Best investing books – the essential list

I have written book reviews in the past in bits and pieces. However, it has been a long time wish to make a comprehensive list of the best investing books that I have read. Such a list goes beyond the typical finance focus and takes a multidisciplinary approach, which is something investment legend Charlie Munger had been advocating for. Hence, in this long (really really long!) piece, not only you will find the usual topics such as valuation and accounting, but also life advice, culture, philosophy etc. The list is however only limited to books that I have personally read and so don’t be disappointed if one of your favorites did not make it. I know that some great books are missing and once I have read those I will include them also.

We start with fiction and fun books to read. These books create passion for the subject of finance and remind us why we fell in love with investing in the first place. The educational content embedded in them are an added bonus. Then I move on to Investing and Risk Management which goes hand in hand. Books on Valuation, Accounting and Economics play a supporting role to the investing decision making process and come next. Everything else including Emerging and Frontier Markets, Life advice, History and Culture, Philosophy comes next.

Fiction

A Conspiracy of Paper

A Spectacle of Corruption

The coffee trader

The first three books are by David Liss who basically writes historical fiction related to the development of the financial industry. The first book is about England during the South Sea Bubble. The coffee trader gives us a glimpse of how financial speculation happened in the old days. These books are the best of both worlds with a mix of entertainment and knowledge.

The Invisible Heart: An Economic Romance

While David Liss touches upon finance, Russell Roberts (also the host of Econtalk) explains economics through his books. A lot of what he writes is about the benefits and costs of free markets in contrary to centrally planned system. He has also written two other books, The Price of Everything and The Choice which also look interesting.

Fun books to read

Liar’s Poker

The Big Short: Inside the Doomsday Machine

Boomerang: Travels in the New Third World

The right word to describe books by Michael Lewis is entertaining. They are filled with interesting characters, have the right amount of humor and educational content for the finance enthusiast. For these reasons, I kind of forgive some of the liberties that Michael takes to increase the entertainment value of the books. Liar’s Poker was the first book he wrote and is about on the evolution of mortgage backed securities based on his experience as a bond salesman. The Big Short came in later after the financial crisis and focuses on people who were able to correctly predict and profit from the housing market crash. Boomerang focuses on countries which were quite adversely affected due to their exposure to the global financial crisis.

The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History

This book focuses particularly more on John Paulson compared to The Big Short. After watching the movie version of the The Big Short, I decided to read another account of the financial crisis.

There are important lessons. Firstly, to be able to make strong returns one has to do very very in depth research and go the extra mile. Secondly, the best trades usually makes stomachs churn. While a lot of people realized there was a bubble in the housing market many intentionally decided to stay away as a bubble can continue for a long time (making short selling a risky proposition).

Fooling Some of the People All of the Time: A Long Short Story

In this book, David Einhorn tells the story of Allied Capital which according to him was duping the investing community. I think more important takeaway is the extraordinary length David went to prove a point. Just goes on to show that there is no exception to hard work in this profession. The challenge for the individual investor is that this level of analysis cannot be done when following too many stocks. There are sure trade-offs between running a concentrated

When Genius Failed: The Rise and Fall of Long-Term Capital Management

This is the story of how a bunch of highly qualified people (two Nobel Laureates) with poor social skills came out of nowhere to dominate Wall Street and their eventual fall. The books shows how hubris can lead to downfall and over-leveraging is a double edged sword.

Outliers: The Story of Success

Outliers is probably the best book by Malcolm Gladwell. His book shows how environment and hard work play a crucial role in shaping us and how an early advantage can turn fairly big over time. He makes a lot of points but the important one for me was again how much a person needs to practice to master something.

The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up

The Innovators: How a Group of Hackers, Geniuses and Geeks Created the Digital Revolution

The Knack is the book I would recommend to any startup founder. It talks about the basic challenges faced by entrepreneurs and suggests solutions. It’s interesting that for both startups and matured companies cash (flow) is indeed the king.

The Innovators is written by Walter Isaacson, who wrote the bio of Steve Jobs. The book traces the earliest computers to the most modern innovations. It’s a good account of how the life cycle of various products have become so much shorter these days. The book also proves that innovation is often the contribution of various people and not one specific person.

Superforecasting: The Art and Science of Prediction

The best book I read in 2015. A must read for anyone engaged in forecasting. Read about how a group of people have the extraordinary ability to forecast future events much better relative to thousands of other people.

