Eight Best Investing Books for Investors
To become a successful investor, you must have ample knowledge of how to invest. Reaping from the investment is not achieved by the simple decision to start investing. To earn substantial money from the investment, you should have a good knowledge of how an investment works and the different types of investment you can choose.
The best way to go about this is to read great books on investment. There is no better way to feed your brain with the right information than to feed it with information from those who have been through the path you are planning to tread in. Whether you are just starting the investment or you are in the trade and experiencing some difficulties, the best way to learn and enrich yourself with the right information is to read.
Books help you to find out what others are doing right that you don't know. It helps you to learn how to avoid some pitfalls and make a smart investment.
It is against this background that we have compiled eight great books from the likes of Warren Buffet, John C. Bogle, and so on. No doubt these men are leaders in the world of investment and learning from them is the best way to equip yourselves with a mole knowledge about investments. However, before considering these books, there are some factors to consider before investing. These factors include:
- The best option for your money
It would only be a waste of time investing your money into stock or bond if you are owing debts that are costing you about 20% of your paycheck. This is because investing the money would only guarantee you a 10% profit or less. Hence, before investing your money into any portfolio, ensure you consider your credit card debts too. If you are owing, it is advisable to clear your debt before investing.
Also, ensure you protect yourself against unexpected financial crises that can either wipe out all your investment or make you further indebted. The best way to go about this is is to buy insurance before investing.
One of the insurance policies that you should have before starting your investment journey is health. Having health insurance would help protect your money against unforeseen health issues that, if otherwise, would wipe out all your investment. Aside from health insurance, you can also buy disability insurance. This would protect you against any form of disability either temporal or permanent.
- Have an objective for the investment.
One of the major factors that determine the type of investment to choose is the purpose of investment. Your purpose of investment would determine whether you should go for a long-term investment or a short term. If you are interested in growing your money fast such that you don’t care about the risk involved because you have more time to pick yourself up when your investment faces a downturn, then you should go for a long term investment. Below are the three major goals that often determine your choice of investment.
- Investing to keep your money safe because you would need it soon
If you have a limited time, for instance, 10 years to your retirement time, you would not want to invest in a portfolio that might face a downturn. Rather you would want to be sure your money is well protected and will be available when you need it. If your financial goal for investment is not long-term, it is advisable to choose bonds instead of stocks. This is because bonds are less risky than stocks.
Ability to take a moderate risk for a better return on investment.
If you have a moderate risk enduring level and you won’t need your money soon, then it is advisable to invest in stocks. However, ensure you do your research before choosing any stock portfolio.
Also, you can invest in a mixed investment. This implies investing in stocks that pay a dividend and one does not pay a dividend but would rather reinvest the return on your investment. This way, you would be getting some money from the investment while at the same time reinvesting for more gains.
- Ability to take an aggressive risk for further return
If you won’t need your money in a long time and can afford to take a longer risk for longer return, it is advisable to go for investment with higher risk. The riskier the investment is the more chance of a good return. If your risk tolerance level is very high, you can invest in stocks of companies that plow its earnings back into its future.
Also, you can invest in both short-term and long-term goals. Your choice of goal will be based on the money you have to invest and your tolerance level.
- Age
Another good factor to consider before investing in a portfolio is your age. Starting your investment journey at a very young age is a plus factor. This is because you have better options than someone who is just starting at in his or her old age. As a youth, since you still have more days ahead and not in a rush to catch out your money, you can decide to leave your money. Depending on your investment, the longer you wait, the more you earn.
Also, as a youth, you have less responsibility than an adult and have more money to invest. You also have more time for compound interest. Compound interest simply means earning interest on your interest as well as your principal. With this, your money will be able to grow over time.
If you are an adult or middle age and considering investing some money for your retirement days, it is advisable to invest enough that would guarantee you a simple lifestyle after retirement.
