Recommend Books Part Two (Essential Readings)

Leading up to the third anniversary of my investing journey, I think an update on recommended study materials is appropriate.

I am still a firm believer of self studying. Investing is not just financial rewarding but intellectually stimulating-- a perpetual treasure hunt.

1. The 5 Rules to Successful Stock Investing
There is not a better book out there (afaik) that explains the financial statements using the simplest of examples: running a hot dog stand. If you know nothing about reading simple accounting stuff, get this book. It will probably take you half a month to finish half of this book.


2. The Intelligent Investor
The writing style and examples used in the text isn't contemporary, but even reading the summaries written by Jason Zweig (latest edition in 2006 covered the melt down in tech meltdown in 2000) will help prevent losses.

As a value investor, we should check the downside and risks instead of the upside-- losing money is often easier than winning.

3. One Up on Wall Street
While this book can serve as a wonderful introduction to investing, it appeals to investors with slight investing experience (such as myself) with little gems like market timing (or why it shouldn't bother you), portfolio management, story checking, etc. Peter Lynch's classification of companies into six different categories is popularly used in the investment circle.

You might be keen on "Beating the Street" by the same author as well.

4. Financial Shenanigans
There are a million and one way for management to commit frauds. One should do one's best to check the numbers... This book will help.

5. You Can be a Stock Market Genius
While it lacks a serious title, this book changes the way I look at unconventional investment opportunities. If you are a fan of the Buffett Partnership, its investments were classified into three categories: Generals, Controls and Workouts. General refers to companies which are undervalued by the market, and after buying enough shares available to control the company, they become part of the Controls group.

The last section, called Workouts, refer to investments which does not move with the general market direction. These are special situations (as termed in book #2) which no doubt lower investment portfolio during a bull market, but greatly provide relief during a bear one. This book deals with Workouts, but even if your portfolio consist mostly of it, it will provide highly satisfying returns.

The same author wrote this book call "The Little Book that still Beats the Market." Another highly entertaining book as well.

6. The Dhando Investor
If you are determined to be a value investor, this book could be priceless. What is the difference between risk and uncertainty?

That is all. You will spend an approximate six months to a year reading all of the above, but re-reading them is not only necessary, but entertaining.

Essential Books

After 2 years of investing, these are my favourite books that I feel are essential to every investor-wannabe out there.

Do follow the order as listed, as it will prevent you from making serious mistakes in your investments.

1. The 5 Rules to Successful Stock Investing
I have not seen a book that explains financial statements as well as this. Even if you lack basic accounting knowledge, this book will turn you into a competent interpreter of financial statements. How the balance sheet, income and cashflow statement relate to each other, using its example of a hot dog stall, is a beauty.

Bonus: If you enjoy the work of this author, he as another book call "The Little Book the Builds Wealth." While not essential in my eyes, it is informative and discusses what constitutes as a moat/durable business advantage.

2. The Intelligent Investor
The writing style and examples used in the text might not suit contemporary readers, but even reading the summaries written by Jason Zweig (latest edition in 2006 covered the melt down in tech meltdown in 2000) will help prevent losses.

As a value investor, we should check the downside and risks instead of the upside-- losing money is often easier than winning.

3. One Up on Wall Street
While this book can serve as a wonderful introduction to investing, it appeals to investors with slight investing experience (such as myself) with little gems like market timing (or why it shouldn't bother you), portfolio management, story checking, etc. Peter Lynch's classification of companies into six different categories is popularly used in the investment circle.

4. Financial Shenanigans
Let's say you are interested in investing in a growth stock, and the numbers look solid. But you are wary of getting suckered into frauds like Enron, Worldcom or Sunbeam... this is your book. Frequently updated to cover the latest trends (and lies) of the financial industry, this book is now in its third edition.

The market is a tough place. You need this book to protect yourself.

5. You Can be a Stock Market Genius
While it lacks a serious title, this book changes the way I look at unconventional investment opportunities. If you are a fan of the Buffett Partnership, its investments were classified into three categories: Generals, Controls and Workouts. General refers to companies which are undervalued by the market, and after buying enough shares available to control the company, they become part of the Controls group.

The last section, called Workouts, refer to investments which does not move with market sentiments. These are special situations (as termed in book #2) which no doubt lower investment portfolio during a bull market, but greatly provide relief during a bear one. This book deals with Workouts, but even if your portfolio consist mostly of it, it will provide highly satisfying returns.

The same author wrote this book call "The Little Book that still Beats the Market." Another highly entertaining book as well.

6. The Dhando Investor
If you are determined to be a value investor, this book could be priceless. What is low risk, high returns? What is the difference between risk and uncertainty?

That is all. You will spend an approximate six months to a year reading all of the above, but re-reading them is not only necessary, but entertaining.