Here is my personal ranking of the greatest investment books of all time. Investors cannot go wrong with any of these titles.
1. The Intelligent Investor by Benjamin Graham
This is hands down the greatest investment book ever written. Warren Buffett considers it his investment bible. Enough said. Mr. Graham’s explanation of stock quotations being more like a popularity contest than a fair valuation of a business is right on. His analogy of Mr. Market and how the price he quotes can be either rational or irrational is exceptionally poignant. The chapters on Market Fluctuations and Margin of Safety are the absolute gems of this work and should be read by every student of finance and investor who puts money in the markets.
2. Security Analysis by Benjamin Graham and David Dodd
A more comprehensive volume of the same topics and points made in the Intelligent Investor, which is simply a more condensed version of this book. This work is ambitious and covers in more detail bonds as well as other instruments such as warrants and convertibles. Financial analysts should read as much of this book as they possibly can.
3. Margin of Safety by Seth Klarman
Quite frankly I think this book is in many ways even better than the Intelligent Investor and I would have put it number one if not for the fact that it is out of print and copies are so difficult to find. This is the most logical and informative investment work ever written. If you are fortunate enough to come across a copy of this rare treasure you will agree with me.
4. One Up on Wall Street by Peter Lynch
Quite possibly the best pure stock picking book ever written. Mr. Lynch transformed Fidelity’s Magellan fund into a juggernaut using the principles contained in this work. His insight on using common sense to identify businesses in your area of expertise and how anyone can use their own knowledge and competence to find great investment opportunities was solid gold. His chapter on finding the tenbagger was the crown jewel of this work, which was the first time the term was ever coined.
5. Market Wizards by Jack Schwager
More of a trading book than an investment book, this unique volume has unparalleled insights into managing risk, particularly in finding deals where the trader has a favorable risk to reward ratio. If you always enter trades where your downside is limited and upside unlimited, you cannot go wrong in the long run. Mr. Schwager’s interviews with Ed Seykota and Larry Hite were some of the best commentaries on trading, investing, and risk I’ve ever come across. Every investor should read at least those two chapters. They are absolute gems.
6. A Random Walk Down Wall Street by Burton Malkiel
This book quite simply launched the index fund revolution. A contemporary classic, this work contains many insights on the Efficient Market Hypothesis (EMS). If you want to engage in the argument for or against buying stock index funds, you should definitely read this cover to cover. The randomness of stock prices is a subject that should be studied by every student of finance.
7. Common Stock and Uncommon Profits by Philip Fisher
A true investment classic in the sense of the word, this book’s greatest contribution to investment literature is how to evaluate the management of a company. Leadership at the top of a company can make or break it, even if it commands a strategic advantage over its competitors. History has shown that a leadership change at the top of a troubled company can completely change its fortunes in a short period of time.
8. How to Make Money in Stocks by William O’Neill
Different from the other investing books on this list, this book covers how to invest in growth companies, which is something that value investors such as Benjamin Graham just haven’t effectively addressed. The fact is, the most successful companies hardly ever trade at a discount to book value or sub working capital, but that doesn’t mean they should be avoided. This book contains ideas that every investor should consider and contemplate upon.
9. Reminiscences of a Stock Operator by Edwin Lefevre
By far the most entertaining read on this list. This is definitely not an investment book, but an abridged autobiography of the greatest speculator of all time, Jesse Livermore. Named the Great Bear of Wall Street, Mr. Livermore shorted the stock market in 1929 and made an estimated $100 million doing so. In today’s dollars, that is a few billion. Every novice and seasoned trader should read this and even non-speculator types will find it valuable especially when it comes to getting good executions on trades. The boy plunger was definitely the greatest speculator who ever lived. He made and lost millions.
10. Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
Before the term behavioral finance was coined, there was this book. First published in 1841, yes that’s not a typo, this book contains the complete histories of the greatest speculative bubbles up until that time, including the South Sea bubble and Tulipmania. Sir Isaac Newton lost a fortune speculating in the South Sea company, which he alluded to frequently in his writings. Tulipmania was a phenomenon in Holland where people paid ungodly sums of money for rare tulip bulbs. Prices eventually crashed. This book is a primer on the greater fool theory, which every sensible investor should be versed on. Identifying and avoiding speculative manias will save many an investor their fortunes.
Don’t agree with this list? Let me know.