- Time
Retirement is not only the reason for investment. Other goals would require that you invest short-term. Therefore, when investing, another important factor to consider is the time you have before you will convert your investment into cash. If you do not have enough time to invest in risky portfolios then it is advisable to go for less risky investments like bonds.
Also, take note that some investors might attract penalties if withdrawn before the prescribed date. This is why it is advisable to decide on when you will need the money before investing.
- Risk tolerance
One of the major factors that you should consider before investing is your risk tolerance level. As a general rule, the riskier an investment is the more potential for a higher return. If you are someone with average risk tolerance level, go for a less risky investment, so that you don’t lose out when faced with the ups and downs of stock investment. But if you can tolerate high risk on investment, invest in long term portfolios.
Eight Best Investing Books
The Intelligent Investor
This book is written by the late Benjamin Graham. Graham is a renowned professor known as the godfather of investing. He was not just a successful investor, but one with a wealth of knowledge in investment. Graham earned most of his wealth from investment and is well-grounded in the nitty-gritty of investment.
The intelligent investor book explained investment from a different angle. When you pick the book, do not expect to read about the ten keys of making your first million in investment. Instead what you will read from the book is how not to lose your shirt in your investment. This implies means that Braham explained investment from the perspective of the risks involved.
Graham's focus is based on investment and things you need to know to become an excellent investor. In the book, you would read about some of the strategies of investments and how to analyze stocks. Also, a comprehensive history of the stock market was provided.
The first version of the book was published in 1949. Warren Buffet has referred to this version as “the best book on investing ever written”
For a beginner or an average investor, this book is a must-read.
A Random Walk Down Wall Street
If you are thinking of trying your hands on one of the 401(k)s investment portfolio, then this book is for you. Investing does not necessarily mean that you devote your time to managing a broad-based extensive portfolio, and this is what Burton Malkiel explained in detail in his book. To become a good investor, you should equip yourself with the right knowledge.
Burton Malkiel’s “A Random Walk Down Wall Street” demystifies investment and the strategies you can use to start earning big. The book provided some handy definitions of investment and explained the stage by stage way to become a pro in investment. Malkiel laid more emphasis on long term investment and explained how you can predict stock prices. The book also contains some of the mistakes investors often make that affect their return. Due to the power-packed knowledge enclosed in the chapters of this book, it has sold more than 1.5 million copies and still selling.
One Up On Wall Street
Peter Lynch stated in his book “One Up On Wall Street: How To Use What You Already Know To Make Money In The Market” that it is not possible for beginners investors to start earning as much as those who have been in the business. However, he emphasized that the newbies already have what they need to know at the tips of their fingers. Lynch believes that investments opportunity are everywhere. They litter even the ground we walk on, and all we have to do is to take a pause, check around us, and grab the opportunity.
The book examines the basics of investment and how we can use what we know to our advantage. The book teaches that you can become a good and successful investor when you put your heart to it and understand the basics. The simplicity of the book has made it sold more than a million copies as of 2000. The book is still selling.
Security Analysis
Security Analysis is another great book on investment written by Benjamin Graham and David L. Dodd. The book was first published in 1934, however, up till now the lessons treated in the book are still very relevant. The book is now in its sixth version. The updated version has more than 200 pages of commentaries from the current Wall Street leader. In fact, in one of the pages, Warren Buffet revealed that he has been following the teachings of the book for more than 57 years. This comment alone reveals how valuable the book is for investors. If you are aiming to start investing or already in the business, this is a must-read for you.
You Can Become A Stock Genius
Do not be fooled by the title of this book, the content is more serious than waking up and finding yourself as a stock investment pro. The book authored by Joel Greenblatt focuses on a special kind of investing. In the book, Greenblatt explains the different situations you can encounter in your investment journey and how you use each situation to your advantage. Some of the situations explained in the book include spin-offs, restructuring, and bankruptcies. One key point explained in the book is how to tread the path most investors are dreading and how you can make a good return on this path. The unique knowledge revealed in the book has made it one of the best books on investment.
