Through the initial weeks of 2018, my mind keeps drifting back to the people and books that helped shape my investment philosophy. Having spent some time on Wiley Finance’s pre-publication finance book review distribution list, I own hundreds of financial books, including many I have purchased on my own.
One of my first tasks as a journalist was to interview financial book authors, hedge fund managers, and other luminaries. I was fortunate enough to meet and converse with dozens of authors, hedge fund managers, traders, investors and even a few financial rogues.
This experience was mind-blowing to say the least. Being able to ask successful investors and other market winners pointed questions regarding their experience and ideas was instrumental in shaping my entire investing belief system.
All of these one-on-one brain probes were combined with hands-on, in-the-trenches, active investing experience. I quickly discovered that 90% of all investment books are nothing more than rehashed old wives tales, page-filling anecdotes, repetitive information, and ideas that only work in hindsight.
In other words, there is a tremendous amount of useless noise in the world of investment books and very little actionable, working information.
However, a few books have been massively influential in my development as an investor. Other, more recent books have struck me as being far superior to anything else currently on the market.
This article distills down what I consider to be the top 3 investment books of all time and provides a brief recap of each.
1. Money: Master the Game by Tony Robbins
I purchased this book not expecting much beyond platitudes and other feel-good rhetoric from the king of motivational gurus, Tony Robbins. Boy was I surprised! Its 600-plus pages contain very insightful information on long-term investing and how the real winners play the investment game.
In true Tony Robbins fashion, he bases the book’s advice on interviews with billionaire investors and provides the actual interviews. The questions he asks of financial luminaries like Ray Dalio, Paul Tudor Jones, T. Boone Pickens, Carl Icahn, Sir John Templeton and others are very pointed and direct. Tony is a very talented interviewer, and I learned a tremendous amount from the mindset and ideas of these true financial visionaries.
To briefly recap, the book starts off by providing seven steps of actionable information to start building wealth, leads into dispelling major market myths, then goes into step-by-step instructions for how to set up your investment for maximum impact/controlled risk. Finally, the interview section wraps up with a few motivational chapters to end the book.
2. Education of a Speculator by Victor Niederhoffer
This book was incredibly influential on me as an investor. It is far from a traditional investment book in a “how to buy stocks”-type tutorial format. It is more a tour inside the mind of a man whom many consider being among the most insightful and unique hedge fund managers of all time. Niederhoffer was the top-ranked hedge fund manager on earth for several years and is credited with developing now-common institutional investment techniques.
Rather than being direct, Niederhoffer, a consummate contrarian, teaches by telling tales of his upbringing, influences, and by applying diverse subjects to help understand market price movements. A statistician by education and an ex-Berkeley professor, he is known as a trader among academics and an academic among traders.
The book itself is nearly as eccentric and interesting as its author and I learned an extremely valuable lesson from it: the correct way to think about the financial markets. Learning how to view the market provides investors a tool that can be applied over a lifetime in disparate markets and economic conditions. How-to-style investment books, in contrast, are often only relevant to specific conditions and markets.
While the prose is often dense and it’s sometimes tough to tell if Victor’s self-depreciating humor is in play, I find Education of a Speculator full of market wisdom unavailable anywhere else.
3. The Black Swan: The Impact of the Highly Improbable by Nasim Taleb
Sometimes cited as the opposite of Niederhoffer, Taleb is an intellectual hedge fund manager whose book is also far removed from the typical investment tome.
The book focuses on how the certain rare and unexpected market events have extreme impact on prices. It’s a deep dive into how investors are often blind to the reasons for extraordinary price moves and therefore do not correctly prepare to profit or protect themselves from these outliers.
Just like Education of a Speculator, there are no secrets in this book. However, it does provide a highly effective framework on how to judge black swan-style market events, where the largest profits lie.
While Taleb does sometimes seem to be on an intellectual power trip, the insights gleaned from this book make the lofty prose well worth the effort.
There’s no question that the three books listed above have been hugely influential on my development as an investor. While these are the top three, several additional books need to be mentioned as having a tremendous impact. These are Trade Like a Hedge Fund by James Altucher, Market Wizards by Jack Schwager, and How Markets Really Work by Larry Connors.
Risks To Consider: No book is perfect; even my top three have their flaws. Never put all your investible cash into one idea from a book. Always test ideas and concepts to confirm their validity before committing significant investment capital.
Action To Take: Read the above books and incorporate the teachings into your market ideas. I think you will be pleasantly surprised with the results!
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