Ask Casual Kitchen: Best Investing Books

Readers! As Casual Kitchen's readership continues to grow, I've been receiving more and more great questions via email, comments and Twitter.

Today's column is an off-topic Q&A covering useful investing books that I'd recommend to readers. As always,
I welcome your feedback.

Q: You used to work on Wall Street, so are there any books on investing that you'd recommend to regular people? And do you think it's a good time to invest in stocks right now?

In my view Jim Cramer's 2005 book Real Money is one of the best books on navigating the modern stock market. The key insight in this book (and sadly, one that many professional investors don't even grasp) is his explanation of business cycle investing. In other words, which stocks and sectors do well when the economy is reaccelerating, and which do well when the economy is heading towards recession? This is extremely useful stuff for every investor, regardless of skill level.

Cramer's most recent book Getting Back to Even is also extremely useful. I just finished it (and recommended it in a recent Weekend Links post), and I was impressed with some of his intermediate and advanced investing strategies, a few of which I've already (profitably, fortunately) put into practice myself. I know it's hard to believe that a guy who behaves like such a crazed buffoon on TV can be such a great teacher, but it's true.

Stocks for the Long Run by Jeremy Siegel. Another great resource, although it's a cruel irony that the central thesis of this book (that long-term stock ownership is the best way to build wealth) was dead wrong over the past decade. But I recommend this book now because Siegel's thesis is likely to be true for the next few decades.

One Up on Wall Street by Peter Lynch. Many people today don't even recognize this weird-looking white-haired guy, but he was a legend on Wall Street thanks to his stellar performance managing Fidelity's Magellan Fund (another cruel irony: this fund began sucking wind shortly after he stepped down in 1990 and has sucked ever since). Lynch's book focuses on all the things regular investors can do to capture advantages over the pros. Today, of course, there are more resources available to the average investor than ever before. Thus when you combine this book with Siegel's and Cramer's books, you can start to grasp why the next few decades could truly be a new era for the individual investor.

I can't have a list of investing books without including The Essays of Warren Buffett: Lessons for Corporate America, which is available for free here. Yep, that's right, free, because the material is simply a compendium of the best content from his company's annual reports, and thus everything is in the public domain. (If the link is dead or isn't working, just send me an email with "Buffett Book" in the subject line. I'm happy to share my copy with any reader who asks.) Put the time and effort into digesting Buffett's ideas and I promise you will profit.

Finally, a book that's less about investing and more about taking your power back over money: Your Money or Your Life. Laura and I read it for the first time more then 10 years ago and we've returned to it many times over the years. It changed everything for us.

There are zillions of great books out there to read on investing, but these specific titles have been particularly important in shaping my thinking over the years as both a professional and individual investor. I'm more than happy to recommend them all.

Okay. Your second question, about whether this is a good time to invest, is the type of question I just dread. I suppose I can say it's a better time to invest than, say, three years ago when the DJIA was at 14,000. But, honestly, I have no idea.

And by the way, when you listen to all of those confident-sounding pundits in the media telling you that now is either a good or terrible time to invest, please remember: they have no idea either.

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Taz @ Climb the Rainbow said...

Thanks Dan! I'm just getting started in shares myself this year and there's so much chaff in the form of investment books it's great to have someone who knows their stuff point me towards the wheat!

Daniel said...

Thank you Taz! Anyone would benefit from reading any of these books.

And I sincerely believe if you read and really ingest all of them, you'll be, education-wise, among the top 10% of all investors.