{"id":7013,"date":"2021-01-01T10:52:19","date_gmt":"2021-01-01T05:22:19","guid":{"rendered":"http:\/\/capitalante.com\/?p=7013"},"modified":"2021-01-01T10:56:19","modified_gmt":"2021-01-01T05:26:19","slug":"stock-market-books","status":"publish","type":"post","link":"https:\/\/capitalante.com\/stock-market-books\/","title":{"rendered":"Top 25 Best Stock Market Books Every Investor Must Read"},"content":{"rendered":"
Financial freedom is the ultimate goal for every individual. First of all, you should prepare a perfect investment strategy to get started. When it comes to investing in the stock market you need to learn how to invest in the stock market. In this detailed guide, we’ve compiled a list of some of the best stock market investing books for beginners who want to boost investing knowledge and skills to pick value stocks. Here are the top 25 best stock market books for beginners.<\/span><\/p>\n Needless to say, The Intelligent Investor is among the ace investor Warren Buffet’s all-time favourite value investing books. This book helped him to build an investment portfolio of over 73 billion dollars. In this book, the author Benjamin Graham focuses on the following points,<\/span><\/p>\n Let’s make it clear with an example. Suppose you want to buy a tailoring shop. You are left with two choices. First, you should visit the tailoring shop headquarters, check the total income, free cash flow, assets, and liabilities, if any. Then come up with a final price of the tailoring shop. The second option is you approach to meet the owner to buy his tailoring shop. Then you make the payment whatever the owner asks for. It is clear from the above examples that an investor follows the first option and the speculator follows the second option.<\/span><\/p>\n <\/a><\/p>\n Let’s make it clear with an example. After making an analysis of the stock you find that the intrinsic value of the stock is around $100. Fortunately, the stock is currently trading at $100. But you are waiting for the stock to come to the level of $90 or $80 or even $70. After a market correction when the stock trades at $80, you buy the stock. The difference between the intrinsic value of any stock and the price you buy the share is your margin of safety.<\/span><\/p>\n The author describes Mr. market as a person who plays with the emotions of the investor. Here the author described Mr. market as the business partner of an investor who is a sentimental person. One day Mr. market knocks at your door enthusiastically and offer you to sell your stake in any company\/stock at a very higher price. And then Mr. Market demands a similarly higher price if you want to increase your stake by buying his stake. Contrary to that, one day Mr. market knocks your door depressed and willing to sell his stake for a very low price and additionally gives you the choice to sell your stake at a very low price.<\/span><\/p>\n As an intelligent investor, you need to execute a profitable deal when Mr. market offers you buy low and sell high. You need to invest wisely in a company where the fundamentals are intact and buy stocks when you get stocks at an attractive valuation and below intrinsic value.<\/span><\/p>\n Even though the book was published in 1934 some 86 years ago, this book is a must-have book for any serious investor. The author Benjamin Graham and David Dodd are considered as the fathers of value investing. In this book, the author emphasizes the following aspects,<\/span><\/p>\n In the introduction, the authors suggest buying ten-baggers that refer to stocks that increase 10 times to its initial price. If you have found a few ten-baggers before the professional analysts discover them then these ten-bagger stocks turn your stock portfolio into the best one. In this book, the authors emphasize on following points.<\/span><\/p>\n Should you own a house –<\/span> If you have not owned a house yet now then buy a house first.<\/span><\/p>\n How much money you should invest –<\/span> Don’t invest all the money which will make you sick if you lose it. Invest the extra money that can’t devastate your life.<\/span><\/p>\n The main point of this book lies in this section is to avoid and ignore the analysts and experts.<\/span><\/p>\n Apart from hot picks delivered by the analysts in CNBC do your won research and find quality stocks to yield better returns.\u00a0 You should focus on sectors that you have deep knowledge or are familiar with and don’t try to time the market. Instead, buy when there is a sharp correction in the market.<\/span><\/p>\n In this section, Peter Lynch focuses on the following qualities of any investor namely patience, self-reliance, willingness to do independent research, ability to ignore market panic at the time of sharp correction, etc. The author advises an investor to buy when everyone else is selling and avoid short term fluctuations in the stock market.<\/span><\/p>\n The gist of the book lies in one word do your research before starting to invest in any company. You should invest in any company after asking yourself two questions, why you think this business is good and why you\u2019re buying this stock though the stock price is moving upward. You should pick such a company which has,<\/span><\/p>\n After starting an investment journey as an acolyte of Benjamin Graham, Warren Buffet was quite impressed by the methods of value investing of a San Francisco based money manager namely Philip A. Fisher. Philip A. Fisher was preferred to invest in high-quality growth stocks and then hold them for decades to gain a compounding effect.