To be a successful value investor means a commitment to keep on learning. This can be from other successful investors, or it can be from relatively unknown investors who bring fresh new ideas and insights to the subject. Most great investors I know maintain a healthy reading habit (over and beyond annual reports). Below are some selected value investing books that in my opinion add tremendously to a value investors’ arsenal, be it in form of theory or practical techniques, developing critical thinking, bringing new ideas and insights or in many cases merely providing a contrarian point of view that can be instrumental in balancing one’s perspective and outlook on the major emerging economic trends. These are the best investing books in my opinion for investors at every level. I have read all of these investing books and I took away lessons that still guide me through my investment practice.
Best Value Investing Books
The following investing books are the ones I have personally read and can whole heartedly recommend. Please be advised that a purchase from this list will benefit VSG in form of a small commission. If you are an experienced investor, you may jump straight to the practicing value investing section. If you are just starting out in the world of investing and feel that value investing resonates with your philosophy, you should read the investing books in the beginner section first. This way you can get acquainted with stocks and how to think about them.
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Best Investing Books For Beginning Investors
Beginners need to be very selective in which books they start their investing career with. If you are just planning for retirement, you may not need to go beyond the books in this section. You may wish to learn more about value investing if investing is more than a hobby. The books below will give you many tips on investments and the financial market. They will also help you start to form a point of view, or a lens, through which you approach investing. Once you get your fundamentals right, the books in the later sections will help you develop a more mature investment philosophy.
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The Real Secret to Beating the Market by 6% Annually
There are ways to earn returns far in excess of the market. Value investing done well can put you ahead, and other techniques I discuss in this book will take your investment returns to new heights.
The Only Investment Guide You Will Ever Need
So let me clarify this first. Despite the name of the book, this is NOT the only investment guide you will ever need. Tobias does a great job of helping you lay out the foundations of setting up an investment portfolio. For most, this would include the pre-work that you should do – for example, handling your debt, saving up for emergencies, buying insurance, you get the idea. For someone who is just entering the work force, or for people who suddenly find themselves responsible their finances but have little prior experience, this book is a great guide to orient yourself towards the financial landscape. The author is funny and will instill in you the “financial common-sense”. As far as the investment advice in this book goes, it is traditional, which while it will not lead you in the wrong direction, it will also not make you a great investor.
Why are We So Clueless About the Stock Market
A great introduction to the fundamentals of business and investing. If you hesitate to read the financial statements of a company, this book explains the main ideas in a simple way. The author is also a value investor so the underlying theme of the book is indeed paying less than the business is worth. This can be a great primer to other more advanced value investing works listed further below.
One Upon Wall Street
Peter Lynch was the legendary manager of Fidelity Magellan Fund and always emphasized investments based on common sense. His admonition to invest in “what you know best” continues to fall on deaf ears today, as so many investors still chase the “hot investments” in companies they have no understanding of. Full of anecdotes from his investing career, this book takes the reader on a journey through the investment philosophy of one of the most successful investors of all time. Peter Lynch averaged 29.2% annual returns over the 13 year period that he ran the Fidelity Magellan Fund.
Best Investing Books to Prepare You for Value Investing
It is said of value investing that either you get it or you don’t. Much of value investing has to come from within and in many ways it has to be an extension of your life philosophy. I would say that in order to become a good value investor, you need to survey the wider field of investing and eventually come to a conclusion that the value investing philosophy makes the most sense.
Common Stocks and Uncommon Profits
Commonly referred to as the Father of Growth Investing, Philip Fisher nevertheless is an excellent teacher to learn from. Warren Buffett believes himself to be 85% Graham and 15% Fisher. Fisher believes that whenever you find an excellent company with solid future earnings growth prospects, you should be willing to pay up. Most value investors will disagree, arguing that future earnings are essentially unreliable. Fisher does lay out methods and techniques to minimize your mistakes in estimation.
A Random Walk Down Wall Street
Malkiel will have you believe in the Efficient Market Hypothesis. After reading this book, you may wish to confine yourself to index funds. This would be a shame, as the Efficient Market Hypothesis, while elegant, is just a construct to help academics explain how the stock market works to a reasonable approximation. In other words, how most of the market works. As a value investing follower, you know that the exceptional profits are not made in the “most of the market” but on the fringes which is where value investors tread. So why read this book?
Simple. You need to understand the counterparty you are trading with to make money.
Extraordinary Popular Delusions and Madness of Crowds
The markets are not always rational and have been subjected to mass hysteria that creates bubbles and busts frequently throughout the history. What causes the seemingly rational people act so irrationally? Charles Mackay wrote this book in 1841, but the story keeps on repeating. Investors are like lemmings and when greed and crowd behavior takes over, they do stupid things. I will tell you this – you do not have to be a great investor. If all you do is to avoid these mistakes in your investment career, you will end up with significantly better returns than the average.
Best Investing Books for Practicing Value Investors
So you have been value investing for some time and have had a pretty good time doing it. You have made more money than you have lost and in general the stock market has been kind to you. You are now ready to take your investing up a notch and learn from the best. Each book listed below has a lot to teach and is a classic.
Stay abreast with my reading as I add to this list of recommendations over time. Also visit my author page on Amazon.