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Saturday, November 27, 2010

My 13 Favorite Investment Books - Holiday Gift Ideas

I first published my list of favorite investment books in the mid 1990 shortly after I built my first personal web site on the free pages that came with my "netcom" account.   I started with "Kirk's Investment Links" which listed my favorite investment sites.  Shortly after I built "Kirk's Reading List."   Over time, Netcom became Mindspring which became Earthlink but my web pages are still there at the original netcom.com URLs. Over time I added some books on my list but most of the classics remain.
Note:  I get a commission from Amazon.com if you buy these books using my links on the day you click the links.  Please use my links to support this blog.  Thanks.

Below is a photo and list of the 11 books I have on an improvised bookshelf for quick access  from my desk:

#1Technical Analysis of Stock Trends
By Robert D. Edwards,  John Magee and W. H. C. Bassetti

I keep "Edwards and Magee" on the top of my books because it is the one I use regularly. It is my Technical Analysis Bible. Originally written in the 1940s this 9th edition is updated and revised by Bassetti for today's markets. I have the expanded and revised glossary bookmarked to "Head and Shoulders" which I used to help me write the Head & Shoulders Bottom page for ForBestAdvice.com.
Chapter 3 "Dow Theory" is a must read for anyone wishing to understand technical analysis and its history. Chapters 29 and 30, "Trendlines in Action" and "Use of Support and Resistance," will help you understand how I trade around long positions in my "explore portfolio" to lower my cost basis and eventually get on "house money" for my positions.
By Lakshman Achuthan and Anirvan Banerji
I consider this a "must easy read" for anyone considering adding the "explore" component to their "core and explore" strategy.
“Would it help you decide when to leave a job, buy a house or step up your investing, if you had a good feel for when business was about to turn up (or down)? It sure will help me. This easy-to-read book tells you how the respected ECRI calls turning points, and how you can, too.”
—Jane Bryant Quinn, Newsweek columnist





#3 Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
By John Bogle

This short, little book is a MUST READ book that explains why I used Index funds from Vanguard for the "core portfolios" I recommend for 80 to 95% of your assets with my "core and explore" approach to investing.

"It's an easy read that will, I suspect, quickly join Burton Malkiel's A Random Walk Down Wall Street and Charles Ellis's Winning the Loser's Game as one of the indexing crowd's favorite books."—Jonathan Clements (Wall Street Journal)

#4 Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor
by John C. Bogle, Founder of Vanguard Low Cost Mutual Fund Family

A terrific book that makes its points over and over. Low cost funds, passive investment strategies, etc. His statistics, and we know they can always lie, are irrefutable that high cost, front-end load funds can never, as a group, match funds that use his proven strategies. There are always exceptions, but you think you are smart enough to pick those funds in advance?? Index funds give you a shot of at least matching the market, which as they say, ain't bad over time.  Add in my use or rebalancing to take profits in the winners and buy what lags and you get reduced volatility and usually even better returns as my own "core and explore" results show.

This is one of my favorite investment books!  It helped me articulate my strategy of buying what is out of favor for my history of index crushing returns for over 30 years of success.

All stock-market investors embrace the motto "Buy low, sell high." Few act accordingly. This book teaches you how. Your job is to execute!  Some great historical charts of returns inside.




#6 Extraordinary Popular Delusions & the Madness of Crowds
By Charles Mackay and Andrew Tobias (Foreword)

This book helped me gain confidence in my contrarian strategy of going against the crowds.    Amazon.com's review says it well: "We may think that the Great Crash of 1929, junk bonds of the '80s, and over-valued high-tech stocks of the '90s are peculiarly 20th century aberrations, but Mackay's classic--first published in 1841--shows that the madness and confusion of crowds knows no limits, and has no temporal bounds. These are extraordinarily illuminating,and, unfortunately, entertaining tales of chicanery, greed and naivete. Essential reading for any student of human nature or the transmission of ideas.  
"This is the most important book ever written about crowd psychology and, by extension, about financial markets..." -- Ron Insana, CNBC


#7 The Intelligent Investor
by Benjamin Graham;
Forward by John C. Bogle, Founder of The Vanguard Group

Graham's Intelligent Investor sets about educating the average person as to what makes an investment, what makes a speculation and how this knowledge can be applied to build wealth in the most risk-averse way possible.  A VALUE Investor's MUST HAVE book!






#8 Investors and Markets
By William F Sharpe, 1990 Nobel Prize in economics recipient for "Capital Asset Pricing Model" along with Markowitz and Miller.

This is a personally autographed book with a personal note sent to my by Professor Sharpe.  This is the most advanced book on my list.

"In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices."

#9 The Lazy Person's Guide to Investing 
by Paul Farrell.

Paul offers many great core portfolios that all should consider before they consider anyone’s newsletter.
In Ch 25 Paul talks about having "two brains" where you put 90% in what I call "core" and 10% into a "Mad Money" portfolio or what I prefer to call "explore."
For more, read about my "core and explore" approach to investing.






#10  The Millionaire Next Door The Millionaire Next Door: Surprising Secrets of America's Wealthy

By Thomas Stanley and William Danko
By focusing on those with a net worth of at least $1 million, the authors show surprising results that reveal fundamental qualities of this group that are "diametrically opposed to today's earn-and-consume culture, including living below their means, allocating funds efficiently in ways that build wealth, ignoring conspicuous consumption, being proficient in targeting marketing opportunities, and choosing the "right" occupation"

After reading this book, you may never laugh at your friends who use coupons or shop Black Friday Sales again!


 #11 The Oil Factor: Protect Yourself and Profit from the Coming Energy Crisis
 By Stephen and Donna Leeb

This book has some great research that shows the stock markets usually have terrible performance after the price of oil surges.  It is worth buying just for the table on page 17 that shows the stock market was between 17% lower and 4% higher after any time the price of oil changed by 100% in any 18 month period between 1973 and 2003.

This helped me know it was prudent to take profits and cut back on my asset allocation when the price of oil skyrocketed just before the last 2008 to 2009 bear market that saw the market crash by 57%.

My Investment Library

I recommend these other two books to complete your investment library

 #12 The Complete Idiot's Guide to Social Security and Medicare, 3rd Edition
By Lita Epstein (Nov 2, 2010)

Lita used to write for my "Investing and Personal Finance" group that I led at Suite101 before it was sold, they changed direction and I left to build my own web sites.  Her "Complete Idiot's Guides" are well written and easy to understand.  This is my one of my favorites and one I find myself recommending the most to others.






#13 The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More - Hardcover (Oct. 27, 2010)
By Annette Thau

This is a great book that includes:
  • Buying individual bonds or bond funds
  • The ins and outs of open-end funds, closed-end funds, and exchange traded funds (ETFs)
  • The new landscape for municipal bonds: the changed rating scales, the near demise of bond insurance, and Build America Bonds (BABs)
  • The safest bond funds
  • Junk bonds (and emerging market bonds)
  • Buying Treasuries without paying a commission
Note:  I get a commission from Amazon.com if you buy these books using my links on the day you click the links.  Please use my links to support this blog.  Thanks.

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