With 2016 in the books, we know that many investors are looking forward to a fresh start in 2017. Our new year resolution of 2017 is to become a better investor through reading. Inspired by Mark Zucerberg and Bill Gates, who both set regular reading as their yearly goal, Mark and I also compiled a list of investment books for 2017. We’ve included 12 books in this list, one book a month to start off your 2017. Whether you just started learning how to invest, or have been in the market for quite a while, we’d like to invite you to join us, learn by reading, and share your thoughts with us.
Without further ado, here's the first part of our top picks of the best investment books, selected by Edwin Kye:
1. The Intelligent Investor
The Intelligent Investor, written by Benjamin Graham, is arguably the singular most influential work on stock selection and value investing. Written in 1949, its principles and methods remain effective today and have influenced legendary investors such as Warren Buffett.
At over 600 pages, this investment book is a very thorough and comprehensive guide that seeks to transform even the most inexperienced layperson into a confident, principled investor. The book contains several interesting allegories to explain important points, such as that of Mr. Market. Mr. Market is a relentless individual who comes to a shareholder’s door every day in order to offer to buy and sell shares at different prices.
The point of this allegory is to encourage investors to ignore the ups and downs of the market, as it is often volatile and subject to sharp fluctuations. Instead, Graham advises investors to focus on the company’s performance and the intrinsic value of its shares.
Both practical and informative, The Intelligent Investor is a must-read for anyone who is serious about honing his or her investing skills and deserves a spot in this list of investing books. I personally enjoyed the book and learned several important lessons through the allegories in the book, which is why another reason why I included it on this list.
2. The Richest Man in Babylon
The Richest Man in Babylon, written by George Clason, is a classic book on money management and financial wisdom. The book is filled with parables set in ancient Babylon, as merchants and other citizens attempt to figure out the secrets of Arkad, the wealthiest man in Babylon.
The Richest Man in Babylon does not have information on investing or the stock market, but I chose to include it in this list because I feel that it contains many important lessons and advice for investors.
For example, one of the primary lessons in the book is that “better a little caution than a great regret”. This tip is a great one to heed when investing, as it is often easy to get carried away by the prospect of huge profits and gamble on high-risk trades. This adage also applies in regards to profit taking, as many investors fail to lock in profits and end up losing money on otherwise solid investments.
The book’s fascinating parables and useful advice earned it a place on this list and is one of my personal favorite books on money management. I’ve used many of the tips in the book to improve myself as an investor, such as exercising caution when making decisions.
3. How to Make Money in Stocks
How to Make Money in Stocks, written by William J. O’Neil, is another classic investment publication. This book provides investors with hundreds of charts of past winners in order to help stockpickers identify stocks with significant upside potential.
O’Neil outlines exactly how to identify good companies through both fundamental and technical analysis through his iconic CAN SLIM system, a seven-part method to identify growth stocks. The method relies on a combination of earnings and technical analysis, along with scrutinizing a company’s products and prominence in its industry.
The methodology and system to successful stock selection outlined in How to Make Money in Stocks have proven track records and have made O’Neil’s book one of the most famous works in investment literature. I decided to include this book as I’ve used the CAN SLIM system myself to help select stocks to invest in and have found that it is a smart way to evaluate equities.
4. Understanding Options
Understanding Options by Michael Sincere is a must-read for anyone interested in trading options. The book contains detailed descriptions of options and step-by-step diagrams to explain how to execute and value them.
Sincere clearly explains everything you need to know about options, which are a valuable tool either as a hedge for your investments or a standalone means to earn profits. The book contains both introductory information and advanced strategies for all levels of option traders.
Options are complex financial instruments but Sincere explains them simply enough for any level of trader to understand. This book would not have made this list in past years, but I believe options trading has become an important skill for all investors, which in my opinion warrants this book a place on our list.
Understanding Options helped me understand the nature of options and how to trade them effectively, and I now trade them nearly as much as I do common stocks.
5. Irrational Exuberance
Irrational Exuberance, written by Robert J. Schiller, was published at the height of the dot-com bubble and predicted that the stock market would “burst”. The second edition of the book was published in 2005 and predicted the fall of the US housing market.
Schiller explains how he predicted that the stock market at the time was in a bubble by using fundamental and psychological analysis. He argues that the price-to-earnings ratio of the S&P 500 companies was far too high and that certain elements of psychology could explain the “irrational exuberance” that caused the stock market bubble in the first place.
The book is a very interesting read and I included it in this list because I took there are several important takeaways for investors. For example, Schiller cautions against following the crowd and argues that people often do so as a fear of missing out on large profits.
I’ve applied some of Schiller’s lessons and advice to my own investing strategy, and I feel that the book has allowed me to become a more rational, cool-headed investor.
6. Common Stocks and Uncommon Profits
Common Stocks and Uncommon Profits, written by Philip Fisher, is a unique guide to stockpicking in that it deemphasizes traditional investing rules. Instead of paying too much attention to whether or not a company is under or overvalued, Fisher encourages investors to pay attention to the company itself.
He advises investors to look at the company’s management, R&D investments, what the company’s doing to improve margins, among other criteria. He argues that a high price to earnings multiple or other measure of valuation shouldn’t be an automatic turn-off.
Fisher is regarded as one of the most influential investors of all-time and his book is a testament to that. Common Stocks contains tons of useful information for investors and offers a non-traditional, yet effective, means of evaluating stocks and is an important read for anyone serious about achieving success in the stock market.
I included this book partly because I agree with Fisher’s thesis that the company itself should be examined when making investment decisions. I also agree that a high valuation shouldn’t automatically disqualify a company from consideration, as several of my own holdings have higher multiples than other companies in the same industry.
Edwin Kye is Keel’s Research Intern.
He began investing due to his passion in sneakers and fashion. To date, Edwin has averaged 25% returns on his investments, which include long/short positions in companies such as Nike, Adidas, and Under Armour.
He has advised analysts at various hedge funds about the footwear industry and the viability of different investment theses, and writes regularly on Seeking Alpha. He also runs a blog at TheSneakerGuru.com, where he comments on various aspects of the fashion and footwear industries from an investor perspective.
Edwin is currently an undergraduate economics major at Cornell University.