way, by Robert G. Hagstrom
Reader – This book is for the long-term, investors. Advice would be appropriate for IRA accounts and other serious money.
What you will learn – This book was not written by Warren Buffet but it does explain Buffets evolution as an investor, his investment philosophy and methodology and what Buffet looks for in a company when he invests. The book also discusses what Buffet looks for in the management in the companies that he invests in, an often overlooked analysis by many investors. One of the great benefits of the book is the appendix of the book where the author lists many of Buffets investments and the cash flow analysis that Buffest used to analyze these companies. You can understand how and why he invests in these companies. Admittedly Buffet’s style of investing is very conservative and his methodology is rigorous, and not a lot of companies fit his criteria, but all investors would do well by including some of his analysis into their investing.
About the author – Robert G. Hagstrom is the Senior Vice President and Director of Legg Mason Focus Capital and Portfolio Manager of the Legg Mason Focus Trust.
Investment philosophy of Warren Buffet – Warren Buffet is essentially a value investor he believes: 1. You’re investing in a company, not a stock, invest in companies that you understand 2. Focus on “owner’s earnings” vs. growth in earnings 3. Invest in managers who are committed to increasing shareholder wealth 4. Stock price should reflect management’s effective use of capital. Essentially there are very few well managed cheap companies with good cash flow when you find them invest and use the cash flow to buy other well managed cheap companies with good cash flow.
12) The Most Important Thing, By Howard Marks
Reader – Great book for beginners to professional investors.
What you will learn - Mr. Marks is a well-known value contrarian investor who focusses on distressed debt. He is also known for his insightful memos to his clients that he has written over many years. This book includes many of these excellent articles/memos. The main advice that the book gives is to not accept conventional wisdom, and to use what he calls second level thinking, in other words critical thinking. He also strongly suggests investing in companies’ assets that the market shuns, hates.
About the Author – Howard Marks is chairman and cofounder of Oaktree Capital Management, a global investment management company domiciled in Los Angeles. He got is BA from the Wharton school, and his MBA from the University of Chicago. Again Mr. Marks made a name for himself by successfully investing in distressed debt securities.
Investment philosophy, don’t accept conventional wisdom, buy low and sell high.
Section 3: Investment Books by Academics, Researchers
13) A Random Walk Down Wall Street, by Burton G. Malkiel
Reader – Good starting book for beginners.
What you will learn – This book explains the three disciplines that most investors use, technical analysis, fundamental analysis and Modern Portfolio Theory. The book also points out the flaws of each discipline and that investors are better off in index funds, which is not challenging or fun. I am sure Warren Buffet, John Neff, Peter Lynch, David Dreman and others would disagree with Dr. Malkiel. The book does provide some good arguments and the last section does provide good investment and financial planning advice.
About the author – Burton G. Malkiel PhD, is an author and successful professional investor. He is a professor at Princeton University, a former member of the Council of Economic Advisers and sits on the board of several major corporations including several large investment firms.
Investment philosophy of book and author – Wall Street and other investment professionals can’t use the past to predict the future so most investors are better off in index funds.
14) Stocks for the Long Run, by Jeremy J. Siegel
Reader – This book is for all investors and traders. Whether you’re investing for your IRA or your day trading account.
What you will learn – You will learn about all the many variables that impact stock prices: inflation, growth, interest rates, cyclical factors and others. You will learn why these variables impact prices and their history and data. This book will help you understand why stock prices move up and down. I think this is one of the best investment books written for the novice investor.
About the Author – Jeremy J. Siegel Ph.D. is a Russell E. Palmer Professor of Finance at the Wharton School at the University of Pennsylvania. Dr. Siegel has written numerous articles for academic journals and financial publications. He is widely known as an investment expert.
Investment philosophy of book and author – Stocks are the best investments for the long run.
15) It Was a Very Good Year, by Martin S. Fridson
Reader – For all investors and traders
What you will learn – This book highlights the years when the markets experienced above average returns. He describes the historical events and economic conditions that created these “very good years”. At the end of the book he does summarize the conditions that create a “very good year” and unfortunately the markets currently do not have the variables for a good market. You’ll not only learn about what makes for a good stock market, but it’s an enjoyable, fun read.
About the Author – This is a really a good book about the stock market written by a bond guy, Martin S. Fridson, known as the “dean of high yield bond market”. Mr. Fridson was a Managing Director at Merrill Lynch and a member of Institutional Investor’s All-American Research
16) What Works on Wall Street, by James P. O’ Shaughnessy
Reader - This book is for all investors, conservative to aggressive. Advice would be appropriate for IRA and speculative accounts.
What you will learn – This book is chock full of the many valuation metrics, strategies that investors use such as P/Es, price/sales, dividend, book value, growth…. The book describes the metrics, strategies back tests the returns and then writes his observations and conclusions on each. You will learn which metrics, strategies work the best proven by their historical returns. The book also covers the metrics that have the worst performance. The reader will be able to use this information to help them in developing an investment strategy and understand the many valuation metrics investors use.
About the Author – James P. O’ Shaughnessy is founder and President of O’Shaughnessy Capital Management. Mr. O’Shaughnessy is known as an expert in quantitative equity analysis.
Investment philosophy of book and author – Author believes that by studying past history of Wall Street strategies investors can learn “What Works on Wall Street”.
17) The Intelligent Investor Rev Ed., by Benjamin Graham
Reader: This book is for the long-term investors. Advice would be appropriate for IRA accounts and other serious money.
What you will learn: The first few chapters try to convince the reader that stocks and fundamental analysis is the way to invest, so you can probably skip the first few chapters. The book is a little dated but there are a lot of valuable stock picking tools that never go out of date. Plus there are a lot of examples to learn from. I consider this book Security Analysis-lite. If you’re familiar with accounting and finance skip this book and study Security Analysis.
