The Best Books Investors Can Read

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<p>The Best Books Investors Can ReadBy Morgan Housel May 28, 2008 Comments (0)</p> <p>1 RecommendationRecommend This</p> <p>Walk into any book store, and you'll find more how-to investing books than you could read in six lifetimes. There are some classics: From Benjamin Graham's The Intelligent Investor to Peter Lynch's One Up on Wall Street, many of the world's finest investors have graciously shared their secrets in a way the lay investor can understand. But as the old saying goes, "To the man who only has a hammer, every problem looks like a nail." If your investing game plan starts with burying yourself in how-to books, you're likely to drive yourself bananas sorting through conflicting viewpoints. To take everything in, you've got to form your own opinions, create your own skill set, and learn to absorb information in the way that works best for you. To begin, take teachings from other disciplines and apply them to investing. Here are four books that don't even whisper about how to beat the S&amp;P, but they can take your interest in investing to new levels. Seeking Wisdom: From Darwin to Munger --Peter Bevelin Sure, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Vice Chairman Charlie Munger's name pops up in the title, but only</p> <p>because part of the book is devoted to how Munger and other brainiacs soak up knowledge from a range of fields and put it to work in their respective disciplines. With striking insights from Albert Einstein, Thomas Jefferson, and great Roman thinkers, Seeking Wisdom underlines how psychology, philosophy, math, engineering, and biology (to name a few) affect our ability to make decisions. Deep Simplicity: Bringing Order to Chaos and Complexity --John Gribbin You'll enjoy this book if you've ever wondered how two guys tamed the mind-blowing amount of information on the Internet by creating Google (Nasdaq: GOOG), how a black-and-white mouse catapulted Disney (NYSE: DIS) into the stratosphere, or how a fizzy drink allowed Coca-Cola (NYSE: KO) to root itself in our minds forever. Deep Simplicity highlights the chaos theory -- that says a butterfly flapping its wings in New York can cause a typhoon in New Delhi -and how vastly complex phenomena can be borne of surprisingly simple forces. A bit heavy on the academic side, some pages made me doze, but the main concepts are eye-opening and not difficult to grasp. The complexities of investing will never have looked so simple after reading this book. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets --Nassim Nicholas Taleb If you think you're a day-trading pro, checked your stocks more than once a day, think there's skill involved in roulette, or insist there's money to be made in momentum investing, this book will humble you. Written by a successful money manager armed with an M.B.A. and a Ph.D., Fooled by Randomness will change your perception of short-term market fluctuations. Taleb's easy-to-understand explanation of how probability shapes our perceptions of triumph provides an invaluable lesson of what truly creates long-term</p> <p>investing success, and why so many investors get burned after their hot streaks prove to be nothing more than a blessing from Lady Luck. The Selfish Gene --Richard Dawkins ExxonMobil (NYSE: XOM) makes a gazillion dollars a second while millions of homeowners are being flushed down the commode -- is that fair? This book will enlighten you without taking a moral stance. Examining biological evolution, Dawkins proposes his own version of survival of the fittest and explains how its the cornerstone of every dynamic system with a will to survive. He presents an understanding of what drives adaptation and the ability to overcome change and makes a cogent case for why this is as important in investing as understanding how to read a balance sheet.</p> <p>The Top Investing Books of All TimeWhether you're new to the world of investing, or have years of experience and success, there's always room for you to grow as an investor. One of the best ways to expand your knowledge is by reading great books. We recently asked the Fool editorial staff to name the top investing books of all time. Competition was fierce and Email this page tempers flared during the debate, but when the Format for printing dust settled, the following seven books Become a Fool! remained. If you feel like adding one or a Reuse/Reprint number of these investing classics to your personal library, you can order them from Related Links by clicking on the headline.More Financial Must-Reads</p> <p>1. One Up on Wall Street By Peter Lynch</p> <p>Discussion BoardsBooks We're Talking About</p> <p>"Rule number one," writes Peter Lynch early on in his individual-investor-empowering classic, "Stop listening to professionals!" Lynch was a Fool before our time. As the portfolio manager who led the Fidelity Magellan Fund to mutual fund prominence in the 1980s, Lynch's 1989 book helped fuel the consumer-driven market passion in the 1990s. His secret to "stalking the ten-baggers" was simple: buy quality companies one can understand and believe in -- and hold on.