Learning how to invest in stocks is easier than ever. Today’s beginner has a plethora of tools and resources at their fingertips. From websites to stock market simulators, a newbie investor can get tips, advice, and hands-on practice with ease.
Then there’s the tried-and-true means of learning through books. No better method allows for the in-depth guidance and understanding needed to succeed in the world of stocks. Best of all, this investment advice comes from titans in their industry, giving us an opportunity to learn from the masters.
Here are 5 primers for new investors to the world of stocks. Each book provides different offerings depending on your financial background and investment experience. Find the right mix of books below to get you on the road to making your money work for you.
Everyone’s heard of Warren Buffet, the acclaimed value investor. But another great mind in investment circles is Peter Lynch. His book, “One Up on Wall Street: How To Use What You Already Know To Make Money In The Market,” is very accessible, using an easy-to-understand approach revolving around leveraging what you already know to pick stocks.
My dad introduced me to Lynch’s book, and it’s been foundational to my investment philosophy. The idea of taking what you know about companies and applying it to stocks has worked marvously for me. So although the book came out in the 1980s (it’s been updated since), I know first hand that its principles are as relevant today as when it was written. Given that it’s among the top sellers on Amazon for stock investment books, it’s clear Lynch’s teachings continue to resonate for others as well.
As a mentor to Warren Buffet, it’s worth every investor’s time to read the words of the master of value investing, Ben Graham. This is another bestseller on Amazon for good reason.
Graham takes readers through what it means to be an “intelligent investor.” It has nothing to do with IQ or financial acumen. Rather, it’s all about cultivating the right skills and mindset to survive in a world of frequent market ups and downs.
From the trade war with China to the Fed’s latest change to interest rates, so many factors can cause a stock to rise or fall. Graham’s teachings help you apply the right outlook to your stock portfolio in order to flourish.
The book was first published in 1949, so view it as a resource to help introduce you to the concept of value investing and what that means since many of its examples may seem anachronistic in the era of smartphones and the Internet. Use its recommendations and insights as a guide to form your own investment strategy.
This one makes the list for anyone who has zero financial knowledge or understanding of the stock market. Its beauty lies in how Greenblatt is able to take concepts like value investing and portfolio diversification and transform it into easily digestible information for anyone using the example of a kid selling gum at school.
As a child, I witnessed my friend do exactly that. He made giant fistfuls of cash selling gum to classmates. So I’ve seen with my own eyes exactly how a business can easily blossom. Now multiply that by millions of dollars and the same concepts translate well to publicly-traded corporations.
Greenblatt is also clever in his use of a “magic formula.” The book keeps referring to this formula, which is only revealed at the end. While reading, I couldn’t wait to get to that point while also wondering if this entire book was a scam. (Many so-called stock market gurus publish books simply to sell their “proven formula” where the only success is in tricking people to pay for nothing.)
By the end, I couldn’t help but laugh at the “magic formula.” It was the author’s way of poking fun at these other “gurus” since the formula is, essentially, a method of looking at the financials of a company to determine if its stock price is undervalued. This is something all seasoned investors do, so there’s no secret here. But for those new to the market and finance in general, this book excels at reinterpreting dry financial topics in a fun, relatable way.
Keeping with the little book theme, Bogle’s approach and style are entirely different from the previous entry. As founder of The Vanguard Group, Bogle is viewed as a champion of no-nonsense investing. He even goes out of his way to encourage you not to pay a bunch of fees to others when you can make your own investment decisions.
That’s where this book comes in. Bogle takes you through his rationale and helps you outline a strategy that involves investing in index funds to deliver long-term stability and reliable growth. Because Bogle fights for the individual investor in a world awash with brokers, financial advisors and institutions charging exorbitant fees, hearing Bogle’s advice is well worth every investor’s time, especially when you’re first dipping your toe in the market.
As the most well-known investor of our time, of course, a book of Warren Buffett’s writings has to make the list. This is a compilation of Buffett’s letters to shareholders of his company, Berkshire Hathaway. Rather than the marketing hype that invades many CEO letters to investors, Buffett’s are filled with his wisdom and insights into investing and what makes for a sound business.
The careful curation of Buffett’s best letters is what makes the book. In one place, you get all the distilled wisdom of one of the greatest financial minds in history. This is a must-read for any new investor. By understanding Buffett’s thought process when approaching the stock market, you can leverage Buffet’s decades of experience to help make your own decisions.
The last word
These 5 books certainly aren’t the only ones to read, but they serve as a starting point for new investors to begin building an investment strategy. Should you only invest in stocks that offer a dividend? Should IPOs be avoided? These and many other questions are answered by masters of the financial world in these books.
You can then evaluate their recommendations and distilled wisdom to determine how you want to formulate an investment approach that makes sense for your financial goals.
Robert “Izzy” Izquierdo was inculcated into the church of finance by his investor father (who achieved millionaire status through stocks). Izzy has bought and sold stocks for decades. As a technologist who has worked at Silicon Valley companies to tech startups, Izzy pursues his dual passions as digital domain expert by day and Wall Street wanderer by night.