My Favorite Books on Investing and Markets
I’ve read an ungodly amount of trashy trading and investing books in the last 10 years.
It seems that in today’s age of electronic trading, everyone wants to get on the magic of turning blinking lights on your iPhone into cash piled up neatly in your bank account.
If only it were that easy.
Combine this renewed interest in trading with social media and you the perfect storm of frauds and charlatans. All selling courses and books, with very few displaying real life profits to back it up.
But this article is about investing and macro economics, not daytrading.
I’m going to get into active trading in a followup article, but first it’s important that we lay out a strong foundation for thinking of the markets (Stocks, Real Estate, Commodity, Crypto etc.) before we figure out how to profit from them.
Here’s my framework for making money through investments:
- Learn all I can about a particular market
- Generate ‘Ideas’ about what might make money (based on my understandings of the market)
- Test those ideas (if good then we make money, if bad then we lose a little bit but learn a lot and reinforce our market knowledge)
If you repeat that cycle with every opportunity and industry you come across, it won’t be long before you have decent investment ideas all over the globe.
But if you’ll notice it all begins with #1 which is an understanding of what the hell is going on. It does NOT begin with a course on trading, or an email list that tells you what stocks to buy.
So how do we gain a broad understanding of finance and investing?
All of the following books are broadly applied to the stock market, but they are so good that the lessons in each can applied across the macro-economic spectrum.
These books teach you how to think not just what to invest in to make some cash.
Ok I’ll hop off the soap box now and give you my favorites.
Black Swan and Fooled By Randomness, Nassim Taleb
These are two classic texts that have gone mainstream since 2008. Taleb is a famous trader/mathematician that bet big on the housing collapse of 2008. He knows his stuff and is incredibly philosophical when it comes to the markets.
Because of this, he’s my first recommendation to start understanding Risk as it relates to your investments. Plus he’s a riot to read and a real practitioner of what he preaches.
Market Cycles, Howard Marks
If Nassim Taleb is legendary, Howard Marks is a God in the investment world. He’s run one of the most successful funds for a long time now and has a truly poetic way of expressing how the markets work.
His book obviously talks about stock market cycles, but it’s much more than just analyzing the ups and downs. He breaks down cycles by what the psychological makeup of the public/investors is currently.
This is a book about human nature as much as it is about stocks, and that should tell you something about Marks’ success. He’s a student of humanity and not just a high volume trader.
If you really want to understand what’s going with the stock market today, give his book a read. He also has a free mailing list where you can read his letters to investors.
Knowing where we are in a market cycle is the first step to making profitable investments. Give this a read.
Big Debt Crises, Ray Dalio
Ray Dalio is another investment legend who’s absolutely worth reading. Though in recent months he’s fallen out of favor (his funds took big hits in the COVID madness) but his research is world class (and largely free).
Dalio produces these epic long research papers on the history of what he calls “Debt Cycles” which are basically just studies of all the economies we have historical records of.
This book is much more dense, but if you’re ready to nerd out about market cycles after reading Howard Marks it’s an amazing resource.
You can get the PDF version for free i’m pretty sure, but it’s so dense that I much prefer the paper copies.
Crash Proof, Peter Schiff
What can I say about Peter Schiff? He is another guy who famously made it big betting on the housing collapse of 08. Well known for beating the drum endlessly for Gold (he owns gold companies) and trolling the Federal Reserve on twitter every 20 minutes.
Personally, I don’t care for Schiff that much anymore, but his book Crash Proof is the perfect primer for someone trying to get a better handle on their finances. He will leave you with a healthy distrust for the government, and forces you to consider a world where the US dollar isn’t king.
While I think that a lot of his writing is sensationalist (and more a sales pitch for his gold companies) there is a lot to be learned from him.
Give it a read and implement the ideas you like of his. Do not go running out and converting 100% of your savings to gold bars and bullets.
The Dao of Capital – Austrian Investing, Mark Spitznagel
Another great read from a seasoned winner in the markets. Spitznagel famously worked with Taleb during the 08 crash (are you seeing a pattern here?) and made a killing. He has continued on running a fund that basically only profits when all hell breaks loose (they made another killing this year).
His book is on risk, and on how to protect yourself from complete destruction financially. He goes into detail about the Austrian School of Economics, and uses real world examples of his trades/ideas to back up what he’s saying.
I hope you’re picking up on the theme of reading books written by proven and insanely successful investors. Spitznagel’s books rounds out a lot of the concepts introduced above, and gives you another look at how to approach risk in your investments.
Why Such a Focus on Risk and Doom?
If you skim the books above you’ll notice that the majority are focused on Risk and on playing good defense.
Great but how do you find investment ideas to buy and profit from?? Glad you asked.
In investing, it’s about 1000x more important that you don’t lose all your cash (go bust) than it is that you actually make money. The idea here is that chances are high (if you study and think) that you’ll pick a decent amount of winners, but they are even more likely that a single loser idea can completely bankrupt you.
So the game is to keep playing and investing while making certain that you never go broke on one big losing idea.
More on that next week.
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