I started getting interested in the stock market back in 2000, when people were still making millions in tech stocks and the mania was close to its apex. I decided to open a brokerage account, and promptly lost $800. So I pulled my money out, and decided to learn what I was doing before I lost what little money I had. I’ve read a lot of books since then, learning about as many aspects of markets, investing, finance, and economics as I could. Here are the books that have had the biggest effect on me and that I have enjoyed the most. Let me know if you disagree or if you think there should be some added.
- Trader Vic
The Trader Vic books by Victor Sperandeo completely changed my way of thinking about investing and the markets. He describes his approach to trading from all angles, including fundamental, technical, and psychological. He gives a good breakdown of technical analysis, including the definition of a trend and determining when a trend begins and when it ends. His writings on fundamentals, including the market distortions created when interest rates are manipulated by a central banking instead of being determined by natural market forces, is actually a great primer for Austrian economics. It’s a little hard to get through, but once you begin to understand what he’s talking about, you’ll never look at what happens in this country the same way again. In the second book, he describes how call and put options can give you tremendous leverage without significantly increasing your risk, and I’ve been using some of these strategies in my own trading since reading this.
I cannot recommend these books enough.
- Reminiscences of a Stock Operator
This book is a true classic. I can’t even remember how many interviews I’ve read of successful traders that mention this book. Not only is it a great story following his ups and downs, but his descriptions of his trading strategies are particularly illuminating, especially the idea that markets will always follow the path of least resistance.
- Jim Rogers
I haven’t had the chance to read the book on China yet, but the other two are great reads on how an astute, former professional investor views what is happening in the world. Adventure Capitalism is the story of his trip driving around the world, and his thoughts on each place he visits from an investor’s point of view. Great stuff for someone who invests in international markets. In regards to our own country, he also describes the perils of fiat currency, and how actual inflation rates are much higher than what the government reports. His book on commodities called the great bull run that has been happening in commodities markets right as it was beginning. I inquired into his commodity fund after reading this book, but did not have the $10,000 minimum investment. I wish I had, because it’s gone up significantly since then.
- Creature from Jekyll Island
I loved a comment I read about this book: if you want to take the red pill when it comes to what is going on in this country, read this book. You’ll learn about the nefarious beginning of the Federal Reserve, how fractional reserve banking and fiat currency has always resulted in economic collapse and ruin throughout history without exception, how central banks benefit the financial elite, and how the system is rigged to privatize gains and socialize losses (sounds familiar, doesn’t it?). I’ll have a lot more to say about this book when I write up a full review in the near future. This book will blow your mind.
- Market Wizards
These books are also classics in the investing world. They provide a great way to gain insight into the minds of those who are truly successful in the investing world. What struck me after reading these books is that there are a multitude of ways to make money in the markets, as each of these investors has their own personal strategy, but the one common denominator among them all is discipline. It’s the one thing that they all mention as to why they’ve been so successful. Very insightful.
- When Genius Failed
Those who remember the meltdown of Long Term Capital Management in 1998, and even those who don’t, will be fascinated by this story. He describes how this group of truly brilliant traders and academics came together to create a financial juggernaut that was wildly successful. He gives great detail on their strategies and how they’re trading methodologies actually work, without getting too bogged down in arcane finance. This story shows once again how dangerous it is to put so much faith in computer models based on the unlikelihood of 100 year events when these market-swinging events actually happen in rapid succession. Most importantly, this book describes the precursor to the current financial crisis, and how dangerous and poorly understood these derivatives are, and how destructive they can be.
- FIASCO by Frank Partnoy
These books are the reason I get angry when people say that no one saw the current financial crisis coming. Frank Partnoy was talking about how dangerous derivates are and how poorly they are understood years ago. He does a good job of describing how these derivative contracts actually work, and why Wall Street was so successful in selling them. If you read these books, you’ll be miles ahead of everyone else when it comes to understanding how we got into this mess.
- Trend Following
Learn the story of the Turtles and how trends can be one of the most powerful investment strategies out there.
- Cramer
While I am reluctant to put Jim Cramer on this list because I would never recommend following his investment advice, I have to admit that I was entertained by this book. Unlike his recent Mad Money books, this book is the story of how he rose to run a large hedge fund. Living vicariously through his insane, violent blowups is actually kind of fun, and this book certainly explains how stressful being a hedge fund manager can be. I definitely wouldn’t recommend this for investment advice, but it is entertaining.
- Ayn Rand
OK, so this isn’t explicitly related to finance or investing, but Ayn Rand has had a much bigger effect on my thinking toward the markets than any book on this list. From her books, I’ve learned the importance of individual responsibility and creativity and the damage caused by self-sacrifice for the “greater good” and corrupt leaders with poorly defined beliefs and a reliance on pragmatism. Atlas Shrugged was especially world-changing. Behavior by people in the media and people in charge of the country, and people in general, that used to baffle me know makes sense. This can be difficult reading, but is well worth it. In my mind, she continues to prove herself true every day.
