10 Best Books On Stock Market and Investing

Books not only increase our knowledge but also help us in framing our own perspective towards things. And, to be frank, this is one art most of us lack in this world brimming with dilettantes. In this age of information where everyone has something to say, finding an authentic source of information has become quite a task.

Even books haven’t been spared from this holocaust of authenticism. With publishing being easily accessible and affordable, everyone has become a writer.

This has increased the importance of being selective while picking up a book because it’s the consumption that has become more expensive than the book itself.

While choosing a book, the most important question to ask is,

What conceptual problem does the book intends to solve from a real-world perspective?

This little brain-storming exercise is something, I have developed to help me separate great books from the utter moonshine.

To corroborate my argument about the importance of reading good books, let me quote Haruki Murakami in Norwegian Wood

If you only read the books that everyone else is reading, you can only think what everyone else is thinking.

These words from the book Norwegian Wood again highlight how important it is to read the right book and not the popular book. And when it comes to selecting the right book on an important topic, we think we are in a position to offer a hand.

To begin with, we have come up with a list of Best Books On Investing and Stock Market that would help you a lot in learning the nuances of the Stock Market and thus levitate you a few steps ahead towards your goal of becoming self-reliant in taking your investment decisions.

Reading tip: Grab a cup of coffee and tighten your seat belts, it’s going to be a long one. Here we go:-

Best Books On Investing and Stock Market:-

#1: The Intelligent Investor by Benjamin Graham

Best Advice – Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.

That’s the beauty of Investing, it’s not gambling like trading. Investors, unlike traders, don’t need to keep track of the day-to-day variations in the stock prices. If the investors have done their research correctly, they are bound to get good returns.

According to Benjamin Graham, before buying a company’s stocks, investors must:

Critically examine the company and its business model.
Analyze the company’s history and its management values

Based on the collected information from the comprehensive analysis, intelligent investors can find stocks that have a gap between their current pricing and the intrinsic value the company holds.

Simply put, it means that the information collected would help the investors in identifying the stocks that are capable of giving pleasant returns in the near future.

According to Benjamin Graham, Intelligent Investing stands on 3 principles:

Deep Analysis: Intelligent investors always analyze the long-term evolution and management principles of a company before investing.
Diversification: Intelligent investors always protect themselves from losses by diversifying their investments i.e spreading their investments among various financial instruments and industries. Diversification helps in reducing the risk as all the firms the investor is invested in are independent of one another and thus react incongruently to the same state of play. Thus creating a much-needed balance among profits and losses for the investor.
Focus on Steady Returns: According to Graham, the Intelligent investor never looks for crazy profits but instead focuses on safe and steady returns.

Start Your Investing Journey with These 3 Powerful Investing Lessons from The Intelligent Investor

Grab your copy Here ― Amazon.in | Amazon.com

#2: The Warren Buffet Way by Robert G. Hagstrom

Best Advice– The size of an investor’s brain is less important than his ability to detach the brain from the emotions.

This is one of the best advice a novice investor can get. The problem with the decision-making of humans is that it is driven by EMOTION, not REASON. This equivocal trait of humans is clearly not welcomed in the Stock Market.

To help you defeat your emotional urge, Warren Buffet has suggested the following 4 Tenets that every investor should dive into before investing in a company:-

Business Tenet: We must only consider investing in a business that we understand. Fledgling investors have this habit of ignoring the understandably profitable enterprise in favor of the inexplicable and flamboyant ventures.
Financial Tenet: Selected businesses must be sustainable in the long term.
Management Tenet: Operated by honest and competent people
Market Tenet: Available at a very attractive price.

Hagstrom further writes that the greatest challenge to emulating Buffett is not in the selection of the right stocks, but in having the courage to stick with sound investments in the face of economic and market uncertainty.

Grab your copy Here ― Amazon.in | Amazon.com

Also Read: 12 Powerful Tenets of Investing from The Warren Buffett Way

#3: One Up On Wall Street by Peter Lynch

Best Advice – If you want to avoid a single stock, it would be the hottest stock in the hottest industry. Boring stocks give the best results.

