Reading is an investor’s best friend. But picking the best investing books of all time is a daunting task.
I’m an avid reader and have read at least 500 books on markets. Inevitably, the list below is subjective and may change in the years to come.
Supermoney by Adam Smith
Adam Smith, a pseudonym for George Goodman, writes of the ups and downs in markets during the 1960s and 1970s with wit, wisdom, and brilliant humour.
What is supermoney? It’s profits, washed through markets. You either have it or you don’t. Smith explains why the green stuff in your pocket isn’t real money, and why the rich just get richer. The themes that Smith writes of are as relevant today as they were then. The book also introduces, perhaps for the first time, a man that would go on to become America’s greatest-ever investor: Warren Buffett.
One Up on Wall Street by Peter Lynch
Peter Lynch was the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990. His average annual return was 29.2%, making it the best-performing mutual fund in the world at that time.
In simple language suited to beginners and professional alike, Lynch explains how individual investors can beat professionals in markets. He says individuals often get information about a growing company before institutional investors, and that has the potential to turn into a multi-bagger (making many times your original money) investment. Many investors cite Lynch’s book as one that got them first enthused with investing, as it was for me.
The Little Book That Still Beats the Market by Joel Greenblatt
After setting up a hedge fund in 1985, Greenblatt achieved returns of 50% per annum over the next 10 years – one of the most extraordinary investment track records. Here, he explains his methods in terms that a 7-year-old kid can understand.
Greenblatt used a so-called a GARP (Growth at a reasonable price) strategy, investing in companies with high returns on invested capital (ROIC) yet on low-to-average valuation multiples.
This is a book squarely aimed at beginners. The author has written a more advanced book, You Can Be a Stock Market Genius, which is just as good as this one.
Capital Account by Edward Chancellor
This is for more sophisticated investors. Chancellor collates the investment letters of the highly successful UK-based fund manager, Marathon Asset Management. The letters introduce Marathon’s capital cycle theory. When investors analyse an industry, they often look purely at demand growth, where Marathon suggests the supply side is much more important.
If you read this, you’ll better understand why the US tech sector was ripe for a market reckoning in 2022, and where to find potential opportunities in under-appreciated industries.
The Essays of Warren Buffett by Lawrence Cunningham
Buffett has done the world an enormous favour by writing about investing in his annual shareholder letters for decades. The letters are a treasure trove of information that every serious investor should read and re-read.
This book is a compilation of Buffett’s shareholder letters and it’s endorsed by Buffett himself. If you want to read about Buffett, start here first. Then go to Alice Schroeder’s, The Snowball.
The Little Book of Common Sense Investing by John Bogle
Bogle revolutionized the finance industry by founding Vanguard in 1974 and introducing index investing. Low-cost index investing has become the norm and it’s made markets more accessible to millions of investors.
In this book, Bogle boils down complex investment issues into simple, understandable language. Yes, he preaches passive investing, but does it in a gentle, humble, yet rigorous way.
The Money Masters by John Train
Train is one of the most brilliant, yet underappreciated writers on investments. A fund manager himself, this book examines the different styles of some of the investment greats and how they’ve outperformed over long periods.
Train was an early investor in Warren Buffett and his book analyses what makes Buffett brilliant in a way few others have done since.
Winning the Losers Game by Charles Ellis
Investing is more about making few errors, rather than picking winners. Ellis suggests the investment game has changed from a winner’s game into a loser’s game. In the decades before 1975, individual investors dominated the stock market. Since then, professional investors have proliferated, making the stock market more efficient. That means outperforming the market is much more difficult.
Ellis suggests that the way you win a winner’s game is different to that of winning a loser’s game. In the stock market, as it’s become a loser’s game in Ellis’ view, there are two ways to win. First, you can choose not to play the loser’s game. Even in 1975, Ellis had become an advocate of passive investing. The second way that you can choose to play the loser’s game is by losing less than your opponents via making less mistakes.
The Big Short by Michael Lewis
Michael Lewis has been the best writer on markets over the past 20 years. His book Liar’s Poker became a cult classic about the high stakes gambling and deception at one of Wall Street’s largest brokerages in the 1980s. This book is equally as good, profiling investors who shorted the US housing market before 2008 and made extraordinary amounts of money.
Given the quality of the book, I haven’t bothered with seeing the movie version – though I should get around to it sometime.
The Warren Buffett Way by Robert Hagstrom
This is the book to get if you want an in-depth look at Buffett’s investment strategies. For instance, it breaks down why he invested in famous portfolio holdings such as Washington Post and Coca-Cola.
It’s aimed at the intermediate to advanced investor who wants to deepen his understanding of the key tenets to successful long-term investing.
Investing for Growth by Terry Smith
UK-based investor Terry Smith is one of the best global investors of the past decade. This book is a compilation of his shareholder letters. Smith is known for being both outspoken and blunt, and he doesn’t mind taking on the views of the financial establishment if he thinks they’re nonsense.
His letters give clear insights into why he invests in growth companies and avoids investing in certain sectors such as banks.
The Downfall of Money by Frederick Taylor
This book is about history, not investing. Studying serious economic crises is a great way to learn about past excesses that went wrong. In this case, it’s the study of how debts incurred from World War Two led to Germany printing so much money, that it ended with hyperinflation in the 1920s. Before that, Germany was one of the world’s most advanced countries, but hyperinflation destroyed it. So much so that it played a big part in Hitler eventually coming to power. 100 years later, the period is still seared into the memories of Germans, who remain paranoid of both inflation and hyperinflation.
Frederick Taylor writes a moving and powerful story that shows the enormous damage done to societies and individuals.