Five investment books you should really read
Published 4:00 am Sunday, March 14, 2021
- Bill Valentine
One question I dread hearing is, “What books are you reading right now?” Or similar versions of the same.
That’s because I always answer honestly, usually in a sheepish tone, by saying, “Nothing. I don’t like reading books.”
Which is true. I am finally at an age where I can admit publicly that I’m too lazy to read. These days, I prefer to get my information osmotically infused into my brain with as little effort as possible. That usually involves the spoken voice. Audio books? Love ’em. Podcasts? But of course. Hardcovered tomes? No thanks.
Fortunately, there was a time when I read a lot of books — including a lot on investing. I thought I’d share five of my favorites with you.
“A Random Walk Down Wall Street,” by Burton Malkiel
This book was first published in 1973 and has stood the test of time. It was required reading in Finance 101 in college. Malkiel, a professor at Princeton, postulates that the prices of stocks reflect all publicly available information about them. As such, unless you possess material information that no one else has (known as “insider” information — which is illegal to trade on), you have an equal chance of outperforming and underperforming the average return of the market. The fact is, despite what you’ve been led to believe, no one has the ability to predictively beat the market by picking stocks. That is a truism.
“Fooled by Randomness,” by Nassim Taleb
Many people know Taleb for a term he coined — black swan — and the book he wrote with the same name. But before he was writing about the impact of the highly improbable, Taleb penned “Fooled by Randomness.” This book examines the fallibility of the human mind when it comes to investing. He explains how our brains are wired to make sense out of random information. In the quest for market-beating investments, we assign meaning and import to data that are only randomly related.
Taleb encourages his readers to become aware of behavioral pitfalls, lest w e become victim to a failed strategy.
“The Only Three Questions That Count,” by Ken Fisher
I used to work with Ken Fisher, long before the world had heard of him. We were a company of 12, overseeing $400 million in assets (in his basement!), and I was a shareholder before venturing out on my own. Today, Fisher Investments employs over 3,000 people and manages over $120 billion. Ken and I couldn’t be more different, but he did help shape my investing philosophy during my formative years. His book nicely encapsulates much of our shared philosophies. The three questions are: “What do I believe that’s wrong?,” “What can I fathom that others can’t?,” and, “What is my brain doing to mislead me?” If you want to have a better chance of performing well in the stock market, read this book.
“When Genius Failed,” by Roger Lowenstein
This book chronicles the rise and fall of a hedge fund called Long Term Capital Management. LTCM was started in 1993 and run by luminaries of high finance — geniuses, if you will — who brought in investors by the droves. Except their geniusness failed them during the Russian Financial Crisis of 1998 and the fund blew up spectacularly — so much so, the Federal Reserve had to organize a bailout. This book is a lesson in hubris, greed and style drift that can still be found in many corners of the investment world. Ignore it at your own peril.
“Devil Take the Hindmost,” by Edward Chancellor
“Devil,” if you will, is a book on the history of financial speculation, drawing on examples from the 1600s to present. Chancellor chronicles past asset bubbles towards the goal of informing the reader as to the common features of all speculative manias in the hopes of preventing them from joining the ranks of the wiped-out. The term “bubble” is too commonly bandied about by those who aren’t aware of the patterns of true bubbles, which are fewer and further between than many would suspect.
If you’re an investor that wants to up their game, I recommend you read these books. Better yet, listen to them as audiobooks, like a good, lazy investment manager would do.