The Best Books On Investing
Growth stock investing isn’t rocket science. Science is easy, because the universe is a law-abiding place, and elements don’t have psychology. Scientists don’t have to worry, for instance, about what will happen if a group of atoms decide they want to leave the periodic table.
But investing is part science, part craft and part art, and you have to learn a fair amount before you can get good at it.
So, my advice for anyone looking to get started is to read through the best investing books you can find before you start putting your money on the line.
But there are investment books that will make you want to rip your eyes out (I’m talking about you, Technical Analysis of Stock Trends, Fifth Edition!) and ones that will keep you happily turning pages while you’re actually learning something.
So, here we are at the first big holiday of the summer, the glorious Fourth of July, when the U.S. celebrates Independence Day. And it’s the perfect opportunity to start both your education and your enjoyable reading.
With any luck, you will be taking some time on this three-day weekend to watch a little baseball, take in your local fireworks display and maybe spend a little time at a beach or other spot where water meets land. Personally, once the lawn is mowed and the hedge is trimmed, I plan to head for the beach at York, Maine. Long Sands Beach is perfect for lying around, and there’s a restaurant and candy shop in York village that I believe has the best saltwater taffy in the world.
Here are three books that will reward you for shoving them in your beach bag. Each one has lessons to teach and wonderful stories to tell.
The first investment book is also the oldest. It’s Reminiscences of a Stock Operator. While the author is Edwin Lefevre, the book is a fictionalized memoir based on the career of legendary speculator Jesse Livermore. It’s a fast-moving tale with Edwin (Jesse) telling about his triumphs and flops in stock and commodities trading, and its lesson is clear: You have to know yourself at least as well as the market if you want to survive in the stock business. You have to plan your trabest-investment-booksdes and trade your plan. (I know that Cabot’s growth guru, Mike Cintolo, still re-reads this book every couple of years. It’s like Swiss Family Robinson for traders.)
Reminiscences was originally published in 1923, but it hasn’t aged a day.
Also high on the list of best investment books is a book from 1997 called A Zebra in Lion Country. The author is Ralph Wanger, the president of the Acorn Fund, a mutual fund that made legendary gains under his leadership. Wanger is a witty writer, and his observations on his successes and failures are perfectly applicable in today’s market. I always think about his term, aureodigititis, when things are going well. (Aureodigititis is the Gold Finger Delusion, which allows you to think that your finger is infallible when you hit the Buy button. It’s a warning against letting a bull market convince you that you’re really good at investing.)
And, once again, even though Wanger is a value investor, everything he writes about analyzing companies and finding your own investment style applies perfectly to an aspiring growth investor.
My third choice for your July Fourth weekend reading is Barton Biggs Hedge Hogging, a series of essays by a 30-year veteran of Morgan Stanley. Published in 2006, the book’s ostensible subject is the rise of hedge funds and the quants who run them. But, as with all good investment books, the lessons Biggs derives from his years in the financial business are timeless and universally applicable: knowing yourself, maintaining perspective, knowing what to do when things go right and when they go wrong.
Barton Biggs is a student of the market and a great storyteller, and you can read one of his chapters (there are 21 in Hedge Hogging) at a sitting. He’s as nutritious a writer as he is fun to read.
So, there’s your short list of the best investment books for your weekend. They’re all good reads and any aspiring growth investor will be better prepared for the market’s wiles after reading them.
Happy Fourth of July!
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Fortune Cookie
Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.
“Sometimes we let life guide us, and other times we take life by the horns. But one thing is for sure: no matter how organized we are, or how well we plan, we can always expect the unexpected.”—Brandon Jenner
Tim’s comment: Until now, I didn’t know Brandon Jenner from the UPS man. But Google tells me he’s the son of Caitlyn Jenner, who I grew up revering as an Olympic decathlete named Bruce, so I suppose he’s right! In the stock market, unexpected events occur frequently, and I have the button to prove it.
Paul’s comment: In theory, if equity markets were completely predictable, all strategies would work. But nobody would make a dime, because all stocks would trade right where they should. No unpredictability, no market. Fortunately for investors, unexpected events are as common as dandelions, and that gives those who are prepared a great advantage.
