PUBLISHED ON SEP. 21, 2019 | 19 MIN READ
Warren Buffett, known as one of the greatest investors of all time started his investment partnership with only $100 in 1956. Today, that investment has grown to 83 billion dollars. In 1965, Buffett used a holding company (Berkshire Hathaway Company) to control and manage his investments. The success of Buffett relies on his evaluation of the business that he plans on investing in. Buffet studies the business, not the market or the economy.
Although there can only be one Warren Buffett and its unlikely that the average investor will see success like him, however, there are many reasons why everyone needs to become educated about investing. For instance, many employers have stopped funding pensions and switched to 401(k) plans, and many have stopped altogether in funding for an employee’s retirement.
In this article we will cover the following topics;
What is Investment Strategy?
An investment strategy is a set of procedures, rules, guides, risk tolerance, and future needs of capital that is designed in an investor’s investment portfolio. Investors have different objectives, skills, tactics, and goals of where they want their investment portfolio to grow.
There are many types of investments, ranging from real estate state to stocks to buying businesses. The key principle in building your own investment strategy is to identify the direction you want to take your investment portfolio, what are your risk, identify your future objectives, and even understand your current knowledge-base and skills. Once you identify where you stand currently and identify your future goals or objective, you can now start to build additional skills and knowledge that is required to reduce risk and even implement greater tactics to increase a larger return on those investments. The list of the best books on investment strategy will help you to develop an investment strategy and identify unknown areas.
What are the Best Books on Investment Strategy?
This list of the best books on investment strategy does not attempt to compile every book that has been written on the investment strategy. Instead, the author attempts to highlight a well-rounded list of the subject matter. The best books on investment strategy are only valuable to the reader and the student of investment strategy if the work is actually done. Books collecting on shelves may appear satisfying to the psyche of the purchaser of those books but become of little value to the mind when no actionable reading or studying is committed. Therefore, the author recommends studying books in groups.
The Best Books on Investment Strategy
1 – The Warren Buffett Way | By Robert Hagstrom
In the book The Warren Buffett Way: Investment Strategies of the World, author Robert Hagstrom explores the secrets of Warren Buffett’s success, discussing how Buffett became the wealthiest man in the world and the most successful investor the world has ever seen. Hagstrom discusses Buffett’s early years and the influences of other investors and professionals in finance had on him. Financial analysts like Benjamin Graham and investment counselors like Philip Fisher. Hagstrom identifies Buffett’s key principles of success in this book and he goes into detail describing how they work. Buffett’s success relies heavily on four key steps in his
investments: Don’t worry about the stock market; don’t think about the economy; focus on buying the business and not the stock and manage an investment portfolio of businesses. Hagstrom’s book has an extensive amount of information on Buffett’s investment and maybe too much detail in understanding Buffett’s investment principles. Nevertheless, investment strategies begin with understanding what and how Buffett became one of the wealthiest men in the world through investments.
Quotes from the book;
“Successful investing involves the purchase of stocks when the market price of those stocks is at a significant discount to the underlying business value.”
“Because emotions are stronger than reason, fear and greed move stock prices above and below a company’s intrinsic value.”
“An investment operation is one which, upon thorough analysis, promises the safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”
“The first lesson of economic goodwill is that companies that generate above-average returns on capital are worth considerably more than the sum of their identifiable assets.”
2 – Unconventional Success | David Swensen
David Swensen in Unconventional Success: A Fundamental Approach to Personal Investment advocates creating a well-balanced portfolio and highly recommended regular rebalancing. Swensen who is an experienced manager of Yale University advocates for investing in low-cost, fair, nonprofit index funds. His advice and recommendations come from a rigorous analysis of the returns earned by other investment media, including mutual funds.
Some of the things you’ll learn in this book include; asset allocation is key to earning a profit; why mutual funds take advantage of investors with high fees and do not perform well; why he believes the best investment is nonprofit index funds that track the major stock market; and even how to select stocks carefully and consider taxes when buying and selling.
Quotes from the book;
“Effective investors combine science and art in constructing investment portfolios likely to satisfy long-term aspirations.”
“Investors [should] engage not-for-profit, fund management companies to create broadly based, diversified, passively-managed portfolios.”
“The mutual-fund industry’s systematic exploitation of individual investors requires government action.”
“Long odds face the investor who hopes to beat the market.”
3 – Capital | By Charles Ellis
This book is about and an organization that is extraordinary. In Capital: The Story of Long-Term Investment Excellence, author Charles Ellis explores the investment firm The Capital Group in chronological order and sketches its developments and evolution. Most investment firms concentrate on the short-term. The Capital Group puts away egotism and embraces the long-term. The Capital Group has “multiple counselor” systems that assign each investment manager to a component of a large fund, but it is designed in such a way where performance is measured, but no one investment manager can take full responsibility or credit for the success or failure of the fund.
