5 books every investor should read
The stock market can be a wonderful place, if one knows what they’re doing. As investing becomes more and more accessible, financial literacy becomes more and more important in limiting risk and improving odds of success.
The easiest approach to building wealth in the stock market is investing in a low-cost index ETF.
A slightly harder, but potentially more rewarding approach, is to invest in individual stocks. To do this, however, one must not only understand the fundamentals of the stock market, valuations, and financial analysis; but also adopt the right mindset and learn not to be guided by emotion. The psychological aspect is often what separates the good investors from the bad ones.
At pevaluator, we’ve built a tool that lets you easily value stocks taking into account each individual’s personal goals and investment strategy. However, nothing is a substitute for individual research - never buy a stock just because someone on the internet bought it or a website or A.I. trading bot says it’s undervalued. Intelligent investors back their decisions with proper research.
Here are five books every investor should read before investing in stocks:
“The Intelligent Investor“ by Benjamin Graham
This timeless classic by Graham, often referred to as the “father of value investing”, lays the groundwork for sound investment principles. Focused on a defensive approach, Graham emphasizes the importance of a margin of safety, comprehensive analysis, and a disciplined, long-term perspective. He introduces the concept of Mr. Market, urging investors to remain rational in the face of market fluctuations. This book provides a solid foundation for value-oriented investing, making it an essential read for those seeking to navigate the unpredictable nature of the stock market.
“The Little Book That Beats the Market” by Joel Greenblatt:
Greenblatt presents a user-friendly investment strategy in this book, introducing the “Magic Formula” that aims to identify undervalued stocks. By considering earnings yield and return on capital, Greenblatt simplifies the stock-picking process. He shares real-world examples and practical advice, demonstrating how the Magic Formula has consistently outperformed the market. With a focus on simplicity and effectiveness, this book is an excellent guide for both novice and experienced investors looking for a systematic approach to stock market success.
“One Up On Wall Street“ by Peter Lynch
Legendary fund manager Peter Lynch offers insights into his successful investment strategies, emphasizing the value of individual research and a personal understanding of businesses. Lynch encourages investors to trust their observations and highlights the potential of everyday encounters in identifying lucrative investment opportunities. With a down-to-earth style and anecdotes from his own experiences, Lynch provides a compelling and accessible guide to stock picking, making “One Up On Wall Street” a must-read for those seeking to capitalize on their own insights and observations.
“The Psychology of Money”
by Morgan Housel
Housel explores the complex relationship between psychology and finance, delving into the behavioral aspects that influence financial decisions. Drawing on stories and anecdotes, he highlights the importance of understanding one's own financial psychology and the impact of emotions on investment choices. The book offers valuable lessons on risk perception, humility, and the significance of long-term thinking. It serves as a thought-provoking guide, providing readers with insights into the psychological nuances that can shape financial success or failure.
“The Most Important Thing” by Howard Marks
Marks, a renowned investor, distills his investment philosophy into a collection of essential principles in this book. Focused on risk management, he emphasizes the importance of understanding market cycles, avoiding pitfalls, and maintaining a disciplined approach. Marks stresses the significance of second-level thinking and developing a deep understanding of investments. This insightful book provides a nuanced perspective on successful investing, urging readers to prioritize the preservation of capital and recognize the inherent uncertainties in financial markets.