Investing

The Little Book That Beats the Market

The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

The Little Book of Value Investing

For the beginners to stock investing these are the best three books to start with. The first one by Joel Greenblatt explains stock investing in the simplest possible way and gives a magic formula for investing. The second one, which is by Pat Dorsey focuses on moats (aka competitive advantages). The last one explains value investing, which in its most common form means buying companies for less than their fair value.

Common Stocks and Uncommon Profits and Other Writings

One Up On Wall Street: How To Use What You Already Know To Make Money In The Market

Beating the Street

The next three books helps the investor go a bit more in-depth in the art of investing. In Common Stocks and Uncommon Profits, Phil Fisher explains how he performed 360 degree evaluation of companies by speaking to various stakeholders of a company. The other two books are by Peter Lynch and quite similar to each other. Aimed at the average investor, Peter explains how a normal person can perform due diligence on a company and outperform Wall Street veterans.

The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor

The Essays of Warren Buffett: Lessons for Corporate America

Warren Buffett, is arguably the most successful and well-known investor in the world. Not only has he made spectacular returns but he has pretty much revolutionized the art of investing. Along with his close friend Charlie Munger he has evolved from buying Cigar Butts at cheap prices to buying quality companies at less than intrinsic values.

Robert Hagstrom explains Buffett’s investment philosophy in the The Warren Bufett way. The other book is a compilation of Warren Buffett’s letter to shareholders which has been carefully organized by topic.

Why Moats Matter: The Morningstar Approach to Stock Investing

The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market

These two books take a closer look at the concept of competitive advantage. Read to know the types of competitive advantages that exist and how sustainable each of them are. Valuable information about investing in different sectors will also be available from these books.

Manual of Ideas: The Proven Framework for Finding the Best Value Investments

Manual of Ideas focuses on investment idea generation which is a key part of the investment process. The book is the result of John Mihaljevic’s interview with top value investors of the world.

The Investment Checklist: The Art of In-Depth Research

Many investors use a checklist approach to investing. Personally I have found that such a method can be quite useful. Michael Shern has put together a very comprehensive list of questions that can be used to analyze companies.

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits

Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor

These two books are the best ones available on special situation investing. The first by Joel Greenblatt has successfully revolutionized investing to such an extent that many of the opportunities he mentioned have vanished. The second by Seth Klarman of the Baupost Group not only looks at examples of special situations but focuses on other issues (like investment fads that seem to spring up from time to time).

Value Investing: From Graham to Buffett and Beyond

While Warren Buffet has moved away from the typical Net-Net investments (aka Cigar Butt investing) advocated by Ben Graham, there are still deep value investors that exist. This particular book takes a look at a few methods used by such deep value investors.

Market Wizards

The New Market Wizards: Conversations with America’s Top Traders

Stock Market Wizards: Interviews with America’s Top Stock Traders

Hedge Fund Market Wizards

These four books are a must read for anyone interested in the financial markets. The broad diversity of investors interviewed, starting from well-known superstars to people who keep a very low profile makes them very unique. The biggest takeaway for me was the diversity of techniques people can use to make money. Proves the point that there are many paths to the same destination and the path each of us should take depends a lot on who we are.

Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market

Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts

The best book for equity research analysts. This is the type of book that has the experience and wisdom of a top wall street analyst, condensed in a few hundred pages so that thousands can enjoy and benefit. For me, this book was surely Godsend.

The Alchemy of Finance

The Alchemy of Finance by George Soros is a fairly complicated and to extent philosophical book in my view. The most important takeaway is that just as real economy impacts markets, the reverse can also happen. Soros also discusses about his theory of reflexivity where two variables tend to feed each other and take trend continuously in one direction (until some other factor reverses the trend).

Risk Management

Against the Gods: The Remarkable Story of Risk

Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

Two remarkable books on risk and mathematics. Starting from the beginning of risk (and even mathematics) the authors take us to modern-day events. While the former focuses on how the discipline of risk management evolved over time, the latter one is about how some people used mathematics to win at the game of chance (gambling) and later also in the stock market. In between a lot of discussion on the two contradictory schools of though about market efficiency.

