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Best intro to investing book that's exciting/interesting


pau_
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I have a friend who is a college student that I started talking to about stocks, and he wants to learn more and asked for a recommendation. I started by being fascinated with Apple as a kid and writing them (Scully's secretary wrote me back and sent a box full of marketing materials and annual reports!). Only later did I learn about Buffett and value investing.

 

The first book I read on the topic was Buffettology, which I now realize has a lot of flaws. But it introduced me to the basic framework in a simple way. I know the orthodox answer might be The Intelligent Investor, but I think that's kind of a slog (especially if you're starting from 0), and it's easy to miss what's important (which is why I think Buffett just highlights two chapters).

 

What book would you give to a new investor? Also open to suggestions on personal finance books—I want to make sure he has the big picture in mind as he embarks on this. Apologies if this has been beaten to death.

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Guest longinvestor

Jane and John Doe need someone to tell them that much of what they are told in the mainstream media by the market insiders is tainted. That their best interests are likely to be harmed if they cannot see through it. One book that does this like none other is Where are the Customers Yachts by Schwed.

 

I am acting like a facilitator of a reading club on investing and this book is well received by inductees. Most of them chose to read it more than once. Schwed cuts through to the essence of folly like no one else has.

 

Once they read it, every other book they read will make that much more sense

 

 

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Fostering someones interest is likely the first step. 

 

Warren Buffett: Making of an American Capitalist - this one really got me into it over 20 years ago. 

 

Peter Lynch: One up on Wall Street

 

John Neff: .forget the title.  He only wrote one.

 

For the more statistically inclined:

 

David Dreman: Contrarian Investment Strategies..  the second one he wrote. 

 

When the person has a solid interest then the Intelligent Investor. 

 

I found Phil Fishers book sort of useless.  His son has made alot of money off the family name though.

 

The Dreman and Neff book are likely hard to find now. 

 

Peter Lynch's advice is to buy what you use.  This would have served you well in the last decade buying stocks like Apple, Google, FB,,etc. 

 

 

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Thanks Uccmal. I agree on fostering interest. My friend is starting from a point where I was basically explaining what public companies were and how buying shares makes one a part owner of the company and what that entails and why you might want to do it. So highly technical books are probably out (eventually he will have to learn financial statements, but right now, he just knows broad strokes). Peter Lynch sounds perfect. I haven't read his work but remember people talking about that premise when I was younger, and it mirrors how I got into it (writing to Apple because I loved the Mac my dad brought home from work and heard they had this thing called stock).

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For a young person i think the best book to start with is Peter Lynch and One Up On Wall Street. Exceptional advice for a young investor. A solid framework for how to look at investing in stocks. Lots of humour. If a young person reads this book and it does not motivate them to want to learn more then perhaps they should just buy index funds (and be a passive investor).

 

If they are keen to learn more then i would have them read:

1.) chapters 8 and 20 from Intelligent Investor: to learn about Mr Market, Margin of Safety, if you are a passive (index) or aggressive investor

2.) watch youtube videos on Buffett: lots of great advice, including buy quality, concentrate (if you know what you are doing)

3.) A Random Walk Down Wall Street by Malkiel; this book gives a great overview of everything a young investor will face (technical analysis etc) from the investment industry. It is like a university course with real world mixed in. Not that i agree with Malkiels conclusions; rather i love the canvas he paints in the book. Just finshed re-reading it and it is a great education.

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I would recommend Ed Thorp's 'Beat The Market'. It really drills down the need for an 'edge' which I feel sometimes value investors easily forget (as they go on to search for that 'compounder'). He even ends up talking about demutualized community banks (a fundamental value play) after his arb career.

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Fostering someones interest is likely the first step. 

 

Warren Buffett: Making of an American Capitalist - this one really got me into it over 20 years ago. 

 

Peter Lynch: One up on Wall Street

 

John Neff: .forget the title.  He only wrote one.

 

For the more statistically inclined:

 

David Dreman: Contrarian Investment Strategies..  the second one he wrote. 

 

When the person has a solid interest then the Intelligent Investor. 

 

I found Phil Fishers book sort of useless.  His son has made alot of money off the family name though.

 

The Dreman and Neff book are likely hard to find now. 

 

Peter Lynch's advice is to buy what you use.  This would have served you well in the last decade buying stocks like Apple, Google, FB,,etc.

 

The Kindle edition of your first recommendation is on sale today,

 

https://www.amazon.com/Buffett-American-Capitalist-Roger-Lowenstein-ebook/dp/B00DPTL2F0/ref=sr_1_1?ie=UTF8&qid=1537124146&sr=8-1&keywords=buffet+the+making+of+an+american+capitalist

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I wonder if Howard Marks' The Most Important Thing would fit the bill.  From memory it's reasonably accessible, so is perhaps more theoretical.

 

Lynch is a good call i.e. pretty straight up if you're starting out.

 

The Berkshire Hathaway letters from 1977 downloaded off the website did it for me in my early days, but I think I knew a bit about the legend and so had bought into it.

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  • 2 weeks later...

For a young person i think the best book to start with is Peter Lynch and One Up On Wall Street. Exceptional advice for a young investor. A solid framework for how to look at investing in stocks. Lots of humour. If a young person reads this book and it does not motivate them to want to learn more then perhaps they should just buy index funds (and be a passive investor).

 

If they are keen to learn more then i would have them read:

1.) chapters 8 and 20 from Intelligent Investor: to learn about Mr Market, Margin of Safety, if you are a passive (index) or aggressive investor

2.) watch youtube videos on Buffett: lots of great advice, including buy quality, concentrate (if you know what you are doing)

3.) A Random Walk Down Wall Street by Malkiel; this book gives a great overview of everything a young investor will face (technical analysis etc) from the investment industry. It is like a university course with real world mixed in. Not that i agree with Malkiels conclusions; rather i love the canvas he paints in the book. Just finshed re-reading it and it is a great education.

 

My personal journey is about 2-3 years long in active investing. Peter Lynch was a good starting point for me as well, then moving onto other famous authors - our Value Investing professor used his own book titled Book of Value https://www.amazon.com/Book-Value-Investing-Columbia-Publishing/dp/0231175426 which I also liked as a simple starting point.

 

I think the next step, which is taking its sweet time, is moving on from stock or business selection to good portfolio construction. I like this lecture from David Swenson as a starting point. Other suggestions would be great.

https://oyc.yale.edu/economics/econ-252-11/lecture-6

 

Also, in personal finance the two starters that helped me a lot were The Ernst and Young personal financial guide, and The Richest Man in Babylon

https://en.wikipedia.org/wiki/The_Richest_Man_in_Babylon_(book)

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I think the best intro depends on the audience's background and (i) how they think/learn/are persuaded, and (ii) what subject matters interest them.  For analytical minds that focus on data, I would start them on something that's based on data or mathematical logic.  For people more interested/persuaded by narratives, I would start with something like Peter Lynch.

 

Alternatively, if there is something this person is interested in, such as cars, then a good intro might be exploring how CarMax actually makes money.  That may spark an interest generally in learning about how companies make money (or lose money). 

 

A third alternative is showing them a brief but very good writeup of an idea.  Several years ago, I came across this writeup: http://quinzedix.blogspot.com/2012/07/hawaiian-holdings-air-transport.html

 

I probably learned more from, and was more inspired by, that writeup than any of the dozens of investing related books I've read.

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