The biggest hurdle that a beginner in the stock market faces is to figure out from where to get information, and which books to read. A simple google search will give you more than 200 books, written over the years by various authors, almost all of which come under the “must-read” category. This overload of information and resources can feel a bit overwhelming for any beginner, which is why we have done the hard-work for you and curated a list of 6 books that you can read to kick off your journey in the stock markets.
There are 2 ways in which one can categorise the books you read:
- Books that give “mile wide and an inch deep” coverage, and
- Books that give “inch wide and mile deep” coverage
Our list will have a mix of both these types of books. Let’s have a look –
WHY ARE WE SO CLUELESS ABOUT THE STOCK MARKET?
The book by Mariusz Skonieczny introduces the basic concepts of value investing in simple and lucid language, in such a way that anyone can understand it.
Topics covered include the difference between stocks and businesses, what constitutes a good business, when to buy and sell stocks, and how to value individual stocks. The book also includes a chapter covering four case studies as well as a chapter on the pros and cons of real estate investing vis-a-vis stock market investing.
The easy to understand explanations of basic concepts make this a must-read for beginners who are looking to foray into the world of investing, and can also be used by experienced investors who want to brush up on their basic concepts.
F WALL STREET
This book by Joel Ponzio is the perfect follow-up to “Why are we so clueless about the stock market?”. It dives into slightly more detailed and complex investing terminologies, acronyms, concepts and investing ideas.
This book tries to teach the reader how to become a sharp value investor and how to use economic downturns to your advantage. It provides very insightful tips and tricks, especially in evaluating securities at a fundamental level, making this another must-read book for beginners in the field of stock market investing.
HOW I MADE $20,00,000 IN THE STOCK MARKET
This classic by Nicolas Darvas is a must-read for novice investors. Darvas talks in detail about his experiences in the American stock market in the 1950s. He explains in very readable terms how he made a fortune in a relatively short period of time. He explains a simple approach, now known as the Darvas Box or Box Theory for entering and exiting the market which many investors use even today. However, a couple of points need to be kept in mind while reading Darvas’ book.
- The method used by Darvas and the results were in the US stock markets during the 1950s. It was a different time with very different macro-economic conditions than what we have now. At that time the US was enjoying a spectacular bull market and economic prosperity. Most stocks were in steady uptrends.
- The other implication is, that this method will work well for trending markets, and should not be seen as a universal approach in all market conditions. Understanding the different market conditions and modifying our approach accordingly is the key to success in the markets.
Inspite of this, Darvas’ book is a must-read which gives a lot of learning and provides deep insights to readers and is not one to miss.
WHAT I LEARNED LOSING A MILLION DOLLARS
They say failure is a stepping stone to success. And in stock markets, losing money in markets is failure.
We often hear about big successes in the markets, but seldom about failures. However, failures often teach us much more than success ever will.
This book, one of my personal favourites, begins with a string of successes that helped Jim Paul achieve a jet-setting lifestyle and land a key spot with the Chicago Mercantile Exchange. It then describes the circumstances leading up to Paul’s $1.6 million loss and the essential lessons he learned from it; which can be summarised as although there are as many ways to make money in the markets as there are people participating in them, all losses come from the same few sources.
BERKSHIRE HATHWAY LETTERS TO SHAREHOLDERS
This book compiles the full, un-edited versions of every one of Warren Buffett’s letters to the shareholders of Berkshire Hathaway. Here, Warren Buffett has given us an insight into his mind and thinking and shows a high willingness to share his methods with the world for all of us to learn from.
Warren Buffett’s letters to his shareholders for the past 50 years contain wisdom on business and investing like no other book. It is the unparalleled journey of the greatest investor of our age and the study of the astounding success of Berkshire Hathaway, one of the best success stories in the history of the stock market.
It is recommended that you buy the kindle version of this book, as it is very reasonably priced and the letters get updated every year for free.
THE MOST IMPORTANT THING ILLUMINATED
This book is heavy in theory, practical application and deep thinking. Read through it slowly, and take plenty of notes as you go along.
In stock markets, getting a hold of your emotions, investing tendencies and psychology is one of the most difficult battles you will face.
Even from own personal experiences, I have learnt that most failures occur because of poor temperament and not because of poor knowledge or skill. Being successful in the stock market is 30% about skill and strategy and 70% about temperament and mindset.
You can learn about the stock market from scratch in a few weeks or months and start developing strategies too. But developing the right temperament and mindset to correctly implement those strategies while conquering some of the most basic and hardcoded human emotions like greed and fear can take years.
In this book, Howard Marks explains concepts such as “second-level thinking,” the price/value relationship, patient opportunism, and defensive investing. He does an honest assessment of his own decisions, including his mistakes, and provides valuable lessons for critical thinking, risk-assessment, and investment strategy.
This book is for advanced readers, and even for them might be challenging to read. But it worth the time it takes to read through, and is even a contender for multiple readings. It is that good!
Happy reading and all the best for your journey in the stock markets!
