Sunday, August 21, 2011

Great Investing Books

Books are a great way to learn how to invest. The trick is finding the good ones to read. There are as many bad books as there are bad professional money managers. A money manager, financial advisor, your friend, wife, dog, and mother could have all publish a book about investing and the likelihood is that it wasn't worth reading. I've read many books on investing and trading, and most of them were pretty worthless. This includes every book that I've read on technical analysis, and efficient market hypothesis.

It wasn't until I finally read some of
the great Warren Buffet's writings that I finally realized the vast difference between a Kia and a Ferrari. His teachings were the only things that made sense. His teachings made sense because he doesn't talk about magic and superstition. I happen to be a reasonably bright lad and magic and superstition just doesn't sit well with me. I'm very grateful that he gave a lot of credit to his teachers, because from credible people know other credible people. That's how I finally found a few books worth reading.

In this post, I will let you know about the absolute must-reads and the most helpful books. This is a consolidation of the most valuable information that took me years of searching before finding. Consider yourself lucky that you've stumbled upon this treasure trove! I've reviewed them in the order of importance.

Must Read
The Little Book That Still Beats the Market (Little Books. Big Profits) By Joel Greenblatt: The Little Book That Beats the Market
The Little Book That Beats The Market, by Joel Greenblatt - Joel had a mission when he wrote this book. He wanted to teach someone to invest, in a way so simple that he could teach it to kids. This book his the result. In a funny, light, entertaining and easy manner, he teaches you how to value a company based on how much you expect the company to be able to make in its lifetime. He starts off with a wonderful story to his son about a fellow student Jason, who buys gum and sells it to other kids. Knowing how much money Jason could make by selling gum for the remaining years in school, he asks his son how much he would be willing to pay in order to receive half of Jason's profits. Even as a sixth grader, his son understood that there was a maximum price that one could pay for a business. I wish that I've found this book earlier, as it would have given me much of the understanding of valuing a business that I have today. It was still pleasant to read, as it reinforced all of the great things that I've learned.

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Warren Buffett and the Interpretation of Financial Statements, by Mary Buffett - Financial statements are how companies tell the amount of success they're having, and corporate accounting is the language that the speak in. While you don't need too master all areas of accounting, you MUST have a basic understanding of how to read financial statements. Mary Buffett, the daughter in law of Warren Buffett, has done an incredible job in teaching me and many others how to read a financial statement. She beautifully presents the numbers in a easy manner so that even someone like me, with no financial background, can easily understand it. Read it. And when you're ready, read it again.

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition The Essays of Warren Buffett : Lessons for Corporate America The Essays of Warren Buffett: Lessons for Investors and Managers
The Essays of Warren Buffett, Warren Buffett - I regret to inform you that our Oracle of Omaha, Warren Buffett, has never actually written a book. This book is a collection the excerpts of Warren's letters to the shareholders in Berkshire Hathaway's annual reports. Every year, Mr. Buffett graces us with a letter about his company, but the teachings that he embeds into his addresses are of utmost value. He strives for a better corporate america and an more intelligent investor. It is through his continued praises to his teachers Benjamin Graham and David Dodd that I've been able to find my way to a wealth of information. Warren teaches a mentality, and teaches you that a shareholder is an owner of a business, not a stock. You need to treat the ownership of one share of stock in the same manner that you would if you owned an entire business. This book was responsible for finally helping me remove the magic and superstition from investing. This was where it all began for me.

Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Third Edition
Financial Shenanigans, by Howard Schilit - This is the last of the must-read books. There are many ways to present the numbers which are deemed legal. To ask why there can't be only one uniform way to report financial statements would show a lack of understanding in how many different needs that businesses have. The amount of complexity allows for fraud and this is the book that tells you what to look for. The most common scam is to increase reported revenues. The top line numbers are the easiest to manipulate, which then leads to easier tailoring of the bottom line profits. Another common scam is to shift profits and losses to different time periods so that you can control the reported income. Howard Schilit explains how this is done and how you can avoid being a victim. Before you can succeed, you must minimize your failures.

No comments:

Post a Comment