Books to read – a Guide
I had asked Swapnil Khende…to do a series of articles on books to read…here is part 1 ..
“Investing success does not accrue to those with savant-like expertise in one field of intellectual endeavor, but rests on four pillars: a command of financial theory, a working knowledge of financial history, an awareness of financial psychology, and a solid understanding of how the financial industry operates. Like the decathlon winner, the successful investor is rarely the world champion in a single event, but someone who excels at all.” writes William J. Bernstein in the foreword of Jason Zweig’s book ‘The Little Book of Safe Money’.
I have selected the must read books for mutual fund investors and advisers from Subramoney must read investing books list and have arranged them in four categories –
- Books on Financial Theory
- Books on Financial History
- Books on Financial Psychology
- Books on How Financial Industry operates
This list does not include difficult to read books, books with significant overlap of content and books that are more relevant for direct equity investors.
- Books on Financial Theory
The Intelligent Investor – Benjamin Graham
Do not begin with this book if you know nothing about stocks and bonds. If not a direct equity investor, read Chapters 1 to 10, Chapter 20, and Jason Zweig’s commentary on these chapters the current edition comes with.
A Random Walk Down Wall Street – Burton Malkiel
This book covers all four important aspects of investing.
Bogle on Mutual Funds – John Bogle
This book covers all the basics of mutual fund investing in great detail.
Common Sense on Mutual Funds – John Bogle
This book makes a compelling case for index funds. A must read to build conviction in indexing.
Asset Allocation – Balancing Financial Risk – Roger C. Gibson
This excellent book is oriented towards financial advisers.
Unveiling the Retirement Myth – Jim Otar
A must read to understand the sequence of return risk; arguably the most important concept in financial planning.
Fooled by Randomness – Nassim Taleb
Taleb writes about the limitations of our knowledge and unpredictability of the future. He makes you aware about the role luck plays in highly random environments of financial markets and how often it is mistaken for skill.
- Books on Financial History
Devil Take The Hindmost – Edward Chancellor
An excellent book on the history of financial speculative manias over the centuries.
Triumph of the Optimists: 101 Years of Global Investment Returns – Emroy Dimson, Paul Marsh, Mike Stauton
This book analyses the history of 16 markets where a reliable 100 year market history is available. A must read to get a global and more realistic perspective.
- Books on Financial Psychology
Your Money and Your Brain – Jason Zweig
An interesting book that helps you understand your investing brain and provides tricks to avoid investing mistakes.
Influence – Robert Cialdini
‘Influence’ covers six basic psychological principles that direct human behaviour and which are frequently used against us.
Poor Charlie’s Almanack – The Wits and Wisdom of Charlie Munger
You would hardly find any other book with so much wisdom in it. I am including it here for the excellent essay ‘The Psychology of Human Misjudgement’.
- Books on How Financial Industry operates
Where Are The Customers’ Yachts? – Fred Schwed Jr.
This is a funny book that entertains as well as educates. There is more wisdom per page of this book than any other book in this list.
How To Smell A Rat – Ken Fisher
This book provides five warning signs that can help detect potential financial embezzlement.
How to Lie With Statistics – Darrel Huff
This small book can help you understand when someone is lying using statistics.
Subra’s comment: this book is not so easily available…
Enough – John Bogle
In ‘Enough’, John Bogle emphasizes the importance of honesty, integrity, ethics, character and unyielding loyalty to the client as the key to success. This should be a mandatory read for financial advisers for training in business ethics and professional standards.
Try to read as many books from this list as you can since no one book covers all
important aspects of investing equally well.