</p> <p>He didn't dabble in the "science of wiggles" or promote options trading. He was able to uncover the winners of his time, like Dunkin' Donuts and La Quinta, by kicking the tires of the life experience. This was Lynch's first book and he managed to provide an easy-toread market primer that also serves as an ode to the joys of selfdirected investing. -- Rick Munarriz (TMF Edible) 2. The Essays of Warren Buffett: Lessons for Corporate America By Warren E. Buffett, Lawrence A. Cunningham In the landscape of investment books, The Essays of Warren Buffett stands out like a schooner on a sea of inflatable rafts. Not only do we get 40 years of wisdom from the world's most successful investor, distilled into a slim, 200-page book, but we get lines like this: "My behavior has matched that admitted by Mae West: I was Snow White, but I drifted." Just as Obi-Wan Kenobi gave young Luke Skywalker a psychological center, Buffett's essays give investors a platform from which to begin a disciplined investing career. He covers issues ranging from mergers and acquisitions, to employee stock options, accounting goodwill, and corporate governance. Buffett can't give you experience -- you have to accumulate mistakes for yourself -- but he gives you a tack to start the journey and an angle to tilt your sails. -- Richard McCaffery (TMF Gibson)</p> <p>3. The Intelligent Investor By Benjamin Graham One of the most important and influential investment thinkers and teachers of our time, Benjamin Graham's ideas about fundamental securities analysis and value investing formed the foundation for a generation of successful investors, including Warren Buffett. Broader in scope and more accessible than Graham's 1934 classic Security Analysis (co-written with David Dodd), The Intelligent Investor presents Graham's logical and proven investment approach with a broader audience in mind. Providing a framework and practical guidance for both "defensive" and "enterprising" (aggressive) investors, the book includes discussion of portfolio policy, the basics of fundamental securities analysis and stock selection, and the idea of "margin of safety." The fourth edition also includes Warren Buffett's famous lecture, "The Superinvestors of Graham-and-Doddsville." -- Brian Bauer (TMF Hoops) 4. Beating the Street By Peter Lynch My colleague Brian Graney recently told me the precise moment at which he became truly interested in stocks and investing -- a conference in 1996, at which he had the opportunity to hear famed money manager Peter Lynch speak. Brian came away with a permanent imprint of Lynch's energy, thirst for knowledge, and commitment to hard work; and readers of Beating the Street will</p> <p>likely have a similar experience. In his 1994 follow-up to the similarly well-regarded One Up on Wall Street, the white-haired Fidelity icon manages to motivate without cheerleading, teach without condescending, and elucidate without confounding. The message is both general and practical: Diligence, the willingness to do homework, and intellectual curiosity -- plus a healthy dose of common sense -- are more than enough to get almost anyone started down the road to successful investing. Foolish, indeed. -- David Marino-Nachison (TMF Braden) 5. Common Stocks and Uncommon Profits By Philip Fisher Every investor should read Philip Fisher. He is one of the pioneers of business-focused and focused-portfolio investing. He encourages an investor to consider 15 points that pertain to the quality of the business and its ability to produce profits, rather than focusing on stock price or other market considerations. The 15 points offer excellent criteria for assessing any company, such as the integrity and honesty of its management, but the book has much more to offer than just the points. It also discusses the reasons for investing in stocks rather than bonds, how to find a growth stock, 10 "Don'ts" for investors, and when to sell a stock (hint: almost never, if the job of buying is well done). To me, Fisher is a direct ancestor of The Motley Fool. If I could recommend one book to any investor, experienced or novice, it would be Common Stocks and Uncommon</p> <p>Profits. -- Brian Lund (TMF Tardior) 6. The Gorilla Game By Geoffrey A. Moore If you're looking for the next Microsoft (Nasdaq: MSFT) or Cisco Systems (Nasdaq: CSCO), The Gorilla Game could help you. The book, written by a former English professor, an investment banker, and a venture capitalist, explains a framework for investing in young technology companies. Like any good story, the book starts with an explanation of why the Intels (Nasdaq: INTC) of the world are much more valuable than the Advanced Micro Devices (NYSE: AMD). Then, using past examples, it shows how you can find strong technology companies before they become official Gorillas. With criteria for Gorilla candidates, 10 rules of how to play the "Gorilla Game," and advice on where to find the information needed to play, The Gorilla Game could be a useful read for technology investors. -- Bob Fredeen (TMF Bobdog) 7. Stocks for the Long Run By Jeremy J. Siegel This book is invaluable because of a vital point that it makes convincingly: If you're going to invest your money for an extended period of time, your best bet is to invest in stocks. Siegel offers financial market data going all the way back to 1802. He</p> <p>demonstrates how stocks have outperformed bonds significantly over many different time periods. (For example, between 1871 and 1996, stocks outperformed bonds in 94.4% of all 20-year intervals. From 1946 to 1997, stocks returned an annual average return of 12.2%, vs. 5.4% for bonds.) He argues persuasively that long-term stock investing can be safer than saving money at your bank. He also offers insights on the effects of baby boomer investing, addresses market timing and holding periods, and evaluates several investing strategies. This short summary doesn't do the book justice. Check it out for yourself! -- Selena Maranjian (TMF Selena)</p>