<\/span><\/p>\n In this book, the author discusses the step by step approach to pick the best growth stocks. Under the chapter ‘what to buy’ the author offers the ’15 point checklist’ before investing in any stocks. Here are the few points of ’15 point checklist’,<\/span><\/p>\n In this book, the founder and managing partner at Gotham Capital provides a magic formula which enabled the writer to end up with a 40% annualized return for over 20 years. The author describes the magic formula by making use of 6th-grade math and humour. The magic formula which enables better returns, in the long run, consists two financial ratios namely Return on Capital and Earnings Yield.<\/span><\/p>\n <\/a><\/p>\n Here the author makes use of ROC apart from ROE or ROA since EBIT does not include tax rates for different companies while making a comparison. [Net Working Capital + Net Fixed Capital] is used as a part of fixed assets since this actually reveals how much capital is required to run the business on a day to day or yearly basis as clear as a day.<\/span><\/p>\n <\/a><\/p>\n Earning yield refers to how much money you can make on every dollar you invest in preferred stocks. Finally, you should consider the following points to pick the best stocks that yield better returns, in the long run,<\/span><\/p>\n The Term ‘Value investing’ was coined by Benjamin Graham the mentor of Warren Buffet. Value investing implies finding such undervalued stocks as compared to the strength of the company i.e. the intrinsic value of the company. In this book, the author has identified various types of investors. <\/span><\/p>\n Let’s make it clear with an example. Suppose the stock market is a supermarket that has various kinds of items i.e. stock.<\/span><\/p>\n Fancy investors are such types of buyers who buy sexy well packaged glamorous products. Apart from this kind of investors, value investors look for such stocks which are on sale and available at best prices i.e. at attractive valuations. The growth investors sit back and wait for an opportunity to buy stocks less than what they are worth and sell stocks at higher prices than their worth.<\/span><\/p>\n You need to diversify your portfolio of at least 10 stocks across various sectors. You need to consider the margin of safety while buying a stock. Needless to say, the margin of safety refers to the difference between the intrinsic value of any stock and the price you have bought the share. In other words, <\/span>the margin of safety is the difference between what the actual price of a stock should be, and how much below the intrinsic value you have bought the stock.<\/span><\/p>\n You should identify value stocks in respect of earnings ratio and compare them with the current trading price of any stock. Pick value stocks after making Analysis of balance sheet i.e. Debt, Current ratio, Liquidity, etc. and Income statement.<\/span><\/p>\n The author advises you to buy not only domestic stocks but also global stocks. You can invest in those countries which have stable economics namely Western Europe, Japan, Canada, Australia, the United States, New Zealand but not in Pakistan or China.<\/span><\/p>\n Before investing in any stock you should ask sixteen researchable questions about the company. If the answers make you feel confident invest in it. If not, don’t invest in the company. Finally, you should stick to the company for the long term for better returns since investing is a marathon not a sprint of 1000 meters.<\/span><\/p>\n Another important aspect to consider while investing in foreign stocks is the currency of the foreign nation. Let’s make it clear with an example. Suppose you want to buy ‘Apple’ from India. In this way, you not only buy any specific stock but also invest in the American dollar. So, if you bought ‘Apple’ in 2010 when a US Dollar was worth Rs. 50 and you sell that stock in 2020 when a US dollar is Rs. 75. Apart from the dividend, you make a significant profit from currency fluctuation.<\/span><\/p>\n Finally, value investing is boring. Stick to the numbers for the long run just say 10 or 20 or even 30 years for a fruitful return. In the case of value investing you won’t outshine during the bull run as compared to sexy or growth stocks. But in the bear market value stocks deliver a positive return as compared to sexy stocks were tanks.<\/span><\/p>\nBook #1. Intelligent Investor by Benjamin Graham<\/span><\/strong><\/h2>\n
Investing vs. Speculating<\/span><\/h3>\n
Margin of Safety<\/span><\/h3>\n
Mr. Market<\/span><\/h3>\n
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Book #2. Security Analysis by Benjamin Graham and David Dodd<\/span><\/strong><\/h2>\n
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Book #3. One up on Wall Street by John Rothchild and Peter Lynch<\/span><\/strong><\/h2>\n
How to invest like an ace investor<\/span><\/h3>\n
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Book #4. Common Stocks and Uncommon Profit by Philip A. Fisher<\/span><\/strong><\/span><\/h2>\n
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Book #5. The Little Book that Beats the Market by Joel Greenblatt<\/span><\/strong><\/h2>\n
Return on Capital<\/span><\/h3>\n
Earning Yield<\/span><\/h3>\n
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Book #6. The Little Book of Value Investing by Christopher H. Browne<\/span><\/strong><\/h2>\n
Value Investors vs. Fancy Investors<\/span><\/h3>\n
Diversify Stock Portfolio<\/span><\/h3>\n
Buy stocks at low valuations<\/span><\/h3>\n
Invest in Global Market<\/span><\/h3>\n
How Currency Fluctuations boost return on investment<\/span><\/h3>\n