There is growing interest in stock market in India due to falling interest rates in banks, and lack of other investing opportunities. Here are the 6 best investing books you should read before you start investing in stock market. From Art of Investing to Science of Investing, this list covers all you need to know.
Peter Lynch worked as a mutual fund manager of one the most successful funds. He shares in this book his secrets to find a three bagger or a ten bagger firm, company or industry. He gave his personal experiences in finding out these multi baggers with real figures and time frames. He talks about how an individual investor can find such firms. The facts are explained with charts and tables right from 1920 to 2000. Although a successful investor, he shows how an average investor can beat the professionals by using common sense and exercising self-control.
Peter Lynch liked companies with a good product that he could understand – he bought into Taco Bell because he liked their coffee, and because he saw it was a strong company with sound management and plenty of room to grow. As a part of his research he would visit company offices. He would find companies that would put money in business and not shiny office blocks or status symbols. This is the most practical book one can read before investing, that’s why it is number one on our list.
This book is about fundamental analysis of stocks and should be read before other investing books. The book broadly talks about how financial statements are constructed in a company ; Types of funding available to businesses and explains the various types of securities; and the basics of of financial statement analysis, cash flow generation, stock price valuation, stock valuation methods including price/earnings ratio, price/cash flow ratio etc.
This book would help you understand how a business works, and what goes into deciding whether the price of a stock or bond is over/undervalued. So will the stock go up or go down, you can decide on your own.
This is one of the most famous book on investing and an eternal classic. This book teaches how to minimize the odds of suffering irreversible losses, how to maximize the chance of achieving sustainable gains and to practice emotional control and behaviour to help the investor achieve full potential. The intelligent investor is the one who estimates the value of a stock based on some key parameters like the company’s long-term prospects, quality of management, financial strength and capital structure, dividend record, and current dividend. Intelligent Investor can be active or passive, and Benjamin Graham talks in detail about both of them. Being an intelligent investor is more a matter of ‘character’ than ‘brain’.
Although this is an highly acclaimed book, its lessons are rarely practiced. This book does not have tactics that offer promises of “do this and get rich”. If you are here for that reason, this is not the book for you.
Philip Fisher is among the most influential investors of all time. This book, first published in 1958, talks about Growth companies, New Growth, and barriers of entry. For retail investors, he talks about the “Scuttlebutt” approach because this approach requires deep understanding of the company, its management, its customers etc. If you have wondered, as to why does Warren buffet buy certain stocks, while avoiding equally good others, you need to read this book. This book is recommended by Buffet himself.
Written by Mary Buffett, former daughter-in-law of Warren Buffett, explains the winning strategies of Mr Buffett. This book talks about Buffett’s approach, mathematical equipments that assist Buffett in making investments and kinds of companies that capture Buffett’s interests. This book probably gives the teachings Buffett would had taught to his children and family.
If the Intelligent Investor would be the art of investment, Security Analysis by Mr. Graham is the science of investment. The theory on which this book is based, was subsequently called Value Investing. It basically teaches how to use financial analysis of the corporation to determine the intrinsic value of a company. This is a thick book and demands patience. This book is kept on number 6, because this is an advanced book, and many would not like to go in such detail. This book is about the technicality and psychology involved in the job of a security analyst. If you have read the above 5 books, this book is for you.
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