Warren Buffet was asked by a young investor in the Berkshire Hathaway 2007 Annual Shareholder’s Meeting: “What should I do to become a great investor?”
“Read everything you can” — Warren Buffett
“Man-with-a-hammer syndrome: to the man with a hammer, every problem tends to look pretty much like a nail” — Charlie Munger (Warren Buffett’s partner at Berkshire Hathaway)
If you want to avoid Man-with-a-hammer syndrome then you need to have not only the hammer but various other tools to avoid seeing all problems like a nail.
In other words, if you can take big ideas from History, Physics, Psychology, Chemistry, Mathematics, Biology and other disciplines and incorporate all big ideas in your thought process then to solve any problem you have many tools and you will avoid Man-with-a-hammer syndrome.
Recommended readings by our portfolio manager
Reading books doesn’t have to be expensive. You can get most of the books from a decent library. You can also buy used books and sell them after reading to minimize your reading cost. For me, reading the 90% of all available finance related books in Fairfax library was fun and free both. You do get some great but some not so good books as well but if you can take even one good idea from one book, the time spent is worthwhile. I started reading on various topics to help me with investment process but you can use the big ideas from different discipline to help you with any decision making process.
To get started I am going to list the good reading links and books below with my comments. I have left out countless number of books to list only very good ones.
|No.||Reading Links||My Comments (Rohit Ranjan)|
|1||Shareholders letters by the greatest investor, Warren Buffet. In his letter, he tries to teach investors to view the stock as a business and shareholders as partial owner of the business.|
|2||THE PSYCHOLOGY OF HUMAN MISJUDGMENT, search it in Google — Munger’s speech at Harvard Law School (1995)||If you don’t find it interesting the first time, read other recommended books and come back later. You will enjoy more|
Some of the better books I have come across.
|No.||Suggested Books||Subject||My Comments (Rohit Ranjan)|
|1||Security Analysis – Benjamin Graham||Investment||Written by the ‘father of Value Investing’, and Warren Buffet’s university professor, mentor and employer, Benjamin Graham. It is as applicable today as it was in 1951. Won’t recommend reading if you don’t do security analysis.|
|2||The Intelligent Investor – Benjamin Graham||Investment||Warren Buffett writes in the preface: “I read the first edition of this book early in 1950 when I was 19. I thought then that it was by far the best book about investing ever written. I still think it is”.
In my opinion the Chapters 8 (on Mr. Market) & 20 (on Margin of Safety) are worth the price of the entire book. Anyone can read those two chapters.
|3||Common Stocks and Uncommon Profits – Philip A. Fisher||Investment||Buffett has often described his investment style as 85% Benjamin Graham, 15% Philip Fisher|
|4||One Up on Wall Street – Peter Lynch||Investment||Written by legendary Fidelity Magellan fund manager Peter Lynch. If you had invested $10,000 when Lynch became fund manager of the fund in 1977, your investment would have been worth $280,000 in 1990 when he left his position.
I read it 10 years ago. Brilliant and easy to read.
|5||Beating the Street – Peter Lynch||Investment||In this sequel to his best seller, One Up on Wall Street, Lynch takes the reader through how he has analyzed several industries, and also candidly discusses his investment mistakes. This really is an excellent account of how he achieved such a stunning track record|
|6||The Little Book That Beats the Market – Joel Greenblatt||Investment||well-written and easy to read. If you wish to introduce a friend, child or family member to the world of investing ; this is the ideal gift. This book was written for his own children in mind, so it is light and simple.|
|7||The Essays of Warren Buffett – Warren E. Buffett & Lawrence Cunningham||Investment||A MUST READ. A compilation of Buffett’s writings ( from his ‘Letters to Shareholders’)It doesn’t get better than this. Raw wisdom. I have read it 3 times and keep going back to this.|
|8||The Warren Buffett Way – Robert G. Hagstrom, JR.||Investment||Very well researched and written, it provides much insight into the man. Easy to read.|
|9||The Warren Buffett Portfolio – Robert G. Hagstrom, JR.||Investment||
Recommended by Buffett and Monger as one of the better books .