Lynch’s strategy to remain underweight on the trending stocks in the hottest sector is nurtured with healthy reasoning in this book. He vehemently recommends to abstain from investing in:

The next big thing – If you hear a firm is going to be “the next Microsoft”, “the next Reliance” or something bright – Avoid it. According to Lynch, such sought-after stocks rarely hold up in the long term.
The whisper stock – If anyone lowers his/her voice to tell you about a stock, stay away from them. They may be the operators trying to manipulate the stock prices for their personal gains.
The middleman – A firm that acts as a middleman and mainly sells to a small number of consumers is vulnerable to any sudden change in the market scenario. So it’s better to divert your path away from them.
The stock that has a catchy name –The stock market works on demand and supply economics. Catchy names often capture more eyes and hence are mostly selling overvalued. So, Lynch suggests, searching for prominent firms with boring names. If luck favors, you may find some great stocks that are cheaply available and at the same time have latent potential to make it big in the long run.

To further improve your chances of a profitable selection, Lynch has suggested a 2-minute drill that he thinks every investor should follow before parting with their money.
He suggests having the following monologue with yourself.

2 Minute Drill – Before buying a stock, I would like to be able to give a two-minute monologue that covers the reasons I’m interested in this company, what has to happen for the company to succeed, and the pitfalls that stand in its path.

If your answer to the above 3 questions satisfies you, you are good to go ahead with the chosen firm. The drill acts as a safety barrier by limiting the role of emotions in your investment decisions.

Grab your copy Here ― Amazon.in | Amazon.com

#4: Rich Dad Poor Dad by Robert T. Kiyosaki

Rich Dad Poor Dad is about Robert Kiyosaki and his two dads—his real father (poor dad) and the father of his best friend (rich dad)—and the ways in which both the men shaped his thoughts about money and investing

Best Advice – In the real world outside of academics, something more than just grades is required. I have heard it called “guts,” “chutzpah,” “balls,” “audacity,” “bravado,” “cunning,” “daring,” “tenacity” and “brilliance.” This factor, whatever it is labeled, ultimately decides
one’s future much more than school grades.

Robert Kiyosaki puts forth a very compelling point. He says that in school, we learn that mistakes are bad, and we are punished for making them. He challenges this old-school method of teaching by contouring the process by which humans learn.

Humans learn by making mistakes. We learn to walk by falling. If a child never falls down, it may never learn to walk. And, that’s one of the laws of investing too. We may lose initially but that’s not something to be anxious about, as long as the fundamentals of the company have not changed,

The most important takeaways from the book in terms of investing are:-

Buy, when the Market is in Turmoil:- When a financial crisis strikes, novice investors let their emotions outperform their belief. They pull back from the market, selling everything they own. However, experienced investors like Kiyosaki see this as an opportunity to invest. As discussed above, as long as the fundamentals of the company have not changed, there is no justification in backing off. It’s in fact the time to accumulate more.
Focus on the available opportunity:- According to Kiyosaki, investors should be alert to what’s happening right now, and grab any opportunity that arises. There are always some good companies available in the lousy market. Identifying these is not something that everyone can do. It’s a skill that is honed with preparation. If the investor is prepared from the knowledge perspective, he/she will never make hasty investment decisions.

Though this book is not entirely based on the Stock Market and Investing, there is no denying the fact that it offers a proficient amount of help to even a layman in getting their basic finances right.

Grab your copy Here ― Amazon.in | Amazon.com

#5: Common Stocks and Uncommon Profits by Philip A. Fisher

Best Advice – Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies that they thoroughly know and far too much into others about which they know nothing at all.

It’s another great piece of advice from Fisher because it’s really very strange that it never occurs to the investors, that buying a company without having sufficient knowledge of it may be even more dangerous than having inadequate diversification.

Like many others, Fisher too lays emphasis on the importance of healthy Management. Regardless of how high the rating may be in all other matters, if there is a serious question of the lack of strong management, the investor should never seriously consider participating in such an enterprise

Fisher further encourages investors to use the Scuttlebutt Investing Method, a term coined by him to help investors invest in a wholesome way. This involves gathering information by interacting with a company’s consumers, rivals, and suppliers.

