Reading books by accredited investors, economists, and journalists is an essential process when investing in stock markets. It’s important to read and pick up new knowledge while investing, it’s a good way to lead a successful investing career. With that being said, there are many books that are available to market participants and it’s extremely difficult to create a “top 5” best list. Nevertheless, the following list will contain books on valuations, theory, psychology, consumer behaviour, speculation, and trader interviews. See below:
The Top 5 Best Books
1.) Common Stocks and Uncommon Profits (by Philip A. Fisher)
2.) One Up on Wall Street (by Peter Lynch)
3.) Stock Market Wizards (by Jack D. Schwager)
4.) The Black Swan (by Nassim Nicholas Taleb)
5.) Flash Boys (by Michael Lewis)
You may or may recognize some of these books depending on your level of experience in the market. As a result, you can read the short summaries below to gain an understanding of why each book deserves to be on this list.
1.) Philip Fisher provides a groundbreaking and out-of-the-box fundamental analysis process that he believed helped him secure “uncommon” profits, even up to 10x his original investment. He kept it simple, yet detailed as he provides a step-by-step guide to the “scuttlebutt” technique.
2.) Peter Lynch uses his street smarts and investment saavy to paint a beautifully simple picture of investing that people often overlook. Simple observations such as, if you notice that everyone is purchasing a company’s product or service and talking about it daily, it’s probably a good investment. Lynch also goes in depth once he has identified such a company.
3.) Jack D. Schwager is a trader who turned to journalism after he realized that there was more value in interviewing those who had been successful in the market. “Stock Market Wizards” is filled with great interviews with America’s truly legendary traders who agreed to share their knowledge; this, coupled with Jack’s great story telling, make for a great read that is sure to have you jotting notes along the way.
4.) Nassim does a superior job at explaining the impact of the highly improbable which are rare and unpredictable outlier events. Markets are not always efficient, if they are at all, there is a steady diet of unpredictable events that are sure to mix things up. “The Black Swan” tells a great story filled with knowledge and metaphors that help you understand the importance of building robustness to negative events.
5.) Michael Lewis tells a great story about high frequency trading (HFT), you’ll learn about the journey that people take to gain an advantage in markets, even for just a slight advantage. You’ll also learn about one of the market participants that you compete against on every trade. This book is not theory or opinion, HFT is a fact, just ask Brad Katsuyama (founder of the Investors Exchange).
Most books contain the theories of their authors and these books are no different in that regard. Although these books contain vast amounts of useful information, they should be taken with a grain of salt. When you read investing books, you should attempt to understand and then form your own theories based on your own experience in financial markets. Your knowledge base, and your “edge”, will be derived from how well you understand the subject matter and how well you manage to make it fit your style.