|10||Buffett: The Making of an American Capitalist – Roger Lowenstein||Investment||One of the better Buffett biographies. Superbly written, it provides depth of insight into Buffett’s character, but does not delve into his investment strategies. Highly recommended.|
|11||Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger||wordly wisdom||This is without a doubt one of my most valuable books in my library. I generally avoid buying books but my wife gifted me this book on my B’day, I was very happy to have a permanent copy. While it looks like a ‘coffee table’ book, it is much more. You can open to any page and just learn. It is filled with a biography of Munger’s life, his speeches over the past 20 years, and hundreds of quotes and testimonials.|
|12||When Genius Failed – Roger Lowenstein||History/Investment||Buffett refers to Long Term Capital Management saga often as an example of the irrelevance of IQ when it comes to successful investing. There is much to be learned from their failure.|
|13||The Wealth and Poverty of Nations: Why some are so rich and some are so poor – David Landes||Sociology/Economics||This book explores and attempts to explain why some cultures that possess certain advantages have never become world powers, and why others have become so prosperous. Thought-provoking.|
|14||Guns Germs and Steel- The Fates of Human Societies – Jared Diamond||Anthropology/Early Civilization||why the economic development in the world (from about 1500 to the present) has happened at different paces and with different degrees of success.|
|15||The Third Chimpanzee – Jared Diamond||Behavioral Sciences/ Evolution||A provocative book that attempts to show the reader that with 98% of human genes being identical to chimpanzees, that we are merely another more developed species of ape. The book explores the evolution of mankind from ape to what we are today.|
|16||A Short History of Nearly Everything – Bill Bryson||History||Have not read it yet. Recommended by Buffett at the 2004 Annual Berkshire Shareholders Meeting|
|17||Titan: The Life of John D. Rockefeller, Sr. – Ron Chernow||Biography||A biography of history’s first billionaire.|
|18||The Smartest Guys in the Room – Bethany McLean||History/Investment||The full story behind the Enron scandal and how it went to zero. This is one my favorite because I tried to do reverse engineering by reading their 10 years of financial statements and it becomes obvious that they were cooking the books.|
|19||Influence: The Psychology of Persuasion – Robert Cialdini||Psychology||This is one my favorite book in my library. Charlie Munger actually gave the author one Berkshire Hathaway share (worth today $120,000) as a show of appreciation. This is one of the most useful books that I have read. Makes you realize what suckers we really are and how easily we are manipulated. Best book on psychology I have read so far which is also practical.|
|20||Ice Age – John and Mary Gribbin||Climate/History||In my must read list.|
|21||How the Scots Invented the Modern World: The True Story of How Western Europe’s Poorest Nation Created Our World and Everything In It – Arthur Herman||History||very few people know that one million poor people with a lousy climate and no resources had such a large constructive influence on the world.|
|22||Deep Simplicity: Bringing Order to Chaos and Complexity – John Gribbin||Physics/Chaos Theory||I agree with Munger fully on this so I will simply quote him .
“Not everyone will like Deep Simplicity. It’s pretty hard to understand everything, but if you can’t understand it, you can always give it to a more intelligent friend.” – Charlie Munger, 2004 Wesco Annual Shareholders Meeting.
|23||The Selfish Gene – Richard Dawkins||Biological Sciences/ Evolution||Book give the insight about how selfish Gene influenced the evolution. Very good read.|
|24*||The Millionaire Next Door: The Surprising Secrets of America’s Wealthy – T. Stanley & W. Danko||Investment/ Personal Finance||Easy read. I highly recommend it if you are open and willing to look at yourself critically and change patterns of behavior.|
|25*||The Richest Man in Babylon – George S. Clason||Investment/ Personal Finance||A short and easy read, this best-selling classic offers timeless wisdom on how to generate and maintain wealth. Ideas are simple and common sense. Readers will say ‘obviously’ – and yet very few have the discipline to implement these.|
|26||The Accounting Game, Basic Accounting Fresh from the Lemonade Stand – Judith Orloff , Darrell Mullis||Accounting||If you want your kid to learn basic accounting then this is the best book I can recommend. This is a story of kid running a lemonade stand and learning accounting.|
|27||Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports – Thomas R. Ittelson||Accounting||very good book to make you understand how the numbers flows through income statement, balance sheet and cash flow statement.|
Benjamin Franklin: An American Life – Walter Isaacson
|Biography||This book captures much of the spirit of America’s founding. I feel this should be required reading for all American high school students but highly recommended for any foreigner who wonders about our energy, our resilience, our confidence and success.|
|28||Andrew Carnegie – Joseph Frazier Wall||Biography||An outstanding account of the life of Andrew Carnegie, one of the greatest philanthropists and capitalists ever. Long but brilliantly written and “must read” for anyone interested in early American industrial development.|
|29||Quality of Earnings: The Investor’s Guide to How Much Money a Company Is Really Making – Thornton L.; Sobel, Robert O’Glove||Accounting||Good pointers to analyze the differences in income reporting to the IRS vs. reporting to shareholders by businesses.|
|30||A short history of financial euphoria – Galbraith, John Kenneth||History/Finance||A humorous and thoughtful book. Auther traces the investor “herd” mentality from Tulipomania, which gripped Holland in the 1630s, through a variety of events and up through the 1987 stock market debacle. This book should be a compulsory reading for economists, especially those working on behavioural finance or econophysics. Being an antidote to illusory financial euphoria, the book is very good read for the general public as well.|
|31||Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger – Janet Lowe||Biography||Lowe has written an extremely interesting biography of Charles Munger, vice-chairman of Berkshire Hathaway.|
|32||The End of Wall Street – Roger Lowenstein||History/Finance||This book will take you the step by step understanding of what happened to us during the 2008 crises. It answered all the questions of what happened, how did it come to pass, who were the players and how they interacted with each other. It read like a thriller!|
|…||To be added later ….||I will add some more books in the list later.|
* If you only want to have a perspective on personal finance , I will suggest reading #24 and #25 first to get started.