warren buffett is an avid reader. read almost 500-600 pages every day! his annual letters to his shareholders always include a couple of book recommendations. he once told a group of mba students at columbia business school in 2000-
‘Read 500 pages like this every day. this is how knowledge works. accumulates, like compound interest. all of you can do it, but I guarantee you that not many of you will.”
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In 2021, Forbes named him the richest man in the world! one of the main contributors to this wealth is his passion for reading and learning. he rightly says… ‘the more you learn, the more you earn’.
according to forbes 2021, he is one of the richest men in the world! His passion for reading and learning certainly becomes a major contributing factor.
To help you get inside his brilliant mind, here are seven books Warren Buffett recommends. he claims that these are the books he read and from which he learned a lot about investing.
It’s time to add these best investment books to your pile of books to read.
1. intelligent investor by benjamin graham
originally published in 1949
See Also: Lorraine Heath – Book Series In Order
about the book:
It’s appropriate to start this list of recommendations with a book by Benjamin Graham. warren buffet considers this book to be the investing bible. when he was 19 when he first read graham’s book…he says, “i owe him a lot of what i know about investing.”
The Smart Investor is full of fundamental lessons one needs to learn to invest wisely. The purpose of this book is to form a guide to value investing for the layman to understand.
according to graham, investors should focus on analyzing a company’s financial reports. we must ignore outside noise and cheat fear. Analyzing the financial health of a company is important to achieving our investment goals. explains the emotional framework and analytical tools that are essential to financial success.
The book consists of many basic principles that explain the importance of investing for the long term. Although this book is over 70 years old, it is still very relevant.
lessons you will learn from this book:
- How can you reduce the chances of irreversible investment losses?
- How can you improve and maximize the chances of achieving sustainable gains?
- How can you control What is your impulsive behavior that prevents most investors from reaching their goals?
- Importance of value investing, margin of safety, and investing versus speculation.
- selection of stocks for defensive investors and entrepreneurs.
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- four extremely instructive case studies, stories and more.
- comparison of eight pairs of companies.
buffet’s comment on this book:
Buffett has praised the smart investor on several occasions. he mentioned it in his 2013 letter saying-
‘I learned most of the thoughts in this investment discussion from the book by ben, the intelligent investor, which i bought in 1949. my financial life changed with that purchase.
For me, the key points were made in what later editions labeled chapters 8 and 20. (The original 1949 edition numbered its chapters differently). These points guide my investment decisions today.
I can’t remember what I paid for that first copy of the smart inverter. Whatever the cost, it would underscore the truth of Ben’s adage: “Price is what you pay, value is what you get.” Of all the investments I made, buying Ben’s book was the best.
quote:
“Regardless of the techniques they use to pick stocks, successful investment professionals have two things in common. First, they are disciplined and consistent, refusing to change their approach even when it’s not in style. second, they think a lot about what they do and how to do it, but they pay very little attention to what the market is doing.”
2. safety analysis by benjamin graham and david dodd
originally published in 1934
See Also: Lorraine Heath – Book Series In Order
about the book:
Benjamin Graham is known as the father of value investing. This book lays out the founding principles of it.
Securities analysis teaches readers the fundamental steps necessary to evaluate an investment. The first part of this book focuses primarily on the role of intrinsic value in analysis. highlights how the intrinsic value of a company can be determined.
further explains how graham’s margin of safety principle can be used to make a profit. it teaches us how stocks can be bought when the market price is well below its original value. Following such strategies can help investors earn good returns. the book also discusses the origin of corporate finance and financial analysis.
lessons you will learn from this book:
- approach to value investing
- the concept of intrinsic value and how to benefit from it.
- involving quantitative and qualitative factors.
- balance sheet and income statement analysis.
- common stock dividend factor analysis.
- preferred stock selection technique for investment.
- various aspects of discrepancies in price and value of an investment.
buffet’s comment on this book:
buffett revealed that he has read this book at least four times! he once said that “security analysis provided a roadmap for investing that I have now been following for 57 years.”
quote:
“As a general rule, investors should spend most of their time on study security disclosures, and should spend considerable time on competitor reports.”
3. common stocks and uncommon gains by philip fisher
originally published in 1958
See Also: Lorraine Heath – Book Series In Order
about the book:
This book teaches investors how to analyze the quality of a business. Fisher says that sticking to financial statements is not enough. we also need to check the operation and management of a company. check the company’s ability to generate profits. emphasizes the concept of networking and gathering information through business contacts.
fisher recommends investing in companies that are geared for growth. especially those that are committed to research and development. he was famous for the depth of his research on the companies he would invest in. This book gives us an understanding of his investment philosophies.
lessons you will learn from this book:
- fisher shares his strategy for how to find a growth stock.
- several parameters to look for before buying stocks.
- ten points an investor should keep in mind mindful account of being a better investor.
- four dimensions of conservative investing (and how it helps you sleep well).
and much more.
buffet’s comment on this book:
‘i sought out phil fisher after reading about his common stock and windfall earnings…when i met him i was impressed by both the man and his ideas. in-depth knowledge of the business, obtained through the use of phil’s techniques… enables intelligent investment commitments.
I’m an avid reader of everything phil has to say, and I recommend him to you.”
quote:
‘never promote someone who hasn’t made some serious mistakes, because if you do, you are promoting someone who has never done anything’.
4. the little book of common sense investing by john c. bogle
originally published in 2007
See Also: Lorraine Heath – Book Series In Order
about the book:
This is a classic guide to learning about the stock market. Juan C. Bogle is the founder and CEO of Vanguard Group. In this book, he reveals his key to getting more out of investing in low-cost index funds.
narrates the simplest and most effective investment strategy. focuses primarily on how to build long-term wealth.
