I cannot find a good new investing book. It’s driving me nuts. Maybe you are in the same boat? If so, here are several “under-the-radar” books from my Evernote archives. If you know of more, leave suggestions in the comments. If you want to receive suggestions like this every month, sign up for the book club over here.
Rational Expectations: Asset Allocation for Investing Adults (Investing for Adults Book 4) by William Bernstein
I really like all of William Bernstein’s books. This is a recent favorite, which is a short and readable e-book. Here are some fun passages:
Oh, yes, and one more thing. Make sure, absolutely sure, that you have enough riskless assets to tide you over during the bad times, when you are the most likely to see your income fall or even lose your job. Preferably, you should have yet more than this, so as to take advantage of that high exchange rate when it shows up, as it inevitably does. Even more simply: you must have patience, cash, and courage—and in that order. All else, as Hillel said, is commentary.
This is no small point: how much liquidity you have when blood runs in the streets is likely the most important determinant of how successful you’ll be in the long run, since this is the time you’re most likely to lose your job, need cash to purchase stocks on the cheap, or buy the corner lot you covet from your impecunious neighbor.
This likely goes double for “tilted portfolios,” the term used for small-cap- and value-oriented stocks. I’ve already alluded to how much of a fiction some of the time series in tables 1-1 and 1-2 are. Before about 1980 or so, a diversified list of small and value stocks was nearly impossible to assemble. For example, in the late 1930s, a young John Templeton decided that small stocks were a bargain and put together a portfolio consisting of the 100 companies selling on the New York and American stock exchanges for less than a dollar per share (market cap data, in those days, being hard to come by). He was able to do so only because his old employer, the firm of Fenner and Beane (a predecessor of Merrill Lynch), owed him some favors. Templeton made out, of course
The History of Money by Jack Weatherford
Not an investing book in the strictest sense, but a very fun and engaging history of man’s most important invention—as Gertrude Stein said, “The thing that differentiates man from animals is money.” It is cultural life-blood…”and it is from the Latin word currere, meaning “to run” or “to flow,” that the modern word currency is derived, along with other, related words such as current and courier.”
As Weatherford puts it,
Humans have found many ways to bring order to the phenomenological flow of existence, and money is one of the most important. Money is strictly a human invention in that it is itself a metaphor; it stands for something else. It allows humans to structure life in incredibly complex ways that were not available to them before the invention of money. This metaphorical quality gives it a focal role in the organization of meaning in life. Money represents an infinitely expandable way of structuring value and social relationships—personal, political, and religious as well as commercial and economic.
I highlighted more than 100 passages from this book.
The Tao Jones Averages: A Guide to Whole-Brained Investing by Bennett W. Goodspeed
Written decades ago, this was a fun read. Kind of like investing escapism. Some quick hits:
We are at war between consciousness and nature, between the desire for permanence and the fact of flux. It is ourself against ourselves. —ALAN WATTS, The Wisdom of Insecurity
Investing, however, remained more or less an art until 1963, when Donaldson, Lufkin, and Jenrette published the first “scientific” research report.
The World’s Smartest Man finds himself together with the president of the United States, a priest, and a hippie in a plane doomed to crash. On board are only three parachutes, which prompts the president to take one immediately and jump, with the declaration that he owes it to the American people to survive. The World’s Smartest Man next steps forth, claims that his life is an irreplaceable asset to humanity, and exits. The priest looks at the hippie and says: “I have lived my life and now it is in God’s hands; you take the last parachute.” The hippie replies: “No sweat, Padre, we’re both safe; the World’s Smartest Man jumped out with my knapsack!” Judging from the reactions I’ve received to this story, I’d say that people seem to find it entirely plausible that the “world’s smartest man” could be so dumb. Such a paradox is not only curious, but may have many implications for stock market investors. Don’t we all know people who are intellectually brilliant, but who lack common sense?
Don’t Count on It!: Reflections on Investment Illusions, Capitalism, “Mutual” Funds, Indexing, Entrepreneurship, Idealism, and Heroes by John C. Bogle
You may have read Bogle’s “little book,” but this is much better. This book, more than any other, made me realize the importance of what Bogle calls “the tyranny of compounding costs.” I obviously disagree with him that indexing is the best investing solution, but I agree that cost is one of the few “knowns” in investing, and managing them lower is one of the best way to produce superior results. I don’t talk much about costs (fees, trading, taxes) on this site because they are boring topics. But lower is obviously better. Great book from the founder of one of the most impressive investment companies in the world.
Expected Returns: An Investor’s Guide to Harvesting Market Rewards by Antti Ilmanen
A very good academic survey of market anomalies.
One study sorts firms on their 5-year growth rates and finds that ending valuations (P/B) are clearly higher for high-growth firms but beginning valuations display, if anything, the opposite pattern. Valuations appear to respond to the realized growth rate instead of anticipating it. Another study finds that the market is able to identify firms with a future growth edge but it overprices this advantage by a factor of 2.
More More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded) (Columbia Business School Publishing) by Michael J. Mauboussin
I am pushing the limits of under-the-radar here because many of you will no doubt have read a lot of Mauboussin’s writing. This was my favorite of his books. It will make you want to go out and investigate the market in new ways.
MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins