In the world of investing, knowledge is power. Many successful investors attribute their acumen to a thorough understanding of the literature that shapes their thinking. When industry professionals share their recommended reads, they provide insight into the concepts and strategies that have guided them throughout their careers. This article explores a curated list of must-read books that can significantly enhance investment skills.
To gather these recommendations, several prominent investors were consulted regarding which books aspiring investors should prioritize. Their responses were diverse, yet they consistently emphasized the importance of continuous learning and critical thinking.
Foundational knowledge for investors
David Abrams, founder of Abrams Capital, highlighted the significance of understanding numbers in his investment approach. He recommends Innumeracy by John Allen Paulos, a concise book that explores mathematical concepts in an accessible manner. Abrams asserts that grasping the fundamentals of numbers is crucial for anyone looking to succeed in finance. He states, “Without a solid foundation in numeracy, your progress in investing will be hampered.” Abrams emphasizes that one does not need to be a math genius; rather, a basic understanding of mathematics can facilitate navigating financial concepts.
In addition to numeracy, Abrams points to Black Box Thinking by Matthew Syed as an essential read. The book draws parallels between the airline industry, which learns from its mistakes, and other sectors that often overlook failures. Syed’s exploration of data analysis and learning from errors offers a valuable perspective for anyone committed to self-improvement.
Understanding human behavior
William Bernstein, co-founder of Efficient Frontier Advisors, recommends two impactful books that delve into human behavior and forecasting. The first, The Secret of Our Success by Joe Henrich, provides insights into human cognition and societal development. Bernstein believes that understanding how we operate as individuals can enhance investment decisions.
The second recommendation by Bernstein, Expert Political Judgment by Philip Tetlock, examines the qualities that distinguish skilled forecasters from less effective ones. Bernstein notes, “The striking takeaway is that few individuals excel at predictions, reminding us of the inherent uncertainty in investing.”
Learning from industry legends
Knowledge also comes from the legendary Warren Buffett. Both Abrams and Tobias Carlisle, founder of Acquirers Funds, recommend reading Buffett’s Letters to the Shareholders of Berkshire Hathaway. These letters are available online for free and offer readers a unique opportunity to learn from one of the greatest investors of all time. Carlisle likens reading these letters to obtaining an MBA, noting that they contain practical wisdom that often surpasses traditional business education.
For a more curated experience, Ric Dillon, founder of Vela Investment Management, suggests The Essays of Warren Buffett by Lawrence Cunningham. This book compiles decades of Buffett’s letters into a cohesive guide on investing and corporate governance. Dillon describes it as “priceless,” emphasizing that it doesn’t require reading from cover to cover; rather, it serves as a reference for key investment principles.
Adapting to market dynamics
Bernard Horn, founder of Polaris Capital Management, introduces the concept of Adaptive Markets through Andrew Lo’s book of the same name. Horn compares investing to sailing, where navigating the ever-changing winds of the market is crucial for success. He asserts, “The investment landscape evolves rapidly, and those who fail to adapt may find themselves at a disadvantage.”
Barry Ritholtz, founder of Ritholtz Wealth Management, highlights Thinking, Fast and Slow by Daniel Kahneman, a profound exploration of human psychology in decision-making. Ritholtz explains, “Many investors do not realize that their own cognitive biases can distort their judgment. Recognizing these biases is key to making sound investment decisions.”
Insights on the risks of impulsive trading
To gather these recommendations, several prominent investors were consulted regarding which books aspiring investors should prioritize. Their responses were diverse, yet they consistently emphasized the importance of continuous learning and critical thinking.0
To gather these recommendations, several prominent investors were consulted regarding which books aspiring investors should prioritize. Their responses were diverse, yet they consistently emphasized the importance of continuous learning and critical thinking.1
To gather these recommendations, several prominent investors were consulted regarding which books aspiring investors should prioritize. Their responses were diverse, yet they consistently emphasized the importance of continuous learning and critical thinking.2