Advice that stands test of time

Investors have more access to information than ever but they still return to classic books for inspiration

Warren Buffett has referred to his best ever investment –  a book, one that chang
ed forever his investment outlook.
Photograph: Nati Harnik/AP Photo

Warren Buffett has referred to his best ever investment – a book, one that chang ed forever his investment outlook. Photograph: Nati Harnik/AP Photo

Tue, Jun 3, 2014, 01:10

Investors and traders have access to more information than ever before, but classic books continue to inspire some of the world’s top money managers.

Warren Buffett recently referred to his best ever investment, but it wasn’t a stake in Coca-Cola or Goldman Sachs or any other company – it was a book, one that changed forever his investment outlook.

Investors have never had as much access to information as they do in today’s internet age, but certain classic books – some of which, including Buffett’s favourite, are many decades old – continue to inspire investors and traders alike.

Market Wizards

Anyone with an interest in markets will enjoy Jack Schwager’s Market Wizards, a hugely entertaining book of trader interviews.

Schwager has written many follow-ups, including Hedge Fund Market Wizards in 2012 and The Little Book of Market Wizards in 2014, but the original 1988 publication remains the best, featuring interviews with Jim Rogers and Paul Tudor Jones as well as lesser-known traders.

Different traders talk of their different approaches, most of which are tailored to their individual personalities, the common thread being the need for discipline, risk management and intellectual flexibility.

Anyone looking for specific strategies will be disappointed, although the book offers genuine insights into market behaviour and psychology. That aside, the stories of fortunes won and lost, of market meltdowns and euphoria, are rarely less than riveting.

The Intelligent Investor

Buffett’s favourite (“by far the best book on investing ever written”), Benjamin Graham’s The Intelligent Investor remains required reading for value investors everywhere.

More accessible than his earlier work, Security Analysis, it argues investors should eschew speculation and ignore the mood swings of “Mr Market”.

Instead, take a long-term approach and look for a “margin of safety” by buying undervalued stocks via a methodical, value-based approach.

Although some examples are dated – the book was written in 1949 – Graham’s emphasis on time-tested principles ensures it continues to be eulogised today, with Buffett writing in his most recent shareholder letter: “Of all the investments I ever made, buying Ben’s book was the best”.

 

The Essays of Warren Buffett

Although some fine biographies of Warren Buffett have been written, his investment approach is best appreciated through his own annual shareholder letters, most of which can be downloaded from Berkshire Hathaway’s website.

The Essays of Warren Buffett, edited by Lawrence Cunningham, does an excellent job of condensing Buffett’s 700+ pages of letters and arranging them thematically, capturing the investor’s philosophy.

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