best book to read for investors

The Best Investing Book to read if you are stock market beginner

“The journey of a lifetime starts with turning of a page” Rachel Anders

Life can change for the better and a rewarding journey can begin with the reading of a single book. Over the festive period I wanted to gift my close friend something really useful. Recollecting Garrison Keilor’s wise words “Book is a gift you can open again and again”, I decided on gifting him an investing book.
My friend is from a non-financial background with very limited knowledge of stock markets. So I pondered over the question of which is the best book for him to read as a stock market beginner? The one book that will kindle his interest in the stock market and at the same time educate, encourage and excite him to take up active stock investing.
My search for the best book for a beginner led me into curating of 10 reading lists and 35 book recommendations from experts. Every book recommended was put into a spread sheet and tabulated to arrive at the top 5 most recommended books. On this top 5 list, I applied my own G.R.E.A.T criteria (Generic, Readable, Exciting, Accessible and Timeless) to arrive at the best investing book for a stock market beginner.

This question of the best investing book had crossed my mind multiple times earlier too.  For those of us who are actively involved in the stock market, one of the regular question we get asked (other than which stock to buy now?) is a recommendation for a good book to learn the basics of investing.
I needed to find an answer. As my search began, unsurprisingly I found that there was no one single book recommended by experts as the best book for a beginner.

  • There were many reading lists and recommendations from leading publications / experts / investing legends. But they were mostly for investors in general and not for beginners in particular
  • Some of the reading lists had book recommendations on which I had severe reservations. E.g. Margin of Safety by Seth Klarman. Even though I completely agree that it is a masterpiece but the stark reality is that the book is out of print for a very long time. Used copies of the book trade at well over 500 USD.

This meant that however well-intentioned the original authors were in their book recommendations, I had to apply an appropriate filter to find the best stock market for beginners. I deliberated hard on the filters / criteria’s to be used and arrived at my G.R.E.A.T framework.

G.R.E.A.T Framework

The 5 criteria’s used to find the best book:
G- Generic. The book should be on stock investing in general and not too specific on a particular theme like trading or investor psychology.
R- Readable. “Classic: A book that people praise and don’t read” Mark Twain. The book should be in simple language devoid of financial jargons and understandable by a lay man who may not even be from a finance or an accounting background. You should not be finance professional nor be proficient with Greek symbols like Alpha, Beta to understand the contents.
E- Excitable. This is a very critical criteria. The book should provide sufficient encouragement, excitement as well as the necessary confidence for a beginner to start his investing journey. Along with gently nudging the beginner into active investing, the book should also make him feel “Yes, I can do it”.
A- Accessible.  This is straightforward criteria that the book should be easily available off the shelf as well as affordable. It should not be impossible to get a copy (like Seth Klarman’s Margin of Safety) nor should it burn a big hole in your wallet.
T- Timeless.  Lastly, the content should be evergreen. As Italo Calvino said “A classic is a book that has never finished saying what it has to say”. It should not be suitable for just one time read. Every time you read the book you should get fresh ideas and perspectives.

Curation of Reading lists

With the G.R.E.A.T framework in place, I began looking for reading lists and book recommendations for stock investing beginners. I ensured that the reading lists I selected and curated were from reputed sites and financial publications.
I curated a total of 10 reading lists which satisfied my criteria of reputation and usefulness. The shortlisted list included recommendations from Business Insider, Investopedia, Street and Motley Fool among others. Some lists were ignored as they were too focused (stock trading, personal finance etc.).
One reading list in particular which I found to be very useful was the survey for best investing book   by Meb Faber. He ran a survey for finding a comprehensive book to learn investing which was responded by 1000 people. What stood out for me was that the survey produced a long list of 200 books!!! I realized finding the one “best” book was going to be difficult, tricky and a little subjective.
I put every single book in the reading list into a spreadsheet and this exercise produced a grand total of 35 book recommendations. I then sorted and tabulated the books by the number of times they were recommended to arrive at a list of top 5 most recommended books. The number of times a book found a mention in the reading lists is mentioned below in parenthesis. The complete list of 35 books is mentioned at the end of the post.
The List of top 5 books for beginners
The top 5 most recommended book for beginners based on the 10 reading lists:

  1. The Intelligent Investor ( 8/ 10)

intelligent_investor
Not surprisingly, the most recommended book is The Intelligent Investor. This timeless classic published in 1949 is an all-time favorite with legends like Warren Buffet even calling it the best book on investing. You can read a detailed review here.
 
 
 
 
 

  1. One Up On Wall street ( 7/10 )

one up on wall street
Next up is the 1988 master piece by Peter Lynch written in simple language for the common man. The book provides encouragement for an individual investor to beat the market experts by using their existing knowledge base. You get a confidence that you too can pick “multi-baggers”. You can read a review here.
 
 
 
 
 

  1. A Random Walk down Wall Street ( 7/10 )

random walk down wall street
Joint second in the list is the 1973 classic A Random walk down Wall Street  by Burton Malkiel. The book is regularly quoted by efficient market hypothesis believers. You can read a review here.
 
 
 
 
 
 

  1. The little Book of Common Sense Investing ( 5/10 )

little book of common sense investing
Fourth on the list is a 2007 classic The Little Book of Common Sense Investing by John Bogle. The book talks of embracing index investing for getting market returns while keeping your costs low. You can read a review here.
 