Managing Country Risk: A Practitioner’s Guide to Effective Cross-Border Risk Analysis

Multinational companies with operations across multiple countries and portfolio managers have to understand the top down macro situation as well as bottom up on the ground realities. This is the best book I read on analyzing country risk.

The Art of Thinking Clearly

The author of this book compiled a list of around 50 behavioral biases which adversely impacts our decision making. A lot of these biases are interlinked and have overlaps. The author used neat examples to explain them.

The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy

James Montier has written a larger book on behavioral finance. However I choose to read this one as I enjoy short books. James has done a good job of highlighting how our biases impact investment performance. He also gives such tips on how to keep those biases under control (e.g. setting a buy price in advance when stocks are coming down so that we don’t try to perfectly time the market ).

Competition and Strategy

Competition Demystified: A Radically Simplified Approach to Business Strategy

Bruce Greenwald took the five forces model and simplified it for people by proving that the major force to watch out for is barriers to entry. He also explains why some of the ‘competitive advantages’ that are considered sustainable are not sustainable at all. An example was the brand recognition of American car makers which soon saw their playground being taken over by Japanese. A lot of examples were provided with some frameworks on understanding the competitive landscape.

Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant

No need to describe this book as marketing students are quite aware of it. The key theme is to avoid fighting it out in the same markets where everybody is a loser and instead create a new segment by itself (almost increasing the size of the industry).

Winning

One of the most popular CEOs of all time, Jack Welch explains how his strategy of running a company. He put a lot of examples in the book and shared unique wisdom. He shares some questions to ask to set the strategic direction of the company which I found very useful as an analyst.

Good Strategy Bad Strategy: The Difference and Why It Matters

Management frequently mixes up targets with strategy. “We will grow profits by 30%” is not strategy but rather a target. Without knowing the constraints to achieving that target and without really formulating a proper plan to get there we don’t exactly have strategy. The author of this book explains the difference between good and bad strategy. He also goes on to explain why there is so much bad strategy around. It is because good strategy requires hard work and we do not want to work hard.

The Decision Book: Fifty Models for Strategic Thinking

This book is a short book with some models for thinking. The book doesn’t elaborate much on the models but rather lets the reader use his or her creative juices to figure out the best possible use. I found it quite useful.

The Outsiders

The outsiders is the story of few CEO’s who have created enormous value for their shareholders. Some of them were quite ahead of time and used methods which were considered very unconventional at those times. They were even misunderstood at times. The book  shows that CEO’s can create shareholder value in many different ways (although some common factors appear such as continuous cost control). For example, while acquisitions are considered negative as acquirers frequently overpay, some CEO’s have used acquisitions very opportunistically.

Valuation

The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit

Investment Valuation: Tools and Techniques for Determining the Value of Any Asset

These two books by Aswath Damodaran are the first books to read to learn the art of valuation. Damodaran also has a pretty great blog which sort of complements his books. Investment Valuation was the first book on valuation that I read.

Valuation: Measuring and Managing the Value of Companies

Valuation by Tim Koller, David Wessels and Marc Goedhart is a must read book not only for equity analysts but for company management. It is in my view a masterpiece. The only issue with this book is that it will  be a bit complicated for the young analyst. However, I would suggest that people read it at various levels of their career to come out with different insights after finishing every single time.

Accounting

How to Read a Financial Report: Wringing Vital Signs Out of the Numbers

This is one of the best books on analyzing financial statements. The authors made it easy to understand and touched upon important topics that were ignored by many other books. Both laymen and professionals will benefit.

Economics

The Little Book of Economics: How the Economy Works in the Real World

Greg Ip is a highly respected economic journalist. In a short punchy book he explains macroeconomic concepts from a very practical standpoint. He does a good job of explaining how economic policies are actually made and the major institutions that play a role.

Puzzles of Economic Growth

In the Puzzles of Economic Growth, the authors compare and contrast a number countries who have been paired together. In all these cases, two countries who had almost similar levels of economic prosperity at one point saw wide deviation in economic growth. The book tries to explain what ultimately led to the difference in performance.

The economist guide to economic indicators

The list will not be complete without a guide for understanding economic indicators. I have read a number of book on this topic and found this one to be the best.

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Think like a Freak

Naked Economics: Undressing the Dismal Science

The Undercover Economist

The popularity of Freakonomics led to a number of similarly styled economic books for the average person not educated in economics. Being an economics and finance graduate myself, I still had a lot of takeaways from these books. These books will make the average person love economics and explain the logic behind a lot of everyday phenomenons.