The book talks extensively about index funds and the magic of compounding. is a book on why long-term investing is a much better option than short-term speculation.
The latest edition of this book contains two new chapters to provide further guidance –
- on asset allocation
- on investing for retirement
lessons you will learn from this book:
- how to build a low-cost, diversified portfolio?
- how to focus on the real world and forget about the false advertising created in the market?
- understand stock returns generated by dividend yield, earnings growth, and change in market valuation.
- learn how to set rational expectations for stock returns?
- recognize that, in the long run, business reality exceeds market expectations.
- learn how to use the magic of compounding while minimizing unreasonable costs?
buffet’s comment on this book:
in the 2014 annual letter, buffet said:
“There are some investment managers, of course, who are very good, although in the short term, it is difficult to determine whether a great track record is due to luck or talent.
Most advisors, however, are much better at generating high fees than generating high returns. in truth, his main competence is the art of selling.
Instead of listening to their siren calls, investors big and small should read Jack Bogle’s little book on investing with common sense.
citations:
“Buying funds based solely on past performance is one of the stupidest things an investor can do.”
5. some lessons for investors and managers from warren buffett
originally published in 2019
See Also: Lorraine Heath – Book Series In Order
about the book:
This book is a must-read for investors looking to read about the timeless wisdom of the Oracle of Omaha. explains in a short and easy to read way what we can learn from it.
this is a collection of timeless wisdom where you will read about their philosophies. buffett explains how to think about various investment options. he will also read about his thoughts on the valuation and qualities of companies. buffett has always emphasized how he prefers to do business with people he trusts. the same is explored in great detail in this book.
lessons you will learn from this book:
For managers, this collection of essays specifically conveys what happens when you think more like an investor than a manager.
buffet’s comment on this book:
buffet wrote in the 2011 annual letter –
“i think you’ll also like a short book by peter bevelin that explains berkshire’s investment and operating principles. It sums up what Charlie and I have said over the years in annual reports and at annual meetings.”
6. Poor Charlie’s Almanac: The Wit and Wisdom of Charles T. munger
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Originally published in: 2005
See Also: Lorraine Heath – Book Series In Order
about the book:
this is buffett’s business partner: charlie munger’s biography. He is the long-time vice president of Berkshire Hathaway. Poor Charlie’s Almanac gathers his investment thoughts.
includes talks and speeches charlie gave on various occasions. the book focuses primarily on the 25 cognitive biases. she explained and discusses each of them in great detail. why we are so flawed psychologically, leading to errors in our decision.
if you enjoy buffett’s unique insights, you’ll definitely love this 550-page book of financial wisdom.
lessons you will learn from this book:
- how does financial behavior influence our every move?
- why are we so psychologically flawed and make investment mistakes in our decision?
- practical thinking on practical thinking.
- investment practices of leading charitable foundations.
- the great financial scandal of 2003.
and much more
buffet’s comment on this book:
in its 2010 letter to shareholders, buffet said humorously –
‘… Chinese edition of Poor Charlie’s Almanac, the ever-popular book about my partner. So what if you can’t read Chinese? just buy a copy and take it with you; it will make you look urbane and erudite.”
citations:
‘In all my life, I have not met wise people (about a wide subject area) who did not read all the time: none, zero. You’d be surprised how much Warren reads and how much I read. my children laugh at me. They think I’m a book with a pair of legs sticking out.”
What are the secrets of success? -one word answer: rational’
7. Entrepreneurial Adventures: Twelve Classic Tales from the World of Wall Street by John Brooks
originally published in 1969
See Also: Lorraine Heath – Book Series In Order
about the book:
bill gates said, “in terms of longevity, business ventures rank next to benjamin graham’s savvy investor.”
gates asked buffett in 1991 what his favorite business book was. buffett responded by sending his personal copy of business adventures.
The book consists of twelve classic tales from the world of Wall Street. most chapters focus on business strategies and management. but the first chapter, ‘fluctuations’, stands out for every investor.
speaks to the volatile nature of the world of finance. The chapter is packed with critical details about the staggering market crash of 1962. It provides hour-by-hour coverage of how a panic destroyed over $20 billion of stocks.
It took three days for the entire market to fully recover. when the situation was under control, investors lost most of their savings. shows how unpredictable the stock market is. it gives you a true picture of how our state of mind and behavior can destroy our wealth in a matter of days.
lessons you will learn from this book:
- an in-depth case study of the 1962 market crash.
- the irrational and unpredictable reason behind the crash.
- what the wall street office was like in those three long, dreadful days.
- another 11 in-depth case studies on business and management.
buffet’s comment on this book:
warren buffet sent his personal copy to bill gates. Gates still has the copy on his bookshelf and considers it one of his best reads.
citations:
‘in the stock market, however, as de la vega points out, news often has little value in the short term, it is the mood of investors that counts’.
‘it is foolish to think that you can withdraw from the exchange after having tasted the sweetness of honey’.
final note:
warren buffet once said –
I insist that a lot of time be spent, almost every day, just sitting down and thinking. that’s very rare in American business. I read and think. therefore, I read and think more and make fewer impulsive decisions than most people in business. I do it because I like this kind of life.’
these were some books that helped you to be a successful investor. each book and each piece of advice boils down to three main points –
- invest for the long term
- do your own homework before investing
- focus on the fundamentals and ignore outside noise
buffet learned these points very early in life. following them constantly helped him increase his investments. The best way to learn and become a disciplined investor is by having practical knowledge.
Investing is simple but not easy. Your first step is to learn the basics of investing. Gather and learn from all sources. Learn from the best in the field. Watch our show: Right Decisions with Dalal Street Oracles and learn from the market experts.
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