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It pays to learn from the best, especially when it comes to investing.
For retail investors, it seems that much of the attention is on ETFs (exchange-traded funds) and index mutual funds. The costs are minimal and there is lots of liquidity. Besides, it’s extremely difficult to beat the markets (just look at how many professional investors fail to do so!) But with ETFs, you will likely not get a home run. Consider the following: If you invested $1,000 in Amazon.com when the company came public in 1997, your shares would be worth over $2 million.
So how can you be a better investor? Here are some excellent books that can help:
Mastering the Market Cycle by Howard Marks
Howard Marks, cofounder of Oaktree Capital Management, is one of the world’s best investors, with a net worth of $2.1 billion. Oh, and he’s a pretty gifted writer, too. In Mastering the Market Cycle, Marks focuses on how investors need to have an understanding of the inevitable cycles of the markets, which often go to extremes. While he notes that there is no formula for picking tops and bottoms, there are still risk factors to watch out for to better position your portfolio.
Big Mistakes by Michael Batnick
Investors like Warren Buffett, Stanley Druckenmiller, John Paulson and Bill Ackman have made big-time blunders, but they are still fabulously wealthy. If anything, their willingness to make bold decisions and learn from their mistakes have been critical for their success. This what Big Mistakes is all about. But it’s not just a rundown of how trades went horribly wrong. There are also insightful takeaways that can benefit your own investing.
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Predicting the Markets by Edward Yardeni
One way to invest is to look at megatrends. Often these are about technology transformations, such as the internet, cloud computing and social networking. To help analyze trends, Edward Yardeni’s Predicting the Markets is a great resource. Keep in mind that—during the past four decades—he has a solid track record of anticipating waves. Just some include globalization and disinflation. He also has a knack for predicting bull-bear turns in the markets.
Big Money Thinks Small by Joel Tillinghast
Joel Tillinghast started his investment career at Fidelity in 1986 and then a few years after, became the manager of the firm’s Low-Priced Stock Fund. Legendary investor Peter Lynch was his mentor (he also wrote the classic One Up On Wall Street). In his book, Big Money Thinks Small, Tillinghast details his investment approach, which involves finding undervalued stocks and holding them for the long haul. He also backs this up with many fascinating examples from his own rich investing history.
Delivering Alpha by Hilda Ochoa-Brillembourg
“Alpha” is the fancy way of saying that an investor has consistently beat the market—after adjusting for risk. It’s something that is very rare. So in Hilda Ochoa-Brillembourg’s Delivering Alpha, she shows how she has been able to achieve this feat since founding Strategic Investment Group in 1987. Even though the book is somewhat technical, it still does a good job of clearly laying out strategies for putting together solid asset allocations for portfolios.
Financial Shenanigans by Howard M. Schilit
Reading financial statements can be boring, tedious and even confusing. But this is a critical skill for investors.To make things easier, you should check out Financial Shenanigans. As a sign of its success, the book is in its fourth edition. Then again, it contains many case studies–like those of Enron, WorldCom, Tyco and Lehman Brothers–about detecting misleading accounting, gimmicks, deteriorating fundamentals and even fraud.
