Where do you get your ?how to? knowledge of the stock market? Do you seek ?how to? knowledge of the stock market? Or do you rely on other sources to provide it for you?like the financial media?
There are bits of information to be gathered from the financial media, but little of it qualifies as the foundational knowledge that all investors should have before committing their hard earned money to the financial markets. For that you need a good book?actually several of them!
Don?t know which ones to choose out of the many that are available? Here?s a list of ten that I recommend.
1. Irrational Exuberance, by Robert Shiller
Few understand today how important Shiller?s book is. He does not just offer a different perspective — his research supports an outright rejection of today?s conventional investing wisdom (Buy-and-Hold). All the work that I have done in this field is an effort to show people how to implement Shiller?s theory.
2. A Random Walk Down Wall Street, by Burton Malkiel
This is the Irrational Exuberance of the Buy-and-Hold Era. Buy-and-Hold was a huge advance that has been discredited. You need to know what this book says to understand what the most important debates going on today are all about.
3. Valuing Wall Street, by Andrew Smithers
I haven?t read this. But I have read many articles by Smithers that are top-notch and many people whom I respect have offered effusive praise for the book. So I view it as a must read and chastise myself for not yet having found time to fit it in.
4. Stock Cycles, by Michael Alexander
This is hard but important reading. The author makes a compelling statistical case that stock cycles are real. If they are, then returns are predictable. And, if returns are predictable, stocks are not nearly as risky as most people think. The subtitle of the book, published in 2000, is: ?Why Stocks Won?t Beat Money Markets Over the Next 20 Years.?
5. Stocks for the Long Run, by Jeremy Siegel
I believe in the idea of using the historical return data to guide one?s investing strategies. Siegel obviously does too. He is rooted in the Buy-and-Hold Model, so he comes to very different conclusions than the ones I come to. But I see so much merit in his approach that I view this book as essential all the same.
6. The Early Retirement Planning Insights Site by John Walter Russell
John died in October 2009. So he was never able to report his hundreds of powerful investing insights in book form. But I refuse to let that stop me from letting you know that you must review his work to bring yourself up to speed on the most important thinking in this field. Start with the ?Foundations? section. Then go to ?Guidelines.? Then just go crazy learning all sorts of wonderful stuff that few know about today.
7. The Investor?s Scenario Surfer, by Rob Bennett and John Walter Russell
This is another non-book that I include here because it taught me more about investing than any book ever did. The Surfer is a calculator lets you test how you would react in as many 30-year returns sequences as you care to run through. There?s a new lesson each time. It?s a lot better discovering your weaknesses this way than it is learning about them with money at risk.
8. Common Sense on Mutual Funds, by John Bogle
This is the book that taught me that Reversion to the Mean is an ?Iron Law? of stock investing. It?s all Bogle?s fault!
9. The Four Pillars of Investing, by William Bernstein
You want to follow an exceedingly odd procedure with this one. You want to read Chapter Two five times. You want to skip the rest. Don?t ask questions. This book is pure gold if you do it that way and pretty darn dangerous and confusing if you work through it in the ordinary way. I?ve read Chapter Two so many times now that most of its pages have fallen out of my copy.
10. The Essays of Warren Buffett, by Warren Buffett
Buffett is one of very few in this field who is a straight talker and who possesses a sense of humor. It doesn?t seem like it should be so hard to find those two qualities in someone who knows something about investing. But it is. So, when you find them, you?ve got to take in as much wisdom as you can take in and share it with as many of your friends as are willing to listen to your recommendations to take it in.
Rob Bennett views one of these books as a fantastic book advancing one of the most dangerous concepts ever introduced to the investment world. Rob?s bio is here.
Rob, interesting to see A Random Walk Down Wall Street on the list. I took a couple of investment courses in college, and that book was one of the text books!
That was more than a few years ago, so it must have some enduring relevance.
It’s had huge influence.
I actually read that book when it first came out — that was 1974. I was 18 and not interested in investing at the time. But my older brother was 10 years older than me and he was on an investing kick. He bought it and I saw it lying around the house and picked it up and read it.
It still haunts me all these years later!
Rob