A normal progression(*) of development in a field goes something like this
– who has the ability to put pre-chosen things together.
– who has the ability to decide which things to put together.
– who has the ability to put new things together.
Many investment books written for non-experts read mostly like autobiographical accounts of the methods developers or experts have put together. When a non-expert reads such an account, he will typically not understand the underlying engineering of the method, and the outcome will be bad.
(*) Notice that as a society develops, there is a strong tendency to push the majority into the technician class — this goes for everything, just look at how consumers buy products — and concentrate developer power in the hands of the few. I wonder whether this could be developed into a model of decline and fall — it is certainly not an equilibrium state. Anyway …
However, while it is easy to head into a bookstore to find the best selling accounts, knowing which books to read to get a technical foundation is impossible as such a foundation is typically acquired within the confines of the ivory towers.
Below I list most of the books I used to learn about the world of money after having been [painfully] ignorant about it for the first 25 years of my life. Starting out, I would first read the economics books (do at least some of the exercises as well). Then I would move onto the investment books to get an overview of the process. The next step would be accounting to be able to understand the nitty-gritty connections between the abstract concepts of the stockmarket and the real world of company reporting. As a bonus, I would read about corporate finance.
- Financial Reporting and Statement Analysis (X)
- Investment Analysis and Portfolio Management(X)
- Economics: Private and Public Choice(X)
- Principles of Corporate Finance(X)
- The Analysis and Use of Financial Statements(X)
If you read and fully understand these books, I dare say, you will have the equivalent knowledge of an undergraduate degree in business, and so you will be able to better evaluate books from investment gurus.
BONUS: Since these books take up a lot of space (they are all 800-1200 page textbooks) and since they are available from the library, I have decided to give mine away. I’ll be giving away any book marked with an (X). If you want them, you’d have to come and pick them up, which probably means that you have to live somewhere in the California bay area. Alternatively, it may be possible to work something out, where you send me a check for the shipping (it would be about $10) and I’ll send you a big box.
Update: All the books have been spoken for.
Originally posted 2009-08-05 00:02:19.