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5 Best Investing Books YOU MUST Read to Make Money

Five Books on Investing to Get You Started Making Money

With over 20,000 investing books in the Kindle store alone, how do you find the best that are going to help you make more money?

In this video, I’ll share feedback from the community on their top investing books, then I’ll reveal the five best investing books every investor must read and give you a summary of each.

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What are the Best Resources to Learn Investing?

Welcome to another episode of Ask the Bow Tie Nation! I’m lovin’ the series here. We’re posting one of your questions in our Facebook group, Let’s Talk Money Together, and getting some great answers from everyone in the nation!

Today’s question comes from Dominique, asking which books I’d recommend as a supplement to the channel. I love that Dominique is looking for more ways to learn about investing so I wanted to get your feedback in the Nation and add a few ideas of my own.

So first we’ll look at some of the book ideas we got in the Facebook group, then I’ll share the five best investing books I think every investor MUST read.

So if we look at the group feedback, we see a couple of votes for Rule #1 Investing by Phil Town, recommended by GE and Bobby. GE also recommends The Little Book that Still Beats the Market and The Little Book of Value Investing, both are part of a series. They all a little more of that stock-picking and market timing idea and a little pricey but definitely good books.

Recommendations for Best Investing Books
Recommendations for Best Investing Books

John recommends The Simple Path to Wealth by JL Collins and this is a great book for that idea overall personal finance. I’ve got another recommendation for wealth-building in my five books but this one is a solid book.

Here DisMan Delija recommended The Winning Investment Habits of Buffett and Soros by Mark Tier and I actually haven’t read this one but might put it on my list.

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My Favorite Investing Books

So all great recommendations and now I want to add a few of my own. I’ve read all five of these finance books and they’ve each taught me something invaluable.

Honestly Nation, this is the best investment you can make with your time and money. I’ll review each of these books and give you a little summary but put at least a few of these on your list, commit to really taking in the information and they WILL change your life.

The Investing Bible; The Intelligent Investor

Our first here is the bible for investors, The Intelligent Investor by Benjamin Graham and reviewed by Jason Zweig.

I’ve read this book three times and every time, I pick up something else or I’m reminded of a critical rule in investing.

Long before Warren Buffett, Benjamin Graham was the father of value investing. In fact, Graham taught Buffett in his class at Columbia Business School. In the book, Graham details six key principles of intelligent investing.

Know the business you’re investing in. The problem is, this is much more than just liking a company’s products. Liking Campbell’s Chunky Chicken Soup isn’t enough to know the company has a strong brand or market position.

You need to be digging into the financial statements and reports on a company. This means understanding how much market share it has against competitors and why. It means knowing the trends in the industry and where costs are going. This is why most professional analysts only cover one sector or a handful of stocks because you really need that deep knowledge into a company and its industry.

Know who runs the business. This was the single biggest factor when I worked as a venture capital analyst. It could be a great product but if the startup founders didn’t have what it took to take the company to the next level, we weren’t going to be investing, not a dime.

For larger companies, I like to look at the company’s management training programs, how well does it train and nurture its talent. I also like to use the operating margin, so from the income statement, that’s the operating income divided by sales. And this profitability number gives you a good picture of how well management is running the company, keeping costs down to get more from those sales.

Invest for profits over time, not a quick return. This one rule will make you more money than all the stock-picking combined. Invest in good companies that will produce those successively higher profits and just hold on no matter what.

Understand the fundamental value of a stock. This one is a little harder because I don’t think most investors understand what truly goes into fundamental analysis of a stock. Yeah, you can talk about the PE ratio or that operating margin, but it’s not enough.

Real fundamental analysis is done through building a financial model of the company, being able to forecast profits and understanding how the finances stack up against competitors. The book does a pretty good job of most of this but my last book recommendation is going to take it to the next level.

Invest with a margin of safety. This one is about understanding risk in an investment and how it fits with your portfolio. So you’re not only analyzing the risk in a stock, but also how it adds or detracts from the overall risk in your portfolio.

Have the confidence in your own analysis to avoid panics. This is really where Buffett says, “Be Greedy when others are Fearful and Fearful when Others are Greedy.” If you’ve invested in strong companies and followed these other rules, then you’ll have no reason to panic with a stock crash hits. That confidence helps you avoid the worst investing decisions people make in a crash and actually take advantage of the lower prices.

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Best Personal Finance Book

Next here is an all-around personal finance book, The Millionaire Next Door, by Thomas Stanley.

There are more than 18.6 millionaires in the U.S. alone and almost 50 million across the globe. Far from the popular idea of some tech geek with a Lamborghini and flashy watch, the book surveyed over 700 millionaires to show you how they really manage their money.

The book breaks down the seven basic factors the survey found in these millionaires, seven rules for being rich. First is millionaires live within their means. They aren’t putting on credit card debt to keep up with the joneses. They use their time to build more wealth. Your average millionaire isn’t watching three hours of Simpsons reruns. They’re reading, they’re in mastermind groups of other entrepreneurs talking about ideas.

