Every investor should make the effort to read - some books can help improve your investing and could also save you making costly mistakes.
Benjamin Graham is regarded as the father of value investing. Warren Buffett was once a student of his and Graham’s book, "The Intelligent Investor" has been described by Buffett as “by far the best book on investing ever written”.
Although a little dour for a modern audience, it acts as a doorway into a world of logical and intelligent investing and clearly explains how conservative investing differs from gambling.
Even the best investors make mistakes, that’s why it’s vital to build in a margin of safety, ensuring that you buy cheaply so that if a stock does fall you don’t get wiped out. Ben Graham pretty much invented this concept and his book explains how to put it into effect.
Here are six more books that you might consider adding to your bookshelf. Together they’ll cost around £100, but you could even see it as an investment if they help you improve your style and put your money to work more effectively.
Common Stocks and Uncommon Profits by Philip Fisher (1907 - 2004)
Fisher was another huge influence on Warren Buffett’s investment philosophy; his focus on how to assess the qualitative aspects of an investment are timeless. It’s an engaging but profound read, providing advice on a wide range of investing concerns, from how to gauge the potential of a company, to when to sell a share. Fisher's guidance on how to use the business grapevine to obtain valuable details about the management and strengths of a company, otherwise known as "Scuttlebutt", is particularly novel and useful.
The Little Book of Value Investing by Christopher H. Browne (1946 -2009)
Former managing director of the US-based Tweedy Browne investment house, this is very accessible and a great introduction to some of the central tenants of value investing. You don’t need to have much financial background, just common sense to get a lot from this book, which succinctly explains the key investment rules in a witty manner. A pocket sized and practical guide to be read and re-read.
Investing Against the Tide by Anthony Bolton
Written by one of the UK’s most successful stock market investors (former manager of the Fidelity Special Situations fund), reveals some of the secrets of his success as he explains his investing methodology, successes and failures. Not all of it can be easily replicated by the private investor, who naturally lacks the resources and access to company management, but it provides a benchmark and insight into the risks of investing.
The Zulu Principle by Jim Slater (1929 -2015)
This legendary self-made financier and investor first explained in this book the idea of investing in small caps that are undervalued yet are growing fast with earnings rising. As he famously wrote: "Most leading brokers cannot spare the time and money to research smaller stocks. You are therefore more likely to find a bargain in this relatively under-exploited area of the stock market.” It’s a useful guide and his originality is always stimulating. The beauty of this book is that he explains in simple terms how to apply screens to find cheap yet good companies. The chapters on price earnings growth (PEGs) and technology stocks are particularly useful.
The Future is Small by Gervais Williams
Fund manager and founder of investment house Miton. A small cap specialist, Williams makes a very persuasive case for why in the years ahead small caps will outperform large companies and why the Alternative Investment Market (Aim) in particular will be a happy hunting ground for investors. He explains complex macroeconomic drivers in a very accessible way. Indeed, the book is highly readable and he even provides sources to back-up his arguments - just in case you wish to delve deeper into the economics that underpin his arguments. Perhaps better used as a motivator rather than as an aid to actual stock selection.
The Little Book of Behavioural Investing by James Montier
Investment strategist at US asset manager GMO. In this humorous, engaging and highly enjoyable little book, Montier outlines some of the most common behavioural challenges and mental pitfalls that most investors are prone to. More importantly, he provides strategies to help you avoid these in-built weaknesses. For example, he explains the importance of preparing plans while in a cold, rational state, as in the heat of the moment emotions can produce investing mistakes. Helpfully, he also provides examples of how the world’s best investors have beaten the behavioural biases that reduce investment returns.
Armed with the knowledge contained in the above books you’ll be in a strong position to make better investments, which should in good time bring the rewards that only sound investing can.
