Investing Begins With Education: Top 12 Investment Books

by: Lowell Herr

Examining the top keyword searches at ITA Wealth Management reveal investors are looking for the "best" investment books. What better place to begin the investing journey than reading and educating oneself about the never ending problem known as the stock market. If one turns to Bing or Google (NASDAQ:GOOG) to begin the search for top investment books, authors Philip Fisher, Peter Lynch and Benjamin Graham are frequently found among the recommendations.

While it is rare to read a book that does not include some nuggets of truth, most investment books leave me dissatisfied as the investing guidelines are too general when it comes to putting together a well-diversified portfolio. I frequently come away from investment books asking myself - how can I make use of this information to construct a portfolio?

Not finding answers I was looking for, I began to delve into academic papers found in the business library of a local university. The research articles painted a different investing picture. A fresh list of names began to surface. Authors such as Sharpe, Fama, French, Surz, Stevens, Statman, Ibbotson, and Arnott emerged. Somewhere along this educational continuum I ran into an author, William J. Bernstein. A "turn-around" book for me was number 8 in the list below. While The Intelligent Asset Allocator is the first of Bernstein's investment books (I list three below.) it is, in my opinion, the most difficult of the three to read. Nevertheless, I found it an eye opener filled with a well researched investment philosophy. Although not an easy read, it is not to be neglected. The academic papers and Bernstein guided me on to a different path of investing and the books below are geared toward an index investing model.

Here are my top dozen investment books.

1. The Elements of Investing - Burton G. Malkiel and Charles D. Ellis

2. The Investment Answer - Daniel C. Goldie and Gordon S. Murray

Selections 1 and 2 rank near the top of the list as they are easy to read and both volumes point out the importance of saving, diversifying, indexing, rebalancing, and keeping it simple. These are definitely books for beginning investors.

3. The Investor's Manifesto - William J. Bernstein

This is Bernstein's third investment book and the easiest to read. If one were able to read only one investment book, this is my recommendation. Fortunately we are not limited to one book as many of the following recommendations add to our investment knowledge.

4. The Power of Passive Investing - Richard A. Ferri

Rick Ferri has written a number of excellent investment books with an underlying thesis of passive or index investing. Yes, there is a difference between the two terms, but I'll not go into it here. All About Asset Allocation is one of my favorites, but number 4 moves into the top twelve due to the underlying research present in Power.

5. The Ivy Portfolio - Mebane T. Faber and Eric W. Richardson

If investors are looking for specific portfolio examples using Exchange Traded Funds (ETFs), Faber and Richardson have several solutions. In addition, they provide a trend tracking model many investors will find interesting.

6. The Four Pillars of Investing - William J. Bernstein

Until Bernstein's third investment book came along (Number 3 above), "Four Pillars" was my "Christmas" gift to young investors. While there is plenty of overlap in all these recommendations, repetition is the mother of all learning.

7. Asset Allocation - Roger C. Gibson

One chapter in particular, The Rewards of Multiple-Asset-Class Investing, push this book into my top 12.

8. The Intelligent Asset Allocator - William J. Bernstein

As stated above, when one has some grounding in investing terminology, this volume is a must read.

9. Unconventional Success - David F. Swensen

This is Swensen's contribution to small investors. Like Ferri, Swensen warns investors of the investment traps set by actively managed mutual funds.

10. Common Sense on Mutual Funds - John C. Bogle

It is inappropriate to put together a collection of index oriented investment books and not include at least one of John Bogle's books. The difficulty is knowing which one to select from his many contributions.

11. What Wall Street Doesn't Want You To Know - Larry Swedroe

About the only thing I have against this book is that it lacks an index. Swedroe builds a strong case for using index funds.

12. The Bogleheads' Guide to Investing - Taylor Larimore, Mel Lindauer, and Michael LeBoeuf

This is another "Keep It Simple" book that branches out into some areas of investing not covered by many of the above books. At its core, this book emphasizes investing in index funds.

While one does not need to read every one of the above books, each adds unique advice. I use all of them as reference material. Narrowing the selection down to 12 was difficult. Here is a more complete list of investment books and there are a few new ones I need to add. Many can be avoided as indicated by the star ratings. The key is to get started and educate yourself so you can make intelligent investment decisions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.