A few concepts that you will learn in this book include; that structure determines strategy for the long-term; The Capital Group is a rare organization that beats market indices on a consistent bases; investment managers must be active to make indexing successful; The Capital Group uses a “multiple counselor” investment management system; The Capital Group is very conservative, but it was one of the first firms to integrate into emerging and international markets.
4 – What Works on Wall Street | By James O’Shaughnessy
Investors get constantly frustrated by their inability to understand and predict the market. In the book What Works on Wall Street: A Guide to the Best-Performing Investment Strategies written by James O’Shaughnessy who takes a different approach when it comes to investment strategies. O’Shaughnessy analyzes stock returns over a period of 45-years and determined that the investment in companies on traditional value, e.g. PE ratios, price-to-book ratios, and price-to-sales ratios will beat the market. Although this book missed the greater part of the Internet and e-commerce boom, nevertheless, the concepts are timeless.
A few key concepts in this book include; to determine if an investment strategy is profitable, it will take at least 25 years; you will learn that passive investing (index funds) consistently beats active investing (stock picking); you’ll learn that the stock market is not random and it will reward and punish; to decrease risk, choose a few strategies; and even growth-measure strategies are riskier over those on value measures.
Quotes from the book;
“No one wants to buy Union Carbide after Bhopal or Exxon after the Valdez oil spill, yet it is precisely these times that offer the best buys.”
“Over the long term, the market rewards stocks with low price-to-book ratios and punished those with high ones.”
“While we may understand what we should do, we usually are overwhelmed by our nature, allowing the intensely emotional present to overpower our better judgment.”
“The price of a stock is still determined by people. And as long as people let fear, greed, hope, and ignorance cloud their judgment, they will continue to misprice stocks and provide opportunities to those who rigorously use simple, time-tested strategies to pick stocks.”
5 – The Big Investment Lie | By Michael Edesess
In The Big Investment Lie: What Your Financial Advisor Doesn’t Want You to Know, written by Michael Edesess who discusses how he founded a financial business and occasionally sat in listening in silent with salespeople who lied to their clients. This book is a hard-hitting on professional investment advice. The book is divided into three sections; how much advisors receive from investors; how little returns investors receive and the techniques salespeople use on investors. To those who are from Wall Street what Edesess says will come to no surprise but will help the average investor.
In this book you can expect to learn; why brokers own yachts and their clients don’t; an investment management business is a con job designed and structured to separate money from investors; the market moves constantly and randomly and past performance is no guarantee of success; techniques that salespeople use are designed to manipulate investors, and even conservative investing is the only strategy to make long-term profits from the stock market.
Quotes from the book;
“If you run enough tests of a random phenomenon, you will eventually get – at random – the result that you want.”
“The hedge fund phenomenon is a patented medicine remedy worse than the disease it’s sold to cure – namely, the unpredictable ups and downs of equity mutual funds.”
“Investors are alarmingly prone to self-delusion, and most investment advisors and managers are only too happy to take advantage of that fact.”
“What do the former Soviet Union and active investment managers have in common? Both believe prices can be determined independently of the market.”
6 – Investment Philosophies | By Aswath Damodaran
If you grasp the knowledge in this book your financial security will increase. In the book Investment Philosophies: Successful Investment Strategies and the Greatest Investors Who Made Them Work, written by Aswath Damodaran discusses the investing philosophies of why they succeed and how. The book is backed up with many studies, detailed graphics, and even a website. If you know anything about Damodaran’s work, you will know that it is well-researched, dense, and detailed. It is highly recommended that all investors read the index investing chapter and final summary.
In this book you’ll learn; active investors rarely succeed; how to keep your taxes low; keep costs down by avoiding trades that are not necessary; if your strategy doesn’t work, change course; learn to understand and know your “weaknesses and strengths” as an investor; learn Warren Buffett’s methods, but don’t try to beat him; if you can’t be an active investor, focus on indexing as a passive investor; and even learn not to allow stubbornness get in the way of success.
Quotes from the book;
“The key to successful investing might lie not in knowing what makes Peter Lynch successful, but in finding out what makes you click.”
“Even Warren Buffett would have difficulty replicating his success in today’s market, where information on companies is widely available and dozens of money managers claim to be looking for bargains in the stock market.”
“In recent years, Buffett has adopted a more activist style and has succeeded with it. To succeed with this style as an investor, though, you would need substantial resources and the credibility that comes with investment success.”
“One of the more frustrating aspects of passive contrarian investing is that you, as an investor, do not control your destiny. Thus, you could invest in a poorly managed company, expecting management to change, but it might never happen, leaving you with an investment that wilts over time.”
