George Jerome Waldo Goodman was an author best known by his pseudonym Adam Smith.
When asked about him, Warren Buffett said:
“Jerry, especially in The Money Game, was incredibly insightful, and he knew how to make the prose sing as well. He knew how to put his finger on things that nobody had identified before. Jerry stuck to the facts, but he made them a helluva lot more interesting. He was a great writer.”
The book was first published in 1968 and is considered way ahead of its time. This is one of the lesser known books on investing. Personally I picked up this book because Paul Samuelson called it a modern classic. And I must say he was right. The book has a different approach when compared to other books on investing. It focuses on the psychology behind investing. I have heard Warren Buffet say again and again that Investing is simple but not easy. To be honest I never understood that before reading this book.
“If you are not automatically applying a mechanical formula, then you are operating in this area of intuition, and if you are going to operate with intuition or judgment then it follows that the first thing you have to know is yourself. You are face it a bunch of emotions, prejudices, and twitches, and this is all very well as long as you know it. A series of market decisions does add up, believe it or not, to a kind of personality portrait. It is, in one small way, a method of finding out who you are, but it can be very expensive. That is one of the cryptograms which are my own, and this is the first Irregular Rule: If you dont know who you are, this is an expensive place to find out.”
Honestly no investing books list would be complete without this book.
Considered as the best book on investing
The book was originally published in 1949 and because of this, you may find something difficult to understand. For this I would suggest reading Jason Zweig’s commentary after each chapter to get the present day context. Most of the times, it will help you to understand the original content much better.
The book begins with a preface from Warren Buffett.
And ends with this line from Benjamin Graham: To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.
Graham in every right is the father of value investing. An according to him.
“The real money in investing will have to be made as most of it has been in the past not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.”
Disclaimer: This book is not a direct investment guide, there is a reason it is called an almanac and not an autobiography.
I had known about this book for a long time but was too lazy to read it. It was Drew Houston, the co-founder of Dropbox who kindled my interest in this book. So I picked it up and started reading.
Warren Buffett said that Charlie Munger had moved him from buying fair companies at a wonderful price to buying wonderful companies at a fair price.
This book probably provides you the greatest insight you can have on the thought process of Warren Buffett and Charlie Munger. I can sum up the book in one sentence, and that is Be wise, don’t fool yourself, and make the right decisions. But I would recommend reading the whole book.
Now comes one of my personal favorites. Before we proceed, let me tell you that the book is a bit specific to Peter Lynch’s personal investing style. But that doesn’t stop it from being helpful to new investors.
What I like about this book is its simplicity.
There is a preconceived notion in the minds of people that an average investor cannot compete against institutional investor.
Lynch rejects this assumption, and says that the average person actually has an advantage, as it is him who is in constant touch with the everyday representation of a stock’s products.
The example he has given to support this is when Lynch took a large long position in the clothing company Gap after his wife and all her friends fell in love with it. And the result was him making a good fortune.
The book can be summed up in three points:
1. Invest Fundamentally
2. Know what you own and why you own it. Invest in what you know and not in what’s hot.
3. Don’t believe the professionals
Now you can either buy this book or read these letters online on the Berkshire Hathaway site.
This is actually not a book but a collection of all the annual letters written by Warren Buffett to Berkshire Hathaway share holders.
Note: the book has only Letters till 2014. For letters after 2014 you have to visit the Berkshire Hathaway website.
The best practice I would suggest is to read one letter a day.
Warren Buffett himself has not written any book. These letters are all that we get from him.
Also read: Biggest Mistakes of Warren Buffett
What makes them great is that the letters start from 1965 and you can clearly see Warren Buffett’s thought process while he was building Berkshire.
In a 2010 interview with Becky Quick of CNBC, Warren Buffett said the dumbest stock he ever bought was Berkshire Hathaway.
Its quite interesting to see how he turned his mistake of buying Berkshire Hathaway into his biggest success.
These letters require repetitive reading and constant thinking. You may agree or disagree on certain things but the most important thing is that you have to understand what Mr.Buffett is trying to say.
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