Managerial Economics

How can economics help managers? A lot of ways it seems. After reading this book you will realize why it is said that finance is an offshoot of economics.

Emerging and Frontier Markets

The Growth Map: Economic Opportunity in the BRICs and Beyond

Breakout Nations

The Growth Map by Jim O Neill and Breakout Nations by Ruchir Sharma sort of contradict each other. The former highlights why emerging countries have long-term economic drivers while the latter focuses on the differences between them. I see truth in both the books and instead of looking at them as contradictions, I would use them as complements.

Emerging Markets: Lessons for Business Success and the Outlook for Different Markets

This book is not written for the investment professional but rather for companies interested in moving into emerging markets. The key takeaway for me was that building a strong franchise in an emerging market is not a short term thing. It takes a fair bit of time to build the brand, the distribution network and get the right human resources. However this also means that once a company takes up a dominant position it is not that easy to upend it.

Frontier: Exploring the top 10 emerging markets of tomorrow

Gavin Serkin travels to various emerging markets and describes his experiences during the travels. He also discusses interesting companies that are domiciled in those countries. Altogether, one of the few books written on emerging and frontier market investing.

The Little Book of Emerging Markets: How to Make Money in the World’s Fastest Growing Markets

Written by Mark Mobius, one of the earliest investors in emerging and frontier markets. I put this towards the last because I felt that its useful for people who have very little knowledge about these markets. It will serve as a primer on emerging markets.

Life advice

Choose Yourself: Be Happy, Make Millions, Live the Dream

James Altucher has an unorthodox way of writing. However, he has a way of touching the soul through the blunt and abrupt style of his. I don’t exactly buy everything he says but I still consider this book to be very useful.

What They Don’t Teach You at Harvard Business School: Notes from a Street-smart Executive

Swim with the Sharks without Being Eaten Alive: Outsell, Outmanage, Outmotivate, and Outnegotiate Your Competition

These are the two best books on life and business advice that I read. Written by seasoned professionals, the books contain advice that everybody can benefit from. How should you impress a potential business partner on the first meeting? How much information to gather on customers and competitors? Read on to know the answers.

The Life-Changing Magic of Tidying Up

Marie Kondo has written the ultimate book on keeping the house tidy. Having an organized house or office actually allows our thoughts to be organized as well.

Equity analysts such as myself also have lot of data sources starting from annual reports, conference call transcripts, information from our sources which have to be stored in an organized way. The tips from this book can be used for organizing such data also.

History and Culture

A Little History of the World

This book does exactly what it promises. Gives a little history of the world from the earliest days to modern times in a short and concise way. A great book to piqué interest in history once again.

The Culture Map: Breaking Through the Invisible Boundaries of Global Business

In The Culture Map, Erin Meyers looks at various dimensions of culture across the world. A very thought provoking book in my opinion. The way we look at the world will surely change after reading this book. Quite useful for employees of multinational companies as well as investors in the developing world.

Philosophy

Sophie’s World

Sophie’s World is exactly the type of book I like to read on a subject to understand the basics. It is an educational book disguised as a novel. The author explains the evolution of philosophy and the thought leaders behind various schools of thought. The interesting characters in the book makes it entertaining.

The Worldly Philosophers

Contrary to the first book which covered philosophers like Socrates, Plato etc, this book focuses on the great thinkers that shaped the discipline of economics. Adam Smith, David Ricardo, John Stuart Mill etc the type of people featured in this book.

More Than You Know: Finding Financial Wisdom in Unconventional Places

More than you know is written by Michael J. Maboussin who is the Global Head of Financial Strategy at Credit Suisse. This book covers his thoughts on investment philosophy, psychology, strategy and science as they pertain to money management.

Biographies

Buffett: The Making of an American Capitalist

Roger Lowenstein wrote this biography of Warren Buffett after getting three years of access to the family, friends and acquaintances. This book was helpful in understand why Buffett is one of the greatest investors in the world.

Sam Walton: Made In America

The book tells the story of the rise of Walmart. After reading the book I made a comment on facebook that I probably learned more about business from this book alone than my undergraduate degree.

