Bonus Material:
There are hundreds of books written on investing and financial markets and it can be difficult to decide which to read first! This is further compounded by the fact that it is hard to know which authors and investing strategies have credibility and which investing books have practical takeaways and advice.
This article will list 10 investing books that offer something different and will help you to make better investment decisions and ultimately improve your returns with long-term investments in the stock market.
Here are my best investment books to read in 2021 (all are available on Amazon), and we’ll cover each in detail below.
The best investing books in 2021
- One Up on Wall Street by Peter Lynch
- How To Pick Quality Shares by Phil Oakley
- The Smart Money Method by Stephen Clapham
- The Sceptical Investor by John Stepek
- Excellent Investing by Mark Simpson
- The Intelligence Trap David Robson
- Millennial Money by Patrick O’Shaughnessy
- The Psychology of Money by Morgan Housel
- 100 Baggers by Christopher Meyer
- Free Capital by Guy Thomas
1. One Up on Wall Street by Peter Lynch
This book is a timeless classic and a must-have on every investor’s bookshelf. It’s a bestseller for a reason.
Peter Lynch is one of the most successful investors and fund managers of all time. He took over Fidelity’s Magellan Fund (a mutual fund) in 1977 and when he retired in 1990 he had returned a CAGR of 29.2%.
He also coined the term ‘bagger’, which is a stock that has increased in value by 100%, and ‘multi-bagger’ which is a stock that has increased in value multiple times.
The book describes the advantages retail investors have over the professionals, and how private investors can get investing ideas from their everyday lives.
Peter’s wife Carolyn discovered a great product called L’eggs, and after some research, Peter bought the stock which became a six bagger before being taken over.
One of Peter Lynch’s investment strategies was to target GARP stocks (Growth At a Reasonable Price); he was able to find and grow multibagger stocks this way with companies that were growing their earnings per share quickly and at a valuation that wasn’t eye-wateringly expensive.
This investment philosophy is popular amongst investors and remains relevant today.
The book gives practical advice on how to improve your returns and how to find, develop, and test investment ideas.
2. How To Pick Quality Shares by Phil Oakley
Phil Oakley was an investment analyst and spent time with ABN’s UK Smaller Companies Team as well as Halbis Capital Management, before becoming a writer and now Associate Director at Investors Chronicle.
I’ve included this book because as a trend follower and breakout trader these patterns often come from quality shares. I use SharePad to filter for stocks on a technical basis, and also look out for quality that may be building a stage 1 base in order to keep an eye out for an early opportunity.
Here’s an example of a stock ABDP (ABDP):
In this period it was a quality stock that grew both its revenues and its profits, and the share price followed accordingly. I have traded this stock several times on the way up and it is an example of why I look out for quality uptrending stocks.
The book is a must-read in my opinion.
3. The Smart Money Method: How to Pick Stocks Like a Hedge Fund Pro by Stephen Clapham
Steve Clapham is a retired hedge fund partner who now trains analysts at some of the world’s biggest and most successful institutions. In this book, he provides a walkthrough of his investing process from idea to position, and to exit.
The Smart Money Method is an investing book with plenty of fundamental analysis methods, but I’ve included it as a trading book because I found it helpful and it will help me make money. I’m a trader, but I don’t like to put labels on things. If something makes me money, it’s useful. That’s all that matters.
Steve’s book covers judging management, identifying dodgy accounting, and assessing the quality of a business. He also runs investing courses at Behind the Balance Sheet.
4. The Sceptical Investor by John Stepek
Everyone likes the idea of being a contrarian investor. The problem with contrarian investing is that nobody is willing to appear wrong. But that’s exactly what contrarian investing is, and you can appear wrong for an extended period of time until the market proves you right.
Many of the most famous and profitable trades in history have been made by contrarians. John believes that the relentless growth of passive investing and ETFs will provide opportunities for the smart investor to profit from contrarian positions.
Wirecard is an example of a contrarian call. Dan McCrum, an investigative journalist at the Financial Times (FT), went public with a series of articles entitled “The House of Wirecard” in April 2015.
Below is the stock price chart of Wirecard, with an arrow from when Dan McCrum’s article went live on Alphaville.
Eventually, Dan was proven right. But before he was the price had multibagged, he was accused of colluding with short sellers, and he also suffered personal attacks on his integrity.
This is an extreme example, but people generally don’t like it if you call their stock a sell. Remember – they are not just emotionally invested but financially invested in the stock. Contrarians need to have thick skin and be prepared to lose some friends.
John’s book is insightful and well-written, and I felt wiser for reading it. John is also an executive editor of MoneyWeek, and you can trial six issues for free here.