The Big Short
Another great book that can take you through a successful investment journey is "The Big Short." The book was written by Michael Lewis and released on March 15, 2010, by W. W. Norton & Company. For 28 weeks, it was in the list of the New York Times bestselling books and became the basis of a movie released with the same name.
In the book, Michael Lewis presented some fictional characters representing investors who are optimistic that the collateralized debt obligation (CDO) would not lead to the ruin of their investment. The story recreates the credit default swap market of 2007-08 and how investors can benefit from similar situations.
The book follows optimistic investors who believed that the market bubble was going to burst. These involve the likes of Meredith Whitney, who predicted the demise of Citigroup, and Greg Lippmann, a Deutsche Bank trader; Eugene Xu, a quantitative analyst who created the first CDO market by matching buyers and sellers.
The Big Secret For The Small Investors
Among the most notable investors in the United States include Benjamin Graham, who is referred to as the value investing old Testament, Warren Buffet is the new testament, and Joel Greenblatt, the investment apostle.
Joel Greenblatt's new book "The Big Secret For The Small Investors" focuses on value weighting indexing. Value investing means buying an index of stock where the cheapest stocks make up the largest part of the index while the most expensive stocks make up the smallest part. For instance, the S&P 500 is a market-cap index and Exxon Mobil (NYSE: XOM) is the largest stock under the S&P 500. However, the book encourages that if you are going to invest 5% of your paycheck, it is advisable to invest the greatest percentage of the money on a cheaper S&P stock, for instance, if Microsoft (NASDAQ: MSFT) is cheaper than Apple (NASDAQ: AAPL) and Apple is cheaper than Exxon Mobil (NYSE: XOM), invest a large part of the money on Microsoft (NASDAQ: MSFT).
In one of his statements about the book, Greenblatt explains that “…this is my third investing book. The first one, “You Can Be a Stock Market Genius,” (yes, I know, I know) was meant to help the individual investor, too. It didn’t. It assumed investors had a lot of specialized investment knowledge and a lot of free time. (Actually, it did end up helping a few dozen hedge fund managers, but…) My second book, “The Little Book That Beats the Market,” gave a step-by-step method for the individual investor to just 'do it yourself.' I still believe strongly in this method and I still love that book. But here, too, I missed the boat. As it turns out, most people don’t want to do it themselves. Yes, they want to understand it. But they still want someone else to do it for them. So maybe the third time really is the charm.”
The Snowball: Warren Buffett and the Business of Life
Written by Alice Schroeder, the book is a detailed biography of Warren Buffett - a renowned successful investor. Below are some reviews of the book:
“The mandatory book to read in these treacherous times of financial crisis. . . . A thoughtful and intimate biography of the globe’s wisest investor.” —Forbes
“Will mesmerize anyone interested in who Mr. Buffett is or how he got that way. The Snowball tells a fascinating story.” —New York Times
“If the replication of any great achievement first requires knowledge of how it was done, then The Snowball, the most detailed glimpse inside Warren Buffett and his world that we likely will ever get, should become a Bible for capitalists.” —Washington Post
“Anyone who has been watching events unfold in recent months—which would be everyone—can now appreciate the wisdom of Buffett. . . . The most authoritative portrait of one of the most important American investors of our time.” —Los Angeles Times
“Even people who don't care a whit about business will be intrigued by this portrait. . . . Schroeder, a former insurance-industry analyst, spent years interviewing Buffett, and the result is a side of the Oracle of Omaha that has rarely been seen.” —Time Magazine
Summary
Books are one of the best ways to enrich yourself with the knowledge needed to become an expert investor. Reading from successful investors helps you to learn from their experiences. The eight books listed and examined above provide valuable information on how to buy and sell an investment and when to buy the investment. The stock market is very tricky, to become a successful investor, you have to have a good knowledge of how and when to buy and sell an investment. Understanding this simple point will have a huge impact on your success as an investor.
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