Category: Books

Best Books for Investors: A Short Shelf

I’ve already outlined 12 books the sophisticated investor should read.

Now Jason Zweig, WSJ reporter and author of Your Money and Your Brain, chimes in with the books he recommends for investors.

(If you’re not looking to be a practitioner, I’d recommend reading Buffettology, which is very under-appreciated).

Gary Belsky and Thomas Gilovich, Why Smart People Make Big Money Mistakes and How to Correct Them

In clear, simple prose, Belsky and Gilovich explain some of the most common quirks that cause people to make foolish financial decisions. If you read this book, you should be able to recognize most of them in yourself and have a fighting chance of counteracting some of them. Otherwise, you will end up learning about your cognitive shortcomings the hard way: at the Wall Street campus of the School of Hard Knocks.

Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk

The late polymath Peter Bernstein poured a long lifetime of erudition and insight into this intellectual history of risk, luck, probability and the problems of trying to forecast what the future holds. Combining a stupendous depth of research with some of the most elegant prose ever written about finance, Bernstein chronicles the halting human march toward a better understanding of risk—and reminds us that, after centuries of progress, we still have a long way to go.

John C. Bogle, Common Sense on Mutual Funds

The founder of the Vanguard Group and father of the index-fund industry methodically sorts fact from fiction. Following his logical arguments can benefit you even if you never invest in a mutual fund, since Bogle touches on just about every crucial aspect of investing, including taxes, trading costs, diversification, performance measurement and the power of patience.

Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists

Neither light reading nor cheap (it’s hard to find online for less than about $75), this book is the most thoughtful and objective analysis of the long-term returns on stocks, bonds, cash and inflation available anywhere, purged of the pom-pom waving and statistical biases that contaminate other books on the subject. The sober conclusion here: Stocks are likely, although not certain, to be the highest-performing asset over the long run. But if you overpay at the top of a bull market, your future returns on stocks will probably be poor.

Richard Feynman, Surely You’re Joking, Mr. Feynman! or What Do You Care What Other People Think?

These captivating oral histories of the great Nobel Prize-winning physicist ostensibly have nothing to do with investing. In my view, however, the three qualities an investor needs above all others are independence, skepticism and emotional self-control. Reading Feynman’s recollections of his career of intellectual discovery, you’ll see how hard he worked at honing his skepticism and learning to think for himself. You’ll also be inspired to try emulating him in your own way.

Benjamin Graham, The Intelligent Investor

Originally published in 1949, called by Warren Buffett “by far the best book on investing ever written,” this handbook covers far more than just how to determine how much a company’s stock is worth. Graham discusses how to allocate your capital across stocks and bonds, how to analyze mutual funds, how to take inflation into account, how to think wisely about risk and, especially, how to understand yourself as an investor. After all, as Graham wrote, “the investor’s chief problem—and even his worst enemy—is likely to be himself.” (Disclosure: I edited the 2003 revised edition and receive a royalty on its sales.) Advanced readers can move on to Benjamin Graham and David Dodd, Security Analysis, the much longer masterpiece upon which The Intelligent Investor is based.

Darrell Huff, How to Lie with Statistics

This puckish riff on how math can be manipulated is only 142 pages; most people could read it on a train ride or two, or in an afternoon at the beach. As light as the book is, however, it is nevertheless profound. In one short take after another, Huff picks apart the ways in which marketers use statistics, charts, graphics and other ways of presenting numbers to baffle and trick the public. The chapter “How to Talk Back to a Statistic” is a brilliant step-by-step guide to figuring out how someone is trying to deceive you with data.

Daniel Kahneman, Thinking, Fast and Slow

Successful investing isn’t about outsmarting the next guy, but rather about minimizing your own stupidity. Psychologist Daniel Kahneman, who shared the Nobel Prize in Economics in 2oo2, probably understands how the human mind works better than anyone else alive. This book can make you think more deeply about how you think than you ever thought possible. As Kahneman would be the first to say, that can’t inoculate you completely against your own flaws. But it can’t hurt, and it might well help. (Disclosure: I helped Kahneman research, write and edit the book, although I don’t earn any royalties from it.)

