Compared to a lot of other investing books, the free writings of billionaire investors have been most useful. What better can you do than learn from those people that have done it right financially?
Reading through online publications can be kind of tedious, as only some pieces are timeless and others are specific, frequently written on timely events. Some of those timeless writings have been compiled into books.
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#1: The Most Important Thing, By Howard Marks
Howard Marks is the billionaire co-founder and co-chairman of Oaktree Capital. Marks and his team have generated market-beating returns for decades, mainly by value investing in distressed debt and controlling risks. He has written famous memos since 1990, which are compiled online here.
In addition, he has turned some of those memos into books, and we think The Most Important Thing is the best one. Warren Buffett asked him to write it.
Informed by a lifetime of experience and study, The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilizing passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Marks offers a volume that is part memoir, part creed, with a number of broad takeaways, expounding on such concepts as “second-level thinking,” the price/value relationship, patient opportunism, and defensive investing. Frankly assessing his own decisions and occasional missteps he provides lessons for critical thinking, risk assessment, and investment strategy.
Encouraging investors to be “contrarian,” Marks judges market cycles and achieves returns through aggressive yet measured action.
Marks often found himself in a client’s office saying, “the most important thing is to manage risk.” And then as the conversation would continue he would say, “the most important thing is knowing where we are in the cycle.”
He humorously kept finding himself saying, “the most important thing is…” because the truth is, there are so many important things to get right when investing. Each chapter in this book is one of those most important things, as a collection of separate lessons. It’s useful for investors in all asset classes; stocks, bonds, real estate, crypto, etc. The strategies are timeless and broadly applicable. It is accessible, short, qualitative rather than numbers-driven, and deeply insightful – therefore it fits almost everyone.
“This is that rarity, a useful book.”WARREN BUFFETT
#2: Big Debt Crises, by Ray Dalio
Ray Dalio co-founded the world’s largest hedge fund, Bridgewater Associates. Dalio and his teams publish research observationscan be found here.
His book Principles for Navigating Big Debt Crises is an insightful read for investors that want to protect themselves from or benefit from recessions and other financial crises.
A fundamental theme of Dalio is that most recessions and financial crises are driven by the debt cycle. The first 60 pages or so of his book serve as a highly-accessible summary of how debt crises tend to play out, based on statistics of dozens of instances from the past.
The remainder of the book drills down into detail on specific crises. Will a recession be inflationary or deflationary? What policies are likely to resolve it? Dalio shows the historical answers to those questions based on the type of crisis it is. There is a video which details his view of how debt cycles play out over and over again:
#3: The Little Book that Still Beats the Market, by Joel Greenblatt
Joel Greenblatt has been one of the best-performing value investors, and this simple book gives an accessible outline of his formula.
This later edition of the book updates it and adds the word “still” to the title to separate it from the original edition.
This short read is especially useful for stock pickers, The Little Book That Still Beats the Market.
#4: The Lessons of History, By Will & Ariel Durant
It’s not an investing book, but The Lessons of History is one of the most important books for long-term investors to read.
If condenses 5,000 years of human history into 100 pages of key lessons, including key chapters on long-term socio-economic cycles.
#5: StockDelver, By Lyn Alden
StockDelver from Lyn Alden will be of use to those who like investing in individual stocks.
It’s a PDF book that comes with a set of Excel spreadsheets for stock valuation, and thousands of investors find it useful in their endeavors.
Recommending a book to start with, it would be The Most Important Thing.