I recently asked a number of my favorite writers to list their five favorite investing books. You can read the fantastic list that resulted here. For this month’s reading list, here are my five all-time favorites.
1. What Works on Wall Street by James O’Shaughnessy—I am, of course, massively biased in this first selection but hear me out. I never like anything just because it was produced by someone well known or well regarded, my father included. But this book is a classic for two reasons. First, its early chapters give an excellent overview of the modern investor’s options and obstacles. These chapters (1-4) explain investor fallibility and how a model-based approach to investing can help investors overcome their inherent faults. Second, the remainder of the book—the “data” chapters (5-29)—provide extensive evidence in favor of systematic investment strategies that favor value, quality, momentum and yield. My entire personal portfolio is dedicated to these ideas.
2. Inside the Investor’s Brain by Richard Peterson—this is the best book on investor behavior that I’ve ever read. It is like Daniel Kahneman’s Thinking, Fast and Slow¸ but specific to investing. It is comprehensive, entertaining, and chock full of stories and examples that I use on a weekly basis.
3. The (mis)Behavior of Markets by Benoit Mandelbrot—A unique take on (and dismantling of) the efficient market hypothesis. I adopted and extended my favorite chart ever from his book, shown below.
4. Contrarian Investment Strategies by David Dreman—this was one of the first books I read on investing when I was 22 and remains one of the best. It reveals “forecasters” as charlatans, highlights the contrary nature of the most successful investing strategies, and proposes concrete strategies for outmaneuvering the market.
5. Devil Take the Hindmost by Edward Chancellor—No investing education is complete without a healthy dose of history. Chancellor’s book is—BY FAR—the best collection of investing history lessons ever compiled. Learning from your own mistakes is great, but learning from the mistakes of others is even better. This is the most entertaining book on the list.