I read hundreds of investment / trading books in my 20 years of trading history. Some are very useful, most of them are useless. Here are the useful ones I highly recommend.
The Intelligent Investor by Benjamin Graham
I’m guilty of putting this book down after reading the first chapter 5 years ago. Man, how I have been wrong. If I absorbed Benjamin’s teaching. I’d have tripled my capital in 2020. The book teaches fundamentals of investment discipline. It starts by teaching the beginner how to preserve their wealth by being defensive and preserve his capital. Dissuade anyone from becoming a speculator. Unlike some of the investment books that teach unproven techniques or try to sell you something, Benjamin really look after average public investors like us. Speculator gets speculation returns. I was a speculator 5 years ago, and I reject the book’s teaching after first glance. I paid hundreds of thousands of tuition fee to the stock market by speculating. Don’t be like me. Read this book first. By the way, Benjamin is Warren Buffett’s teacher, and he highly recommend this book too.
One Up On Wall Street by Peter Lynch
Just finished the audio book version. Peter Lynch is a famous investor who averaged 29% annual returns in his 13 years of career as manager at Fidelity Investments. I’ll put this book in the same category as the Intelligent Investor. This book taught us how average investors have an edge over those wall street analyst in picking the undervalued companies.
Options as a Strategic Investment by Lawrence G. McMillan
This is the most comprehensive book on options. I learned everything about options from this book. The book is surprisingly easy to read. There are a few math heavy chapters on Black Scholes model and volatility trading. But if you have a high school degree, you should be able to understand this book easily. No experience required, and by the end of this book, you will be at advanced level in options trading. It’s only 1000+ pages. I read about 5 to 10 pages a day. I suggest do some small trades to practice the strategies. I’ll blog a lot about advanced options strategy here. I’m not gonna blog anything for beginners. I cannot teach beginner better than this book has already offered.
Value Investing for Dummies
This book taught me how to read financial reports. I like for dummies series because of its structured teaching. You need to be able to read the financial report to make intelligent investing. You don’t need to be an expert. There are thousands of financial analysts out there, and their ratings and target prices are free. Just take bunch of them and you’ll get a range on the estimation. But the analysts won’t touch some of the small undervalued companies. And this is where you can make a fortune. You have to dig into their financial reports to see if it’s a gem or just a rock. The annual report is also a valuable resource to understand an industry. If you are a gamer like me, try download the Blizzard annual report. It’s fun to read. If you are a programmer like me, the 10-K annual report has standard XML format. You can download it from Edgar Online. Write a parser yourself to parse the contents.
Advances in Financial Machine Learning by Marcos Lopez
You’ll learn a lot about algorithm trading from this book. You’ll learn everything, except the algorithm that makes money. That means the author is honest. Any working strategy made public will immediately lose its effectiveness. Besides average investors, even if you are expert in programming like me, won’t be able to take advantage of the algorithm trading. You won’t have the resource to access micro transaction data like FIX, or own a Quantum computer. I write programs to aid me in trading. I make most of my money from traditional trading methods. A fully automatic trading system sounds fantastic, but it’s not for me.
How Technical Analysis Works by Bruce M. Kamich
Just learn the essence of the reasons behind some of the chart patterns. But most of the patterns doesn’t work any more. The knowledge is already public. Machine probably trade 80% of the volume in the market, and they are designed to take advantage of you, who read charts. What you can learn instead is how the author reason those patterns.
Reminiscences of a Stock Operator
Read this book as if you want to read a fiction for its entertainment value. The main character of this book really existed. The trading technique no longer applicable to our era. But this is a great book.
The Secret Language of Money
Unexamined life is not worth living. So is unexamined motive behind trading. Money is a mean to an end. And you need to discover what is this end for yourself. Mine is freedom and intellectual pursuit. Or, is it lethargy? Let’s stop here, we’re closing in on some darker side of me.
As you can see, I don’t recommend any trading related books. Because these are for speculators, and I personally lost lots of money speculating. Ever since I started getting wiser and changing style to investing, my portfolio returns improved a lot. I still speculate a little bit, but I only use a small amount of gambling money. There is nothing wrong with speculation, as long as you are having fun and no one is getting hurt, especially your family. Most speculators will lose money eventually. The only way to get good returns consistently is by investing. If you only have time for 1 investment books. Read the “One Up On Wall Street” first, it’s a more modern, summarized version of the Intelligent Investor. But the Intelligent Investor will teach you much more.