Charles P. Kindleberger, Manias, Panics, and Crashes

In this classic, first published in 1978, the late financial economist Charles Kindleberger looks back at the South Sea Bubble, Ponzi schemes, banking crises and other mass disturbances of purportedly efficient markets. He explores the common features of market disruptions as they build and burst. If you remember nothing from the book other than Kindleberger’s quip, “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich,” you are ahead of the game.

Roger Lowenstein, Buffett: The Making of an American Capitalist

This book remains the most comprehensive and illuminating study of Warren Buffett’s investing and analytical methods, covering his career in remarkable detail up until the mid-1990s. If you read it in conjunction with Alice Schroeder’s The Snowball, you will have a fuller grasp on what makes the world’s greatest investor tick.

Burton G. Malkiel, A Random Walk Down Wall Street

In this encyclopedic and lively book, Malkiel, a finance professor at Princeton University, bases his judgments on rigorous and objective analysis of long-term data. The first edition, published in 1973, is widely credited with helping foster the adoption of index funds. The latest edition casts a skeptical eye on technical analysis, “smart beta” and other market fashions.

Bertrand Russell, Sceptical Essays or The Scientific Outlook

Russell is Buffett’s favorite philosopher, and these short essay collections show why. Russell wrote beautifully and thought with crystalline clarity. Immersing yourself in his ideas will sharpen your own skepticism. My favorite passage: “When a man tells you that he knows the exact truth about anything, you are safe in inferring that he is an inexact man…. It is an odd fact that subjective certainty is inversely proportional to objective certainty. The less reason a man has to suppose himself in the right, the more vehemently he asserts that there is no doubt whatever that he is exactly right.” Think about that the next time a financial adviser begins a sentence with the words “Studies have proven that….”

Alice Schroeder, The Snowball: Warren Buffett and the Business of Life

With unprecedented access to Buffett, Schroeder crafted a sensitive, personal and insightful profile, focusing even more on him as a person than as an investor—and detailing the remarkable sacrifices he made along the way. If you read it alongside Lowenstein’s Buffett, you will have an even deeper understanding of the master.

Fred Schwed, Where Are the Customers’ Yachts?

First published in 1940, this is the funniest book ever written about investing—and one of the wisest. Schwed, a veteran of Wall Street who survived the Crash of 1929, knew exactly how the markets worked back then. Nothing has changed. Turning to any page at random, you will find gleefully sarcastic observations that ring at least as true today as they did three-quarters of a century ago. My favorite: “At the end of the day [fund managers] take all the money and throw it up in the air. Everything that sticks to the ceiling belongs to the clients.”

“Adam Smith,” The Money Game

In the late 1960s, the stock market was dominated by fast-talking, fast-trading young whizzes. The former money manager George J.W. Goodman, who wrote under the pen name “Adam Smith,” christened them “gunslingers.” In this marvelously entertaining book, Goodman skewers the pretensions, guesswork and sheer hogwash of professional money management. Reading his mockery can help sharpen your own skepticism toward the next great new investing idea—which almost certainly will turn out to be neither great nor new.

Not sure what to get the book worm on your list? Start here

From the library of Farnam Street

All of the 2014 reading lists together in one shareable place. Start here if you’re still searching for the perfect gift for the book lover on your list. (The curious can compare with the 2013 edition.)

Financial Times: Best Books of 2014

The Financial Times published their list of the best books in 2014. If you have a bibliophile on your list, this is the place to start.

Economics

Business

Politics

History

Science

Art

Architecture & Design

Literary Non-Fiction

Fiction

Poetry

Travel

Sport

Food

Crime

Science Fiction

Children’s Fiction

Young Adult Fiction

 


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The Best Nonfiction Books of 2014

Tyler Cowen is consistently one of my favorite sources of reading material. There hasn’t been a year where I don’t find something new from his recommendations and this year is no exception.

He’s out with his 2014 list of the best nonfiction books. If he had to pick three favorites out of this list he would choose Music at Midnight: The Life and Poetry of George Herbert, On the Run: Fugutive Life in an American City, and Yucatán: Recipes from a Culinary Expedition. (Also revisit his selections from 2013, and 2012.)

I ended up picking up copies of Music at Midnight: The Life and Poetry of George Herbert, Stalin, vol. 1Beethoven: Anguish and Triumph and Philosophy Between the Lines: The Lost History of Esoteric Writing.