7 – Investment Titans | By Jonathan Burton
In Investment Titans: Investment Insights from the Minds that Move Wall Street, written by Jonathan Burton who relays the advice of top investors, Harry Markowitz, William Sharpe, Paul Samuelson, Peter Bernstein, Jeremy Siegel, Gary Brinston, John C. Bogle, Richard Thaler, and Joseph Lakonishok. Burton concentrates on different concepts of investing including, risk tolerance, stock market risk, and reward, international investor strategies, investor psychology and value versus growth investing. Burton summaries and concludes a common trait among the investors – investing now and continue investing, diversifying. This book is very impactful that aims at different investment situations for different types of investors.
A few things you will learn in this book include; how you tolerate risk determines how you will invest; investor Harry Markowitz created his portfolio based on the “Modern Portfolio Theory”; low-cost index funds is recommended by John C. Bogle; long-term investing by Paul Samuelson’s “Time Diversification Theory”; and even how investors psychology dominates the market.
Quotes from the book;
“Josef Lakonishok, a finance professor at the University of Illinois and a respected institutional money manager, is a staunch supporter of value investing.”
“Investors need to make a realistic and honest assessment of their risk tolerance, for portfolio risk is one of the few factors within their control. Portfolio return, unfortunately, is not.”
“Risk doesn’t have to control you; the goal is to control risk. When approaching an investment decision, be realistic about what the market can give you in exchange for the risk you take.”
8 – The New Investment Superstars | By Lois Peltz
The New Investment Superstars: 13 Great Investors and Their Strategies for Superior Returns is recommended for Wall Street players and those who are interested in investment strategy. Author Lois Peltz discusses the keys to Wall Street’s inner circle. Her insights into how it works, who runs the show, and how insiders and outsiders talk the game. She gives the insights of Julian Robertson Jr., George Soros, and Michael Steinhardt. Details how George Soros speculated in his way to a $2 billion gain all in a day. These in-depth profiles of these superstars include Brian Start, Lee Ainslie, Paul Singer, Leon Cooperman, Raj Rajaratnam, Ken Griffin, Daniel Och, John Henry, Bruce Kovner, and Mark Kingdon. These manage built huge fortunes.
A few concepts in this book include; superstar managers evaluate opportunities through investment committees; managers diversity by funding other investment managers to invest; the sheer size of a fund is a liability; new managers employ decision making through team-oriented.
Quotes from the book;
“As a fund becomes very large, it also gets so closely watched on Wall Street that it hurts; its footprint makes it too visible in the market. Other investors watch and copy.”
“Some analytical studies show that many hedge funds generate their best performance in the early years when there are fewer assets under management and the fund is more nimble.”
“Most of the managers seemed to lead balanced lives and talked passionately about some outside interest. Sports was a common theme. The challenge of winning and/or the mastering of a technique was exhibited in what managers did in their free time.”
“Hedge funds are not designed to outperform the stock market in a roaring bull market but rather to shine in flat, negative, choppy markets.”
9 – The Smartest Investment Book You’ll Ever Read | By Daniel Solin
This book is primed for beginners and unsophisticated investors. The Smartest Investment Book You’ll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals demonstrates why active stock trading may be good for your financial broker but bad for you and your investments. Although Solin’s method is not a new concept, nevertheless, it is simple to grasp. Solin advocates setting up a low-cost account with a strong and solid investment company, allocate those assets in a diversification portfolio of bond and stock indexes that represent the market at large, and regularly rebalance your portfolio to line it back up to your desired asset allocation. Solin’s writing style avoids much of the financial theory, sometimes he can be energetic and entertaining.
A few key concepts to look forward to including; index funds yield and an average of all the bonds and stocks in a broad index; rebalancing your portfolio takes 45 minutes every six months; hyperactive investing benefits your financial managers more than you.
Quotes from the book;
“Most investors should not invest in a hedge fund. For those who do, the investment should be limited to a very small percentage of their portfolio. Hyperactive brokers and advisors love the. The commissions are great.”
“Investors should own the entire market. By ‘the entire market,’ I mean a broadly diversified portfolio of investments in domestics and international markets.”
“Only 46% of the actively managed funds beat the index during the first five-year period, and only a pathetic 8% beat the index during the second five-year period.”
“There is little independent…scientifically valid evidence that anyone can successfully engage in either market timing or stock picking consistently over the long term…All the evidence concludes that the opposite is true.”
