5 best books to read in Stock investing
Most successful people in any field, then they give a lot of importance to book reading. And when it comes to investment or personal finance, the importance of book-reading becomes even greater.
Many successful people like Mr. Warren Buffet, Bill Gates read books regularly.
5 best books to read in Stock investing & personal finance
1. The first book is The Psychology of Money authored by - Morgan Hausel
In this book, the author has shared 19 stories that tell us how we should deal with money.
Through these stories, the author tried to convey that to become rich, it does not matter how smart you are, but how you behave with money.
In this book, the author tries to say that compounding will only work if you give it enough time to grow. Not all investment decisions taken by you will be correct.
But even if you are correct in 50% of the cases, you can generate good wealth in the long run.
Also, the author has said that the meaning of ultimate wealth is that you have the ability and freedom to control your time, And you can do whatever you want, whenever you want.
2. The second book is The Intelligent Investor which is authored by Benjamin Graham
Benjamin Graham is also known as the father of value investing. And his book, “The Intelligent Investor” is considered the bible of the investment world.
Legendary investor Warren Buffett also mentions the book several times in his annual shareholder letter and interview.
Yes, this book was written a long time ago. So it may happen that some formulas or techniques may not work today. But the principle of value investing given in the book is equally valuable and relevant today.
We should keep in mind the 3 important principles of this book:
# Circle of Competence: An investor should understand the extent of his knowledge and should take decisions on his own.
For example, if you have good knowledge of the FMCG sector then you should first analyze FMCG companies only.
# Margin of Safety: As an investor, you should keep in mind that you may be wrong in your analysis.
So if you think that something is worth 100 then you should try to buy it at 70 or 80 only. So that you have a margin of safety.
# Ownership means the owner of the business: Whenever you buy shares of a co., you should have the mindset that you are buying the co. itself.
This mindset will encourage you to invest in the long term and as we discussed earlier, compounding works well in the long term only.
3. The third book on our list "Coffee Can Investing" authored by - Saurabh Mukherjee, Rakshit Ranjan, and Pranab Uniyal:
The first question that may come to your mind is what is this CCP i.e. Coffee Can Portfolio or Coffee Can Investment?
In the 1900s, when banks were not so popular in America, people kept their cash & valuables in coffee cans to keep them safe for a long time.
When this approach was introduced that is, buy good stocks and hold them for a long time, this approach became popular as Coffee Can Investing.
According to the author of the book, we should focus on the following factors before investing in any company. The market cap of the company should be more than 100 crores.
The company should be more than 10 years old. The company must have shown a minimum of 10% revenue growth in each of those 10 years.
The company should have a minimum return on capital employed (ROCE) of 15% in every one year out of those 10 years.
For financial companies, we have to use ROE instead of ROCE i.e. Return on Equity and we should use Loan Growth instead of Revenue Growth.
Businesses that satisfy all the criteria, we must make investments in them. We can ignore all other companies.
4. The fourth book is Common Stocks and Abnormal Profits and Other Writings author of the book - Philip A Fisher:
After Benjamin Graham, if Warren Buffett gives the most credit to anyone, it is Philip A. Fisher.
Warren Buffett has said that 85% of his investment style was influenced by Benjamin Graham and 15% by Fisher.
In his book Common Stocks and Abnormal Profits, Fischer states that the best time to sell any stock is “almost never”.
Warren Buffett also stated in his 1988 letter to Berkshire Hathaway shareholders that "My favorite holding period is forever."
Fisher has mentioned 15 such points in his book which we must see before investing in any stock. According to Fisher, we should keep in mind 2 points to generate good wealth in the stock market.
5. The 5th book on our list is The Zurich Axioms: The Rules of Risk and Reward Used by Generation of Swiss Bankers The author of the book is Max Gunther:
The author begins the book with a question.
Switzerland, a small country rich in natural resources and agricultural land, has the highest per capita income & standard of living in the world.
Why is it like this?
The author then describes how the citizens there have learned to face and manage risk. And this is why Switzerland's per capita income is so high.
The author has given 12 axioms in the book that teach you a little bit about personal finance, investing, and general life.
There are some behavioral mistakes mentioned in the book to avoid so that we can become good investors.