The average millionaire has a different perspective on financial independence. Instead of the idea of relaxing on a yacht, they’re driving around in the same car as you and me.

Most of the millionaires weren’t born with a silver spoon up their ass and their parents didn’t give them a handout. They used this same rule for their own kids. They aren’t financially supporting their adult children, instead making them earn their own.

The rich learn how to spot opportunities to build wealth. They’re watching the business environment and the trends to see which types of businesses are doing well and which they can start. Even the ones that aren’t serial entrepreneurs, they’re picking the right occupation. They’re not getting stuck in an industry or job with no future. They’re going after the opportunities they can grow in and rise to the top.

So it’s not necessarily an investing book but I would definitely put this one in the top three must-reads. Not only does it give you some step-by-step guidance but it’s also going to give you that perspective you need into what being rich really looks like.

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Best Investing Book for Stress-Free Investing

Here’s another of the most popular investing books, The Bogleheads’ Guide to Investing by Larimore, Lindauer, LeBoeuf and forwarded by Bogle himself.

Bogleheads is one of the best books for a simple, stress-free investing plan. It’s modeled after the advice of Jack Bogle, founder of Vanguard funds and the vast majority of the book is spent getting you ready to invest. So we’re talking understanding your goals rather than picking stocks.

In fact, the extent of stock investing talked about in the book is mostly through mutual funds and other funds. So instead of picking stocks, you’re investing in just a few funds that will be the core of your set-it and forget-it portfolio.

The one disagreement I have with the book is it’s approval of mutual funds which I think are about the worst decision you can make. Now don’t get me wrong, mutual funds were great back in the 60s when you had no other choice. They gave regular people an easy way to invest into a group of stocks and not have to watch the market.

With the creation of exchange traded funds, ETFs, mutual funds are an overpriced-, inefficient and misleading way to invest. Compared to ETFs which are also those groups of stocks, mutual funds cost you two- or three-times as much in fees, they cost more in taxes and a lot of times come with advisor commissions that will rob you blind.

Beyond that, the book is probably the best you can read for investors that want a simple approach. If you want to put your money in the market but never have to look at stocks, this one will show you how to do that.

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Learning about the Stock Market

This next one is a great beginner’s guide to investing, A Random Walk Down Wall Street, by Burton Malkiel.

I went back and forth on whether I would include this one. I don’t think it’s as actionable as the others. For example, it doesn’t really lay out a simple step-by-step like Bogleheads and it won’t teach you stock analysis like the next pick, but it was a really good read for understanding the market.

Basically, Random Walk proves that stock prices reflect what we know and can know about a company. If that’s true, and he does a pretty good job of proving it, then there are a lot of investing strategies that are really just a waste of time and money.

The book covers some of these like technical analysis and fundamental analysis. He lays out some of the behavioral biases that cause investors to make bad decisions, which was a really interesting chapter but a little hard to apply.

Honestly, the biggest reason I read the book was for the chapters on stock market bubbles. He spends three chapters giving you a history of bubbles from Tulipmania in the 17th century to the internet bubble of the 90s and it’s a great view of how these things happen in cycles.

Best Book for Stock-Picking

Now I wanted to include one last book for the hardcare investors, Financial Modeling by Simon Benninga.

If you’re serious about picking stocks, and this is kind of a dare because the book is a monster, you absolutely have to work through this one.

Simon Benninga was the Director of the MBA program at Tel-Aviv University and for many years a visiting professor at the Wharton School of the University of Pennsylvania. He first published Financial Modeling in ’97 and it immediately became THE required reading for analysts.

This one isn’t so much a book you read, like the others, but a workbook that is going to teach you exactly how professional stock analysts determine their stock picks. More than that though, you’ll start with basically everything they’ll teach you about corporate finance in a four-year degree. The first hundred pages are all your basic finance calculations and cost of capital.

Then you’ll dig right into how to create a financial model for a company including examples. This is all about being able to read a company’s financial statements like a pro, understand exactly what it says and put a value on any stock.

The book walks you through options pricing and bonds, really everything a professional analyst uses in terms of calculations and analysis. So this one is a little harder to summarize because it’s so much process, so much a step-by-step to building an investment analysis.

The fourth edition was updated in 2014 and comes with a CD to walk you through all the analysis and spreadsheets. I’ve got the third edition from 2008, required reading for the job I was working as a freelance analyst, and I’d say you can probably get 99% of what you need from one of these older editions. The most recent edition or new can be pretty expensive on this one so maybe look for a copy on eBay, just as long as you get the CD.

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These aren’t the only investing books I’d recommend investors read but they’re definitely five you want to start while you’re getting started. These five finance books will give you a great base of knowledge into how the market works and how to start an investing plan. From there, you can expand your skill set into more complicated strategies.

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