10 – Searching for Alpha | By Ben Warwick
Author Ben Warwick turns technical, anecdotal and analytical in his investment guide Searching for Alpha: The Quest for Exceptional Investment Performance. In this book, Warwick takes you on a tour of modern-day investment theory. This book raises serious questions and attempts to answer them in a completed format. And if the question was not explained entirely, Warwick at least directs you towards a path of financial enlightenment. These illuminated trips into the worlds wildcatter, Beethoven, Napoleon, and Dom Perignon are abstruse and conceptual.
Some of the few concepts in this book includes; securities are risky as well as being in the market; the stock market will always outperform the mutual fund industry; learn to establish accurate benchmarks to measure investment performance; rational theories cannot be accurately modeled by the market; there is a large difference between stock investing and investing in the market.
Quotes from the book;
“An alpha-generating strategy that is not dependent on forecast accuracy could present a desirable alternative to more traditional approaches.”
“When futures and cash markets get askew of one another, (arbitrageurs) buy the low price and sell the high price simultaneously, thus locking in a profit when the two prices converge.”
“Research has shown that losing one dollar makes the average investor feel twice as bad as winning one dollar makes them feel good. As a result, investors are much more likely to hold on to sinking stocks and sell stocks that are appreciating in value.”
“Investment is art. Science merely helps in the mixture of the paint, not in its application to the canvas.”
11 – The Intelligent Investor | By Benjamin Graham
A book that must be on every investor’s bookshelf, The Intelligent Investor: The Classic Text on Value Investing is the principles that are laid out by author Benjamin Graham. These precepts and guides are so great that the best investors like Warren Buffett and John Bogle use them for their success. Graham’s book was first published in 1949, which shows signs of age in its discussions, such as interest rates, savings bonds, and other time-sensitive topics. Nevertheless, the fundamentals and counsel of Graham’s concepts and principles are timeless to all investors.
Some of the key concepts you’ll learn in this book are; that investors fall into two categories, the defensive and the enterprising; you’ll learn that speculation is not investing; to become successful, a enterprise investor must treat their investment as any other business they are in; there is no evidence that supports that market timing and market forecasting even work; diversification and the concept of margin of safety can protect portfolio investing.
Quotes from the book;
“It is amazing to see how many capable businessmen try to operate in Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings.”
“Some of these issues may prove excellent buys – a few years later when nobody wants them and they can be had at a small fraction of their true worth.”
“The intelligent investor (needs) an ability to resist the blandishments of salesmen offering new common-stock issues during bull markets.”
“Good management produces a good average market price, and bad management produces bad market prices.”
12 – One Up on Wall Street | By Peter Lynch and John Rothchild
This book, One Up on Wall Street: How to Use What You Already Know to Make Money in the Market is a classic for personal investment. Much of the content is pre-bubble 1989 but offers haunting warnings about inflated price-to-earnings ratios on stocks. The authors give warnings to beginning investors.
In this book, you’ll learn; never ever invest in a stock because someone tells you it will be the next Microsoft; before buying anything you need to know what type of investor you are; companies fall into six categories, so categorize your investment decisions; don’t invest in stocks, invest in companies; the best way to find good stock is to study the companies.
Quotes from the book;
“The basic story remains simple and never-ending. Stocks aren’t lottery tickets. There’s a company attached to every share.”
“It’s impossible to distinguish cod from shrimp when your mutual find has lost the equivalent of the GNP of a small, seagoing nation.”
“This book was written to offer encouragement and basic information to the individual investor.”
13 – Rich Dad Poor Dad | By Robert Kiyosaki
Robert Kiyosaki’s Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class do not, is much more than an investment strategy book on investing. It is a book on personal finance but has practical and fundamental investment principles that when implemented may save you a lifetime of trouble. Kiyosaki’s book is a best selling book the presents financial literacy principles as he illustrates through having two dads; a rich dad and a poor dad. Both dads taught him life concepts and principles, including character and experience. However, both dads had different perspectives on what money, finance, investing, and assets are. This book teaches necessary and basic instructions on how differently the poor and rich think.
Some of the concepts you’ll learn in this book include; money is a tool, no matter how much money you have, you can always learn to use what you have; learn to buy assets, stop buying liabilities; learn how to make money work for you instead of working for money; understanding the operating principles, e.g. difference between liability and asset, building your financial intelligence, seek jobs not for money but to expand your knowledge of how to make money work for you.
Quotes from the book;
“In school, we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk.”
“You’re only poor if you give up. The most important thing is that you did something. Most people only talk and dream of getting rich. You’ve done something.”
“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
Final Thoughts on the Best Books on Investment Strategy
The best books on investment strategy is a list that is compiled on the author’s opinion. The list is compiled with much thought, research, and study. However, regardless of how many books a list makes it is useless until the reader becomes the student of the topic. The author thought hard on constructing the list to benefit a broad by in-depth compilation of investment strategy. Therefore, happy reading, studying and learning all about the best books on investment strategy.