I was thinking the other day, ‘If I was to lose all of my accumulated share market investing knowledge tomorrow and could only set aside a handful of books to get me started as an investor again, what would they be?‘
When I first got interested in investing in 2001 it was a daunting prospect. I had a strong feeling that I would like it and that it was the right way for me to go, but at the same time it all seemed pretty confusing. The markets seemed to be an off-putting mix of snake oil salesmen and a bunch of ‘fancy’ gamblers – I couldn’t workout if there was anything legitimate about it all. It wasn’t until I started reading the ‘right’ books that it all began to come together for me – and I haven’t stop reading and learning since.
One of the most important lessons I have learnt through all of my research is this – ‘What you learn and who you learn from are immensely important in this game.’ That said, if I had to start over again here’s a list of 6 books I would set aside for myself to help me become a better share market investor:
The Richest Man in Babylon
by George Samuel Clason
Though not specifically a book on investing, I would definitely want myself to read this book before I got started.
The Richest Man in Babylon is full of short, sharp lessons that are told via fables based in ancient Babylon. I’m a big fan – I like the story-teller style of it’s writing. I find it makes the lessons more memorable, and this book is full of powerful lessons;
- avoid debt,
- pay yourself first,
- control your spending,
- multiply your savings and
- the importance of understanding the source of any advice.
I believe without the grounding principles of this advice firmly understood and practiced all of the investing knowledge in the world wouldn’t be that helpful.
The New Buffettology
by Mary Buffett and David Clark
Next, I would want my newbie self to read The New Buffettology. For me this book was my Ah-ha moment. I still remember picking it up in the bookstore years ago, reading the blurb, flicking through the chapters and then having a party in my own head – I instantly knew that this book was what I had been looking for.
If you don’t know who Warren Buffett is, he is a kind, generous, simple-living, investment genius. Buffett’s genius and his impressive ability to stay rational even when the markets are anything but has helped him to become the third richest man in the world – his wealth was last recorded at about US$72 billion and 99% of this wealth he has also pledged to give away!
The New Buffettology provides a decent introduction to Buffett’s investing philosophy and also provides a rough stock screen to help explain the types of companies that Buffett prefers to invest in.
For me buying this book has been the best financial decision I have ever made.
The Consolations of Philosophy
by Alain De Botton
My newly investing self would now be saving my pennies and beginning to compound them like Buffett again. But before I’d let myself get too excited I would want myself to read ‘The Consolations of Philosophy.’
The Consolations of Philosophy I found to be a good little introduction to a handful of philosophers and the more practical branches of philosophy. Reading this book at the beginning of a new investing career I believe would be helpful for grounding yourself, solidifying your intentions and strengthening your intestinal fortitude.
I believe that to be great at anything you need to spend a solid amount of your time working on your internal self – not just your external skills and projects. The more you understand yourself and develop your own internal operating system the more clarity and focus you will be able to put into your chosen work.
In a way that I found interesting and engaging The Consolations of Philosophy introduces the below concepts and Philosophers:
- Consolation for Unpopularity (Socrates)
- Consolation for Not Having Enough Money (Epicurus)
- Consolation for Frustration (Seneca)
- Consolation for Inadequacy (Montaigne)
- Consolation for a Broken Heart (Schopenhauer)
- Consolation for Difficulties (Nietzsche)
The Most Important Thing
by Howard Marks
Now that I would be rolling along and beginning to introduce some working philosophies and values to my work I’d want myself to gain an even deeper knowledge of Value Investing – I would want myself to study from Howard Marks.
Howard Marks is the billionaire cofounder and Chairman of Oaktree Capital – which has $75 Billion dollars under management. Marks, like Buffett is what is referred to as a Value Investor. This is the method of investing that I and many other devotees subscribe to.
Basically, as Value Investors we are trying to buy into companies that have been under priced by the market to take advantage of their cheap assets and revenue streams. These companies usually become under priced due to a range of human emotions, irrational investor mistakes and the effects of herd mentality. This all sounds easy enough understand, but there is quite an art to it.
I have found Marks’ insights in his book to be one of the best references for Value Investors that there currently is. From second level thinking, to understanding value, to understanding risk, to ensuring patience and avoiding pitfalls, Marks’ does an impressive job of cataloguing and detailing many of the facets that we Value Investors need to always keep front of mind.
I would also note here to read Howard Marks’ Memos
by Dan Ariely
With all of this new found knowledge from the first four books I believe now would be a good chance to further my understanding of my own mind and all of the short comings it shares with the rest of the human race.
Predictably Irrational is a perfect book for preparing yourself to survive in the share markets. With many examples and shared experiments such as understanding how marketers ‘persuade’ us into making the choices they want us to make and why our ‘Dr Jekyll and Mr Hyde’ selves can make completely different choices on our behalf, it begins to help you realise the tricks the mind can play on you. From there it then helps to guide you towards setting-up your life and putting yourself in the best possible position for being less irrational – which is pretty valuable when share markets start Yo-Yoing.
By helping to provide a deeper understanding of how and why we are all irrational at the most inconvenient of times this book helps you to prepare yourself to follow Warren Buffett’s timeless and insightful wisdom – ‘Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.’
by Alice Schroeder
This is Warren Buffett’s biography – if this couldn’t help my newly investing self to become a better share market investor, I’m not sure what could.
I find biographies are a great way to receive ‘mentorship’ from your hero’s. They allow you some insight into what makes them tick and often provides you with learnings that you can pick and choose from to incorporate into your own life and work. I found this biography on Buffett to be perfect for this. It is a monster book and I am a pretty slow reader but due to my interest in the subject I devoured it in under a week.
Learning from a man who is compounding his passion into billions of dollars to be donated back into society can only be a good thing to end my initial learning phase on.
I would also note here to read Warren Buffett’s Letters to Shareholders
Over the years I’ve now read many more books than are listed above to help me continue to be a better share market investor, but if I had to break it down to a few this is my pick of the bunch. If you’d like to keep up-to-date with what else I am reading…
Enjoy the ride!