Mathematics and Statistics

The Joy of x: A Guided Tour of Math, from One to Infinity

I was never fond of mathematics as a child. Growing up I felt that any subject could be made interesting by the right teacher. Steven Strogatz did not disappoint at all. This book will make you fall in love with mathematics.

Naked Statistics: Stripping the Dread from the Data

Like mathematics, another very dreaded subject is statistics. However it is something which is necessary for finance professionals. What The Joy of X does to Mathematics, Naked Statistics does to the subject of Statistics. Fun fact: Did you know Milton Friedman the Nobel laureate in economics was originally a statistician?

How to lie with statistics

How many ways can statistics be used to manipulate us? As far as Darell Huff is concerned, numbers can be used to mislead in many ways. The only way to avoid getting duped is know them and remain aware.

Investment Banking

Damn, It Feels Good to Be a Banker: And Other Baller Things You Only Get to Say If You Work on Wall Street

Monkey Business: Swinging Through the Wall Street Jungle

Two hilarious books on investment banking (a coveted job among graduates of top business schools for high salary levels). In between the jokes and the exaggerated accounts of the experiences, the books also manages to explain to touch on the difficult part of the role and why it pays so much.

Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions

The book to read to really get to understand the technical details of investment banking is this one. Concrete examples and explanations makes it the go to ‘reference book’ for anyone thinking of breaking into this sector.

Communication and Presentation

What is the relationship between investing and communication? In my view, being able to explain the investment hypothesis in a clear way and using the right supporting material (charts and presentations) helps us become better investors. I have often found flaws in my arguments while pitching an idea to a client.

Say It with Charts

Who better to learn which chart to use than the Director of Visual Communications of Mckinsey and Company. This book will not disappoint anyone.

Slide:ology: The Art and Science of Creating Great Presentations

The go to book to learn how to make really great presentations. Nancy Duarte is one of the best in this field and had helped Al Gore on the documentary An Inconvenient Truth.

Pitch Perfect: How to Say It Right the First Time, Every Time

We have covered how to make great presentations and the right charts to represent data. The last and most important part is the actual delivery. Bill Mcgowan is a two time Emmy Award winning journalist and trainer to people like Sheryl Sandberg and Jack Welch. Why would you miss the chance to learn from him?

Technical Analysis

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications

Technical Analysis Explained: The Successful Investor’s Guide to Spotting Investment Trends and Turning Points

Technical Analysis of Stock Trends

Technical analysis is a controversial topic. A lot of people swear by it while others find it useless. I thought that I should make up my own conclusions by reading on the subject myself. Having read a number of books, I have mixed feelings. I would rather use technical charts to gauge the sentiment of the market than to make investment decisions. Charts can also show whether analysts are missing anything. These are the three best books I would recommend.

Asif Khan, CFA

Asif Khan is presently a Research Analyst (Financial Sector) for Exotix which is a frontier market focused investment bank. He has more than 6 years of work experience as equity analyst in both buy and sell side roles across Asian frontier markets. Asif is a CFA Charterholder and has a dual major in Finance & Economics from North South University.

5 thoughts on “Best investing books – the essential list

  1. Great list. Deserves more comment. Thanks for the recommendations. Bookmarked. Gonna try some books, looks interesting.

  2. Please I need your kind guidance on an issue; there was a time I was presenting on a Monday morning and one of my bosses asked me a question regarding a banking stock in our model portfolio- he asked what my projection was for the bank’s Non Interest Revenue which I could not answer. He also asked why a particular stock formed part of our model portfolio, I gave answers- like the stock is a defensive stock and that the company has the leeway to push rising input costs to customers since the company has the largest market share in the industry- to the best of my ability but he countered all I said saying their MD recently resigned and that being a commodity stock, an investor could as well buy the ETF instead of the stock but perhaps maybe because of a backward integration the company recently embarked upon- he was expecting me to say that. I was wondering how he knew all these and had time to dig these information.????

    Before then, he asked me a similar question regarding the financials of a company that had released its results – he asked me what my estimate of the company’s PAT was vs the actual. Honestly, I couldn’t give a definite answer as I knew that if I guessed, other questions would follow. All these seem like I have to be able to design models which I really don’t know how to do. I have requested that I be taught but seems I am on my own. What can I do to bridge this gap and being a research analyst, what do you think he requires and how cn I go about it?

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