The Surprising Books That Billionaires, Chess Prodigies, Performance Coaches, and Bestselling Authors Recommend

books2

One question Tim Ferriss, the author of The Four Hour Workweek, asks people on his podcast is “What book have you gifted most often to others, and why?”

This is one of my favorite parts of the show.

Below are some of the answers from people like Tony Robbins that might catch your attention. Thanks to this list, I just got a lot of my Christmas shopping done.

Before we get to that though, let’s recap the books that Tim has recommended.

Ok, now it is time for Tim’s podcasts guests to take over. Here are some of the ones that caught my eye. While I’ve read a lot of these, there were some very interesting new finds. I ended up ordering several books.

Kevin Kelly, the founding editor of WIRED magazine, recommends:

Tony Robbins, performance coach to Bill Clinton, Serena Williams, Paul Tudor Jones, Leonardo DiCaprio, Oprah Winfrey, and a bunch of other people you’ve heard of, recommends:

Neil Strauss has written 7 New York Times bestsellers, including The Game: Penetrating the Secret Society of Pickup Artists. He offers:

Ryan Holiday is an author and the media strategist behind authors Tucker Max and Robert Greene. Ryan mentioned Farnam Street in his podcast with Tim and might be the only person I know who consistently reads more than I do. He recommends:

Ramit Sethi is a personal finance advisor and entrepreneur. Sethi is the author of the 2009 book on personal finance, I Will Teach You To Be Rich, a New York Times Bestseller. He recommends:

Not enough? See what Elon Musk, Peter Thiel, and Bill Gates recommend.

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The book I give away most often is Peter Bevelin’s Seeking Wisdom and Robin Dreeke’s It’s Not All About Me: The Top Ten Techniques for Building Quick Rapport with Anyone.

Books for Schools That Need Them

This might surprise you but I was never a big reader as a kid. In fact, I wouldn’t be caught dead with a book. This lasted all the way to university.

While never lazy, I was ignorant to the infinite possibility that books opened up. Once I realized what I’d been missing I made a point to never make money an issue when it came to reading (time to read on the other hand is harder to come by.)

When I got a job, I offered to buy my brothers as many books as they wanted as long as they read them.

Well my brothers are all grown up now. They can afford their own books but not everyone is that fortunate.

Last year on twitter, I asked a simple question.

I wanted to know if there were any parents out there struggling to buy a book for their kids for Christmas. If so, I’d take care of the first 20.

I wasn’t sending 20 random books or trying to get rid of anything. Rather, I wanted to know what book the kids wanted — that’s the book I’d send them. Who wants to read a book they don’t want?

Once people realized I was serious, things got a bit out of control for the rest of the night. Generous Farnam Street readers, like you, chipped in offering to take the next ten or the next twenty.

All in we purchased over 170 books. I lost count at that point but I’m pretty sure we were north of 200 when it stopped. Together we did an awesome thing.

Just thinking about it makes my eyes water a little.

In addition to hearing from parents, I heard from teachers who couldn’t afford to buy books for their classrooms.

This year I want to do it again but I need your help — I want to make it easier to participate and easier for me to organize.

Here is what I need from you….
If you know of any teachers or schools struggling with budget cuts to buy the books the kids want and need to learn from, tell them to email me their Amazon wishlist today. Any that I can easily verify, will get posted below. I’ll update this page a few times today.

If you want to buy a book for a school that needs one, that’s awesome. Simply, click on a link, purchase a book, and it will go right to one of the schools that need them. I’d only ask that you send me an email with your Amazon order number and the number of books you purchased so I can keep a final tally. The first 30 are on me.

And, hey, Thanks.

(update: We’re over 300 books given away this year. I’ve been removing wishlists that were entirely fulfilled by generous Farnam Streeters.)

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United States

Luke Neff’s class in Newberg, OR

Global Village Project 2014-2015 Wish List, “an absolutely amazing place for girls that either have never been to school or have had interrupted education in refugee camps before arriving in the U.S.”

Libri Foundation (The Libri Foundation is a nationwide nonprofit organization that has donated over $6,200,000 worth of new, hardcover children’s books to more than 3,000 rural public libraries in the United States. )

Canada

Red Lake Madsen Public School Library in Red Lake, Ontario, Canada “This list contains requests from students or teachers and /or replacement copies of previously owned books.”

Midland Secondary School in Midland, Ontario, Canada