This is, of course, above and beyond all the other extensive research a prospective investor is expected to do. If the results obtained from following the Scuttlebutt Investing Method is found to be consistent with the findings from the other methods, the investor is good to go ahead with his investment.

Start Your Investing Journey with These 3 Powerful Investing Lessons from The Intelligent Investor

Grab your copy Here ― Amazon.in | Amazon.com

#6: Beating the Street by Peter Lynch

Best Advice – While catching up on the news is merely depressing to the citizen who has no stocks, it is a dangerous habit for the investor

As is evident from the above advice, Beating the Street contains a lot of stories about the strategies Lynch followed during his illustrious career as an investor and a mutual fund manager. These stories put forth the important investment hacks Lynch has developed through his immense experience.

Let me share one of my favorites from this book:-

Stay away from the Weekend Warriors– We simply can’t see the future through a rearview mirror: Peter warns us against people whom he calls “weekend warriors”. Those people who every Saturday and Sunday spread thousands of reasons for why the economy will tank.

He recommends staying away from such people and focusing on finding good and undervalued businesses. He goes on to claim that investors who disregard market swings and simply acquire stocks outperform the market timers in the long run.

If you aspire to be adept at beating the street, someday, this one from Peter Lynch should definitely be on your reading list.

Grab your copy Here ― Amazon.in | Amazon.com

#7: How to avoid loss and earn consistently in the stock market by Prasenjit Paul

Best Advice – Have you ever seen your broker offering any investment idea that is for 2-3 years holding period? They can’t offer because their broking business will dry up if you buy today and hold them for 2-3 year. On the contrary, wealth can only be created over the long run.

Broker’s job is to help you buy and sell shares and they make money only when you keep on doing so on a regular basis. However, if you buy and hold shares for let’s say, 10 years, the broker will not benefit from such investments. So, they keep baiting you into Buying today & selling tomorrow trades (BTST Trades)

Under the disguise of helping you with investment advice, they are interested in earning regular brokerage fees. Also, it’s a well-established fact that long-term holding is good only for the investor, not the broker. So, while choosing a stockbroker make sure they are not giving you unsolicited unnecessary free advice all the time.

Further, during selecting a stock, Paul suggests focusing on the following among other things:-

Debt To Equity Ratio: In 90% of the cases, the debt to equity ratio gives a good idea of the debt burden of a company. So before investing in any stock, Paul insists on having a look at its debt to equity ratio for at least three years. If you find a stock having a debt-to-equity ratio of more than 1, it carries a RED signal.
Return on Equity (ROE) According to Paul, ROE is a far superior metric than profit and sales growth metric to give investing a thought. High and consistent ROE is an indication that the management is utilizing the capital effectively.

This one from Paul definitely offers a different approach and thus is a helpful one in augmenting your knowledge of investing.

Grab your copy Here ― Amazon.in | Amazon.com

#8: How to Make Money in Stocks: A Winning System in Good Times Or Bad by William J. O’Neil

Best Advice – I made a rule that I’d buy each stock exactly at the pivot buy point and have the discipline not to pyramid or add to my position at more than 5% past that point. Then I’d sell each stock when it was up 20%, while it was still advancing.

There is no end to human greed. But when it comes to the Stock Market excessive greed can backfire. Deft balancing is required between Greed and letting go.
In Shadow and Bone, Leigh Bardugo had said,

“What is infinite?
The universe and the greed of men.”

One has to decide how much is enough.

Further, to help you in your search for big winners of tomorrow, William O’Neil has suggested a techno-fundamental strategy named The CAN SLIM method that might help you in picking up quality stocks. The criteria are listed below:-

C = Current Quarterly Earnings per Share (EPS) – EPS has increased at least 20% in the
current quarter compared to the same quarter in the previous year.
A = Annual Earnings Increase – Annual EPS growth should ideally be in excess of 20% over the last three years.
N = New Products, New Management, New Services – New products, New Management and New Services bring novelty to the firm which has proved to be good for the overall growth of the firm.
S = Supply and Demand – When the demand of the stock is high among the insiders and the institutional investor, that conveys strong confidence in the firm. Such firms are a good option for investment.
L = Leader or Laggard – Use the Relative Strength Index (RSI) to identify the leading stock in the market. RSI value above 30 suggests indicates bullish momentum, thus suggesting a buying opportunity.
I = Institutional Sponsorship – Identify the stocks that have very few institutional sponsorships and are seeing a spike in the number of institutional investors due to above-average performance in recent times.
M = Market Direction – About three-fourths of the stocks tend to follow the general market trend. So it’s always a good idea to invest during times of uptrend.

