Top Investment Books

My list of favorite / most influential investment books:

1) One Up on Wall Street - Peter Lynch If I could give my parents one investing book to read, this would be the one. Lynch takes a complicated subject (investing) and boils it down to some simple lessons. Earnings drive stock prices, overpaying can be painful, and the best investments are all around us - just pay attention. Even professional investors should probably read this book once a year to dampen some of the noise we are subjected to daily.

2) Trading in the Zone - Mark Douglass This book isn't technically about investing, rather it is meant for traders. In the end, we're all just traders with different time horizons, anyway, so who cares? Douglass' lessons are all about the psyche needed to partake in our capital markets. This book should be read every year. Its genius is in its simplicity and the visual examples he uses. Anyone with intellectual curiousity will realize the discussion also could help explain many life experiences.

3) Expectations Investing - Alfred Rappaport & Michael Mauboussin This book helps to better explain how stocks are priced...that is it attempts to give a methodology for understanding the expectations of future company performance built into today's stock price. It is NOT for my parents - it uses finance and accounting terms that the layperson cannot understand, which is unfortunate. Nonetheless, the framework of thought is a good one to understand because it helps to understand how stocks are priced and why. The authors created a website to aid with the concepts, too.

4) How to Makes Money in Stocks - William O'Niel This book sort of breaks all the "rules". O'Niel will tell you that the P/E is useless (true from the alpha tests I have run) and that buying stocks high and selling them higher is the key to big returns. Who can argue with his track record? Professionals would simply call O'Niel a momentum investor - the equivalent of a used car salesman among money managers. But, his lessons are quite important and his methodology is tried and true, albeit not for the faint of heart type of investor.

5) The Little Book that Beats the Market - Joel Greenblatt Simple, but effective in its approach to finding stocks that can generate excess returns based on [generally] short term share price weakness in high return on invested capital (ROIC) companies. The book has a free website that gives its top picks at any point in time.

6) The Warren Buffet Way - Robert Hagstrom I like this book because it tells a story and gives great insight into what the world's greatest investor actually did. It also reminds you that traditional thinking does not lead to excess returns. Many managers today still rag on Buffett's methods - most likely because they are jealous of his success (plus he lives in Omaha, not on either coast - adding to the jealousy perhaps?)

7) The New Market Wizards - Jack Schwager Another book that breaks rules. It is filled with interviews of the best traders and money managers out there. What I glean from the book is that the people Schwager interviews are very confident in their ability even after losing tremendous amounts of money. Just wait till you get to the ZEN part!

8) Japanese Candlestick Charting Techniques Many do not believe in technical analysis. Nonetheless, if you want a great reference this is one to keep handy - it contains pretty much all the basics.

My investment library has some other books that I have yet to read and many that I have read but did not put on this list. I also didn't include any textbooks, like the McKinsey valuation "bible" which isn't much of a "read" although its topics are certainly useful for investors. The same would go for anything by Damodaran or any accounting professor (ugh).