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Investment Books: 5 Best Books on Trading

Knowledge is power in the financial world. And there’s no better way to attain it than by reading from those who’ve been successful in the past. But anyone who’s ever spent some time browsing all the titles at the bookstore or online surely has noticed one thing: there are A LOT of books written for investors! Which ones contain real advice and which ones are… well, it’s better left unsaid.

In this article, we’ll look at the Top 5 books on investing that every wealthy investor should have on their bookshelf, as well as few others that didn’t make the cut, but are great reading material nonetheless.

 

#5 – The Intelligent Investor

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Don’t know where to begin? Begin with this classic first published in 1949. The Intelligent Investor by Benjamin Graham won’t make outlandish guarantees and can’t-miss strategies that any slick salesman is barking at you. No, this book is about imparting wisdom that makes up the heart of all well-managed and high-performing portfolios.

It might seems counterintuitive, but the Graham’s against-the-grain philosophy makes sense: Investing isn’t always about profit maximization, but instead should focus on minimizing how much you stand to lose. To many newbies readers, reading this book has that pivotal flicking-a-light-bulb-on moment about how one should conduct their investments in a more rational manner.

In some ways, The Intelligent Investor deliberately flies in the faces of how speculators of the markets favor following trends. Instead, Graham preaches how research, rational thinking, and discipline may push you towards “unpopular” but sound investments. He cautions investors to avoid emotional behavior during bull and bear markets, instead focusing on how the stocks are actually performing despite all the upheaval and commotion.

The book core message hasn’t changed, but subsequent publications have been updated with chapter-by-chapter commentary and footnotes prepared by the senior editor of Money, Jason Zweig. Its advice still holds true, especially corroborated with more modern information about recent market activity and investment vehicles that hadn’t existed when Graham first wrote the book.

If you’re still not convinced that this dinosaur of a book is valid, take it from Warren E. Buffet, who called The Intelligent Investor “the best on investing ever written.” High praise, indeed, and that’s why it remains a top-seller (over a million copies sold to date).

#4 – A Random Walk Down Wall Street

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It’s an interesting thought experiment, but would a “random walk” for investors have as much luck selecting a winning portfolio as a professional? Should we all just give ourselves a blindfold and concede that the market is a gamble?

Author Burton Malkiel’s A Random Walk Down Wall Street makes a compelling case that it is short-term thinking that causes investors to lose out. Malkiel argues that stock prices are too unpredictable in the near-future; instead, investors should focus on buying and holding onto index funds. He goes on to say that investors should avoid securities and manage mutual funds passively—a broad range of index funds outperform managed portfolios. Plus, investors avoid decreasing their returns from trading costs and other expense charges.

A Random Walk Down Wall Street has seen its seventh edition in print since being first published in 1979—and with good reason. Incorporating a new range of investment choices like Roth IRAs and money-market accounts, or even the emerging global economy, the book’s advice still holds true. Why? According to Malkiel, “the market eventually corrects any irrationality.” Looking at the boom-and-bust of the DotCom bubble and other market hysteria, he makes an irrefutable point of stoicism in the face of optimism. The methods may change, but the game stays the same: focus on the tried-and-true. The market always recognizes true value.

Similar to the rational mindset, the book features a section called “Life-Cycle Guide to Investing”, on how the age of an investor should be taken into account when gauging one’s capacity for risk. For instance, a retired investor in his 60’s must exercise more caution than a 30-year-old with a substantial income from full-time employment. This and other kernels of wisdom ensure that reading A Random Walk Down Wall Street is anything random. Instead, it may be the most valuable book on investing that you own.

#3 – Common Stocks and Uncommon Profits

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Looking for more advice from high-performing investors? Philip Fisher’s Common Stocks and Uncommon Profits is a book that’s practically taken as gospel in investing circles since its initial publication. Written in 1958, it has since moved onto to becoming mandatory reading for long-term investors. One of the biggest fans of this book includes Warren Buffett, who was so impressed with the time-tested advice that he credited this book (and Fisher’s approach) for his substantial success. So, what’s in it?

Basically, Fisher spells out how investors can inspect a company qualitatively, emphasizing prospective growth in earnings and how the management of the company are significant factors used in determining the viability of choosing that stock.

Additionally, the updated version hasn’t lost any of its initial vitality. The updated editions includes an extended preface and introduction by the author’s son, Ken Fisher, who is a successful investment guru in his own right, who explains how his father’s teachings still form a pivotal role in playing the market.

#2 – How to Make Money in Stocks

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Looking for a book on investing from one of Wall Street’s most famous investors? Bill O’Neil’s aptly-titled How to Make Money in Stocks explains just that. Why should you trust his opinion? Because he built his portfolio on finding high-performing stocks before everyone else knew about them. Their names should be familiar to you: Amazon, Microsoft, Home Depot and the list goes on. And it doesn’t hurt that he founded Investor’s Business Daily.

Want to trade like Bill? How to Make Money in Stocks is written in three parts.

First, you’ll have to learn his unique trading system, called CANSLIM, and how it has provided him with enormous wealth and incredible accurate predictions of the next big thing. Each letter of the acronym spells out a particular guideline (ex. L stands for “Leader or Laggard”) or strict criteria when judging a stock performance and how to handle your portfolio. Second, new investors are introduced to technicals and charting—crucial rudiments for new investors. Finally, the book offers some general advice (like avoiding bear markets completely) and an overview of successful investors in the past.

#1 – One Up On Wall Street

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If there’s one book that every investor can agree on impacting their financial outlook, it’s Peter Lynch and John Rothchild’s seminal book, One Up on Wall Street. What makes this million-seller tome so powerful is contained in the subtitle—by using what you already know, you can make more money.

The book boils down to how the natural advantage of money-mindedness that investors develop—even amateur investors—over other professions. Lynch explains that investment opportunities are just about everywhere in our daily lives, from seeing retailers struggle to keep hot items on their shelves to products that colleagues in the office are raving about. With this ear-to-the-ground approach, investors can beat the professional analysts to these opportunities, essentially getting “on up on Wall Street”.

As with any classic investing book, some of the nicknames will stick with you long after you put down the book. What do you call stocks that appreciate 10x from your initial investment? “Tenbaggers”. Soon, you’ll find yourself hunting tenbaggers to turn your lagging stock portfolio into a high-performing asset.

The advice contained in One Up on Wall Street resonates because it’s so timeless and easy to follow. Lynch offers his guidelines and techniques to separate the wheat from the chaff. For instance, which numbers of a company’s financial statements should you base your decision-making on? What timeframe should you be thinking in for your investments? Lynch answers these questions and more, spelling it out for you in laymen’s terms. And that’s why this book is a classic tool in wealth-building and investment know-how.

More Best Books on Trading

It’s hard to pick just 5 books when it comes to investing. But the previous should provide a solid foundation for those new to investing and season veterans, too. Looking for more reading material to round out your knowledge? Here’s our list of some books that should be pique your interest after you’ve read the classics.

The Little Book of Common Sense Investing
Author: Jack Bogle
What’s in it: Keep your costs low, invest in market indexes for the long-term.

Alchemy of Finance
Author: George Soros
What’s in it: Soros’ thoughts on the theory of reflexivity relating to the market. Not for beginners, but rewarding for diligent investors.

Extraordinary Popular Delusions and the Madness of Crowds

Author: Charles MacKay
What’s in it: How to avoid herd mentality and coping strategies for future bubbles.

Moving away from books on investing and books on trading, you may also want to take a peek at The Online Writer’s Companion. This is a personal favorite of ours and has helped many contributors to this site to become fully paid-up freelancers. There are also sections on how you can invest all of that expendable income.

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