If a company meets the above criteria, it can be considered a pleasant investment option. The best thing about this method is that it incorporates both fundamental and technical factors. Experts have suggested that putting the two factors together can prove to be a win-win strategy for the investors.

To learn the appealing CAN SLIM method in-depth you should check out the book.

Grab your copy Here ― Amazon.in | Amazon.com

Also Read: How To Make Money in Stocks ― The CANSLIM Method Explained

#9: The Little Book That Beats the Market by Joel Greenblatt

Best Advice – Although over the short term, Mr. Market may set stock prices based on emotion, over the long term, it is the value of the company that becomes most important to Mr. Market.

Of course, there are plenty of ways we could define what makes a business either good or bad. Among other things, we could look at the quality of its products or services, the loyalty of its customers, the value of its brands, the efficiency of its operations, the talent of its management, the strength of its competitors, or the long-term prospects of its business.

In the book, Joel has suggested what he calls The magic formula. It’s an investing approach that in simple words comes down to, Buying a good company at a good price. To identify good companies that are available at bargain prices, he has suggested the following 2 financial ratios:-

Return on Invested Capital (ROIC): Return on invested capital is a metric that suggests how efficiently the company is covering investors’ money into profits. This ratio can help investors in identifying Good Companies.
Earnings Yield: Good Price – The earnings yield gives the measure of the company’s earnings per share. This metric is used by the investors to determine which stock is underpriced and which is overpriced. It’s useful for identifying stock available at a bargain price.

Joel insists that if you really want to beat the market, professionals and academics can’t help you much. You would have to do it yourself by increasing your knowledge.

And in that endeavor, Joel’s Magic Formula in the book definitely offers some light.

Grab your copy Here ― Amazon.in | Amazon.com

#10: The Little Book of Common Sense Investing by John Bogle

Best Advice – It will also tell you how easy it is to do just that: simply buy the entire stock market. Then, once you have bought your stocks, get out of the casino and stay out. Just hold the market portfolio forever. And that’s what the index fund does. This investment philosophy is not only simple and elegant. The arithmetic on which it is based is irrefutable.

Written by the founder of one of the largest mutual fund companies in the world, this book lays emphasis on investing in indices.

Here are the 2 important takeaways from the book:-

Actively managed funds suck – The Actively managed funds try to outperform the market index. Such active management comes at a cost. Hence, compared to passively managed funds, the management expense ratio of active funds is significantly higher which in turn reduces your effective earning in the longer run.
Also, the stock market changes very rapidly. Ideas that worked this year might not give the same result next year. So, just because a fund manager has had a phenomenal current year does not guarantee that they would be able to repeat their performance the next year.
Money Invested in a low-cost Index fund is the safest in the long run– According to John Bogle, instead of paying exorbitant amounts to the fund managers for actively managing their funds, long term investors should invest in the low-cost index funds. Index funds offer strong long-term returns and hence are perfect for the buy-and-hold kind of investors. Though these funds don’t intend to outperform the market like actively managed funds it has been observed that due to the low management expense ratio involved they do often outperform their counterpart.

If you’re someone who is interested in average returns and want to invest in the equity markets without taking a lot of risks, this book will definitely give you a kickstart.

Grab your copy Here ― Amazon.in | Amazon.com

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That’s all we have for today. Thanks a lot for tuning in to HappinessDhaba. Do let us know your views on these in the comment section. And, don’t forget to add more to the list.

Happy Investing!

Signing off with my favorite words.

Zindagi Zindabad!

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Jasmeet SinghPsychologist | Engineer | Reader | Blogger

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10 Best Books To Learn Investing in Stock Market | HappinessDhaba

Best Books On Investing and Stock Market:-

#1: The Intelligent Investor by Benjamin Graham