 
 
 
 

  1. Stocks for the long Run ( 4/10 )

stocks for the long run
Rounding up the top 5 is the 1994 classic Stocks for the Long Run by Jeremy Siegel. The book takes a very long term view of investing and backed by historical data from as far 1802, highlights the benefits of investing in equities. You can read a review here.
 
 
 
 
 
One book I personally believe is an excellent book for a beginner but surprisingly did not have a single mention in any of the recommended reading list is The Dhandho Investor by Mohnish Pabrai.
dhandho_investor
The book provides a comprehensive framework for investors in easily understandable language based on the acumen of the business savvy Patel community. The 9 point Dhandho framework for investing is great starting point for an investing beginner.
 
 
 
 
 
 
Summary- list of Top 5 books
This exercise has produced a unique and eclectic list of investing classics:

  1. The Intelligent Investor ( 8/ 10)
  2. One Up On Wall street ( 7/10 )
  3. A Random Walk down Wall Street ( 7/10 )
  4. The little Book of Common Sense Investing ( 5/10 )
  5. Stocks for the long Run ( 4/10 )

Applying the G.R.E.A.T filter
All the five books in the list are classics of very high quality written by legends in the field.  Picking one among them is not only an extremely tough exercise but also brings in a little bit of personal bias and subjectivity into the process.
To emphasize again, we are not judging the quality of content but we are trying to find that one book which is the best for a stock investing beginner.  The best book that will educate, excite and encourage a beginner to take up the path of sensible stock investing.
I tried to get into the shoes of a novice and applied my G.R.E.A.T criteria on the top 5 list of books.
GREATThe Intelligent Investor was the most recommended book for obvious reasons. Graham’s master piece has guided scores of investors and will continue to do so in the future. But in my humble opinion, the book is a step too far for an absolute beginner.
Unless you are extremely motivated to learn, reading more than 20 -25 pages of the book at a stretch is bit of a challenge nor does it excite you to start your investing journey immediately.
A random walk down Wall Street is a fine book but it is likely that the central message on efficient market hypothesis may be misunderstood by an investing beginner. Markets are generally efficient but not always. As Buffet put it “ I’d be a bum on the street with a tin cup if the markets were always efficient”
The Little book of common sense investing has an extremely useful message of embracing index investing which is relevant for majority of the investors.
Imagine you are a participant in a marathon race. Just before the race begins, your coach tells you that you have zero chances of winning the race and you will be damn lucky just to complete the race without any injuries.  How motivated will you be for the race?
This is my only grouse that, notwithstanding the usefulness of this approach to a majority of investors, the book bats for “passive” investing where as I am looking at “active” investing.
Stocks for the long run uses wonderful charts and historical data to highlight the benefits of equity as an asset class. Putting myself in the shoes of a beginner, I will be easily convinced to invest in equities.
But will the content excite me and also provide me the confidence that as a novice, I too have a fair chance of succeeding in the stock market?  I am afraid, it does not.
That leaves us with One Up on Wall Street which I believe ticks every single criteria of the G.R.E.A.T framework.
It is written in simple language: no use of financial jargons and Greek letters; Gives you the confidence and encouragement that as an individual investor, you have a fair chance of beating the big boys.
Just as in the Popeye cartoon series, on eating spinach, Popeye gets a tremendous reserve of energy; similarly reading the book “One up on Wall Street” not only gives a sound investing framework but also fills you with confidence as in “Yes, I can succeed”.
On a related note, The Dhandho Investor also ticks every single criteria of G.R.E.A.T framework and personally believe it be an excellent investing book for a beginner. Just the 9 step investing framework / rules is worth the book’s price.
Final Thoughts
All the five books in the list are investing classics and I can confidently say that a beginner who reads all the five books will have a solid investing foundation on which they can build their investing empire. Also it is obvious that no one single book is going to be the only investing book needed for stock market success.
But just like a journey of thousand miles starts with a single step, a fine first step for a beginner starting his stock investing journey will be to read “One up on Wall Street” ! The book is sure to enlighten, educate and encourage beginners like my friend to take up the path of safe and sound stock investing.
 The complete list of 35 books recommended

  1. Intelligent Investor
  2. One up on Wall Street
  3. Random Walk down Wall Street
  4. Little book of commonsense investing
  5. Stocks for the long Run
  6. Essays of Warren Buffet
  7. Commonsense on Mutual Funds
  8. The Richest man in Babylon
  9. Rich dad, Poor Dad
  10. Boglehead’s guide to investing
  11. The Millionaire next door
  12. The four pillars of Investing
  13. Reminisces of a stock operator
  14. Think and Grow Rich
  15. Market Wizards
  16. Value Investing: From Graham to Buffet
  17. Buffetolgy
  18. Competitive Strategy
  19. The Ascent of Money
  20. Thinking Fast and Slow
  21. Against the Gods: The remarkable story of risk
  22. Making the most of your money
  23. The Successful Investor today
  24. The Most important thing
  25. Little book that beats the market
  26. What works on Wall Street
  27. Stock investing for Dummies
  28. Irrational exuberance
  29. You can be a stock market genius
  30. When to sell
  31. If you can
  32. How to make money in stocks
  33. The Warren Buffet way
  34. The only investment guide you need
  35. Buffet- Making of an American Capitalist

(Cover photo: Stocksnap.io)
What do you think is the best investing book for a stock market beginner? Let me know in the comments.
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