5. Excellent Investing by Mark Simpson
I’ve included it because Mark’s book teaches us to play to our strengths and define our own competitive advantage. This is a necessary skill not just in investing but in trading too. Grading trades and knowing which trades are our money makers and which trades are not is an important part of trading.
Excellent Investing also covers behavioural biases which affect everyone, and offers suggestions on reducing the impact of these by developing a specific set of rules to apply to your portfolio and asset allocation.
Mark’s book is worth a read for anyone involved in the stock market because it forces us to think about our systems and our own rules.
6. The Intelligence Trap: Revolutionise your Thinking and Make Wiser Decisions by David Robson
David Robson is a mathematician who became interested in how we make decisions.
The Intelligence Trap is not a finance book – but making wiser decisions is financially beneficial in the business of trading and investing.
The book features the latest behavioural science as well as historical examples, and offers ways in which we can realise our full cognitive potential.
The Intelligence Trap explains why Nobel prize winners spread fake news and how a physics professor was tricked into carrying 2kg of cocaine through an airport. It helps to identify biases and teaches us to think with more clarity.
7. Millennial Money by Patrick O’Shaugnessy
Millennial Money is a book for younger investors written by Patrick O’Shaughnessy, the son of James O’Shaughnessy (author of What Works On Wall Street).
The book refers to the ‘millennial edge’, the time in the future that millennials will have to grow their wealth before retirement. The effects of compound interest only increase over time.
It also references several factors in stocks that millennials may wish to look for, such as high return on equity and high earnings quality, and shows how to do this.
Millennial Money is a great read for the early investor and you can read my summary of the book.
8. The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
The Psychology of Money is more about personal finance and decision making on money rather than a book on investing.
Morgan uses storytelling to show his points rather than laying on data and graphs heavily. It’s a book that will get you thinking about your own finances and how you might be able to manage them better.
The book hammers home the importance of compounding but also not taking risk in order to achieve something you don’t need to achieve, and that money’s greatest value is its ability to offer more freedom and control over your own time.
9. 100 Baggers by Christopher Meyer
100 baggers are stocks that return £100 for every £1 investment. This book is about finding 100 baggers.
Chris Mayer believes he has found several patterns that can help you find the stocks that will go on to generate huge multiples in returns.
It starts with some stories of private investors who have made 100 bagger returns and includes the concept of the ‘coffee can’.
The coffee can idea is that you buy stocks and don’t sell them for ten years. This comes from the original article from Robert Kirby, who received a call from the wife of a client who had passed away. He had been buying all of the recommendations for his wife’s account but never ever sold them.
The portfolio contained lots of strange holdings with varying position sizes, but was worth well in excess of what the wife had expected due to a sliver of Xerox shares which had ballooned.
The book is based in practicality and there are plenty of stories and anecdotes to make this an easy but educational read.
10. Free Capital: How 12 Private Investors Made Millions in the Stock Market by Guy Thomas
Free Capital chronicles the strategies, wisdom, and lifestyles of 12 private investors who have made at least £1m in the stock market.
The 12 investors are from a wide range of pursuits – whereas some have City backgrounds others left school with few qualifications. Some hold large positions in shares they hold for years, and others were short term holding trades for a few hours.
There is enough variety in the book to find something that resonates with you. As well as detailed insights into the lives of these 12 individuals the book is also relatively jargon-free, meaning it is an easy book to work through.
Free Capital is specific to the UK market and offers practical ideas but also inspiration. It’s a great read for both novices and those who have already experienced success in the stock market.
Conclusion
We’ve come to the end of the top 10 investing books. There are many great trading books not on this list and yet to be published.
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You will notice that Benjamin Graham’s (the father of value investing) books The Intelligent Investor and Security Analysis do not feature on this list. The former is a favourite of Warren Buffett (co-founder of Berkshire Hathaway) but I found it difficult to read and little is applicable to today’s market. It definitely offers value but I felt that other books were more useful for successful investing.
Honorary mentions include:
- ‘A Random Walk Down Wall Street‘ by Burton Malkiel
- ‘The Little Book of Common Sense Investing‘ by John Bogle
- ‘Your Money and Your Brain‘ by Jason Zweig
- ‘The Essays of Warren Buffett: Lessons for Corporate America‘ by Lawrence Cunningham
However, investing in stocks is not for everyone and many people wish to invest in real estate or index funds as well as equities. Covering several asset classes can be a good way to diversify yourself. If you are unsure then you should seek professional advice through an investment advisor.
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The prices come at no extra cost however if you’d rather add to Jeff Bezos’ billions rather than my own non-existent billions, you can go directly to Amazon instead.