About the author: Benjamin Graham is considered the godfather of fundamental analysis. He was the former president of Graham-Newman Corp., an investment fund. Mr. Graham taught finance at Columbia and at UCLA. Warren Buffet was a student of Mr. Graham’s and Buffet thanks the lessons from Mr. Graham for his success. This is a book to study and not read.
18) It’s When You Sell That Counts, by Donald L. Cassidy
Reader – This book is for investors and traders
What you will learn – This book highlights the very important skill of knowing how and when to sell. It covers many aspects of the sell decision, including psychological issues, technical analysis indicators, news analysis, understanding institutional movements. Personally I don’t think it spends enough time on developing price targets, but the concept of knowing how and when to sell is extremely important. We have included several books on stock valuation which should help investors develop target
About the author – Mr. Cassidy is a senior analyst of closed-end investment funds with Lipper Analytical Services, Inc.
Investment philosophy of book and author – The sell decision is a vital process of investing.
19) Investments (6th Edition) by, Dr. William F. Sharpe
Reader: This book is for the intermediate to advanced investor who is familiar with economics, accounting and finance.
What you will learn: This is a text book which I studied as a first year MBA student. It is a comprehensive book on many investment theories with applications and examples. The book also covers most financial vehicles available to institutions and individuals. This is a book to study and not read.
About the author: Dr. William F. Sharpe is a Professor of Finance, Emeritus at Stanford University's Graduate School of Business. He is a giant in the investment and modern portfolio world. He received a Nobel Prize in Economic Sciences. Dr. Sharpe is a founder of Financial Engines, Incorporated, and an investment advice and management company.
20) Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Second Edition by Aswath Damodaran
Reader: This book is for the intermediate to advanced investor. This is for the value investor and for your serious money investors.
What you will learn: This is a very comprehensive and valuable book on how to value stocks and assets. The serious investor must learn the skills of how to value a company and a stock. With this book you will learn many valuation models that professionals and investors use to value assets from P/Es to the discounted cash flow model. The book describes each valuation measurement, gives examples and explains how and when to use each measurement. This is a book you study and not read. This is a great resource book.
About the author: Aswath Damodaran is a Professor of Finance at New York University’s Leonard N. Stern School of Business.
21) Valuation: Measuring and Managing the Value of Companies, 3rd Edition by, Tom Copeland, Tim Koller, Jack Murrin
Reader: This book is for the advanced value investor who wants to learn more about how to value a company.
What you will learn: This book was written for corporate managers to teach them how to create value for investors and for security analysts and investors to help them identify and analyze and value in a company. Investment Valuation is a much more comprehensive book on how to value a company, and the focus is in on the discounted cash flow model. This is a book you study and not simply read.
About the author: All three authors are affiliated with McKinsey & Company, the prestigious consulting firm. Dr. Copeland has PhD in applied economics from the University of Pennsylvania, Tom Koller received an MBA from the University of Chicago and Jack Murrin received his from Stanford University.
22) Corporate Valuation: Tools for Effective Appraisal and Decision-Making, by Branford
Reader: This book is for the advanced investor.
What you will learn: Learning the skill of valuing a company is a must for the serious investor. This book teaches several valuation processes, their theories and applications with examples. The valuation methods that are taught include the discounted cash flow model, the direct comparison approach, and the adjusted book value approach. This is a book you study and not simply read.
About the author: Dr. Branford Cornell received his PhD. in financial economics from Stanford University. He is a distinguished professor of finance at the Anderson Graduate School of Management at UCLA. Dr. Cornell is founder of Fin Econ, a consulting firm providing financial research on valuation techniques.
23) The Wisdom of Crowds, by James Surwiecki
Reader – This book is an excellent book for novices and investment professionals.
What you will learn – The best lesson from this book is to consider the collective wisdom of a crowd. Collectively, a diverse, well-informed crowd will know much more than the smartest individual. This means investors should know what the consensus is for a stock, especially the consensus for a companies’ price targets.
About the author – The author is a staff writer for the New Yorker and writes their business column.
Section 4: Technical, Price Analysis
24) Technical Analysis of Stock Trends, 8th Edition, by Robert D. Edwards, John Magee
Reader: This book is for the beginner trader and investor.
What you will learn: Before the personal computer, traders and investors developed the skill of reading charts and most traders learned from this book. This is an important book that many investors and traders overlook. It teaches Dow, theory the recognition of major trend reversals as well as identifying intermediate and short-term patterns. It is important to learn the concepts and patterns this book teaches. The book was originally written decades ago and the charts in the book are from the 30s and 40s, and the same patterns that you see then you see now, not a lot has changed in the markets. Many of these patterns have the same predictive value now as they did then. You study this book and not read it. This book is one of the books recommended by the Market Technicians Association.
About the author: Robert D. Edwards was a naturalist, mathematician and teacher. John Magee an alumnus of the Massachusetts Institute of Technology was a professional counselor in stocks and commodities.
25) Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy
Reader: This book is for the beginner to intermediate trader and intermediate investor.
What you will learn: This book will teach you about chart pattern recognition and indicators that have predictive value that you can use for the timing of your buy and sell decisions for your trading and investing. Master the patterns and indicators described in this book and it will serve you well in your investing and trading efforts. This book is very comprehensive as it describes the basics of technical analysis that was developed over a hundred years ago to contemporary indicators that have become popular with the advent of the personal computer. This is a book you study and not read. This book is one of the books recommended by the Market Technicians Association.
About the author: John J. Murphy is President of MURPYMORRIS, Inc. a producer of interactive educational products for technical analysis. He was formerly with Merrill Lynch as a Director Technical Analysis Futures Division.