As opposed to day trading and swing trading, long-term investing is an art that is difficult in its way. Having the patience to hold on to your portfolio during the various market crashes is something the weak-hearted cannot do. However, before you get to that level where you can manage a sizeable portfolio and be confident in your long term view, there are a lot of knowledge gaps to be filled up, and these gaps can easily be cleared through detailed research of the experiences and knowledge of those who have been-there-done-that. With that being said, here are the top 5 books every investor must read before plunging into the stock market, and as mentioned in our previous article '5 books every stock trader must read' these books must be read and studied with as much seriousness as your JEE preparations books, if not more.
Rich Dad Poor Dad by Robert Kiyosaki
Before understanding the stock market and investments, it is important to understand how money and compounding works. One cannot get into detailed balance sheets and income statements without having the adequate financial literacy to understand the concept of investing itself, and that's where Robert Kiyosaki's Rich Dad Poor Dad has come in and revolutionized the lives of many people who are today successful businessmen and investors. Almost anyone who understands finance and investments today has started with Rich Dad Poor Dad and that will be our recommendation to you too.
The Intelligent Investor by Benjamin Graham
Benjamin Graham is widely considered as the pioneer and face of value investing, and The Intelligent Investor is the bible for value investors. This book is notable today, with famous investors like Warren Buffett, Peter Lynch, Radhakishan Damani, Vijay Kedia, Michael Burry, etc praising it for helping them learn how to determine value in the stock market and successfully pick stocks for their portfolios. Understanding and practicing value investing is what gives the edge between average investors and top-class investors over a long time.
Beating the Street by Peter Lynch
Once the fund manager of the best-performing mutual fund in the world at Fidelity Investments, Peter Lynch is a bonafide legend in the field of long-term investments. And his best-seller Beating the Street chronicles his experiences as a successful manager, where he speaks about his journey, his insights, his philosophy, and his eventual retirement in his 40s at which point his investments can make money for himself without having to work much harder for it. Entering the mind of Peter Lynch can be one of the most fruitful decisions you will have taken, regardless of whether you would like to be an institutional investor or a retail investor
Thinking, Fast and Slow by Daniel Kahneman
Thinking, Fast and Slow is another best-seller in this list, written by Daniel Kahneman, the 2002 Nobel Prize winner in economics. What makes him unusual is that Kahneman is a psychologist. This 2012 book comprises of the research he has conducted over the decades concerning cognitive biases, prospect theory, and happiness. Kahneman talks about the two different ways the brain forms thought, i.e. fast system and slow system, and how both are essential for functioning in life, for different scenarios and professions. For an investor, knowing about his/her thinking systems and the insight on it provided by Daniel Kahneman will certainly take his/her investing journey to higher levels.
ETFs and Indexing by CNBC
A personal favorite of mine, ETFs and Indexing explains the benefits of using indexes and ETFs as a useful instrument for investment through the stories and conversations of working professionals who are worried about their investments. An investment adviser explains the advantages of ETFs over mutual funds and individual stocks and this can be understood simply and comprehensively throughout this book.