To make any investment decision, a rational investor shall make a study the propositions of investment and weigh them in terms of strengths, weaknesses, opportunities, and threats.
Making an investment analysis is tough. It takes into account the type of investor, his risk appetite, the books of the company, and ultimately the compounding factor that plays massively in building one’s wealth.
Here are 7 books that are necessary and covers the necessary financial, psychological, and historical analysis of stock markets and investors and would tremendously help any investor:
1) Quantitative Investment Analysis (CFA Institute Investment Series
Book 123) 4th Edition Author: CFA Institute Format: Kindle Edition
Rating: 4.2 out of 5 stars (30 ratings)
Review: “Quantitative Investment Analysis” is a highly recommended resource for novice investors and experienced practitioners.
Part of the CFA Institute Investment Series, this book covers a wide range of quantitative methods and their relevance in today’s investment process.
The fourth edition includes:
- Updated statistical tools.
- Information on machine learning algorithms.
- The role of big data in investment.
One notable feature of the book is its clear and consistent treatment of the subject matter, ensuring a smooth learning experience.
The authors have maintained mathematical notation consistency and topic coverage, which are essential for understanding the concepts.
The book also includes learning outcome statements (LOS) for each chapter, investment-oriented examples, practice problems, and a wealth of charts, tables, and graphs to reinforce the concepts.
The expanded coverage of machine learning algorithms and big data provides valuable insights into their application in investment analysis.
The capstone chapters on factor modeling, risk management, backtesting, and simulation further enhance the book’s relevance and practicality.
The accompanying “Quantitative Investment Analysis Workbook, 4th Edition” is recommended for individuals who prefer hands-on learning.
It contains learning outcomes, summary overviews, and challenging problems with solutions.
Overall, “Quantitative Investment Analysis” is a comprehensive resource that equips readers with the necessary knowledge and tools for quantitative investment management.
Whether learning independently or seeking a general reference, this book offers valuable content and examples aligned with real-world investment scenarios.
2) Investment Manager Analysis: A Comprehensive Guide to Portfolio Selection, Monitoring, and Optimization (Wiley Finance Book 243) 1st
Edition Author: Frank J. Travers Format: Kindle Edition Rating: 4.0 out of 5 stars (16 ratings)
Review: “Investment Manager Analysis” fills a crucial gap in investment management by providing a systematic approach to evaluating and selecting investment managers.
The book covers various stages of the analysis process and offers practical guidance on analyzing investment professionals and the products they manage.
The book is divided into three sections, each focusing on different aspects of the investment manager analysis process.
The first section covers preliminary work, such as setting investment objectives and understanding investment manager guidelines.
It provides a solid framework for conducting effective evaluations. The section also offers tips for obtaining information from top investment managers worldwide.
The second section delves into traditional equity and fixed-income manager analysis in detail.
It covers performance and risk analysis, portfolio analysis, style and attribution analysis, interview techniques, and contract negotiation.
The section concludes with a scoring model that combines qualitative and quantitative assessments to aid investment decision-making.
The book’s final section focuses on evaluating alternative investments, with a specific focus on hedge funds.
It addresses the challenges of assessing various hedge fund strategies, including long/short equity, convertible arbitrage, global macro, merger arbitrage, CTA, and fixed-income arbitrage.
The author uses a fictitious investment firm, CAM Asset Management, throughout the book to illustrate concepts and calculations.
This approach enhances understanding and allows readers to apply the learned techniques effectively.
“Investment Manager Analysis” is well-organized and breaks down complex analytical tools and methodologies into easily understandable explanations.
It caters to less experienced practitioners and veteran decision-makers needing a comprehensive guide for investment manager selection.
While the book provides valuable insights and practical advice, some readers might find it focused on the specific task of investment manager analysis rather than broader investment strategies or portfolio management techniques.
It primarily targets professionals responsible for conducting investment manager due diligence.
Overall, “Investment Manager Analysis” is a valuable resource for those involved in evaluating and selecting investment managers.
Its comprehensive coverage, practical examples, and clear explanations make it a recommended read for individuals seeking to enhance their understanding of this critical aspect of investment management.
3) Security analysis by Benjamin Graham
This book is one of the most fundamental books in the history of financial investment analysis. This book directs to teach investors along with readers the analysis behind the investment in securities.
It helps investors and readers to analyze the financial position of the company to determine the intrinsic value of the company and make informed decisions.
Despite being published almost 8 decades ago, this book still holds prominence in the field of security analysis and investment management. The book is focused on the careful analysis of the balance sheet as a road to investment success.
This edition gives guidance on analyzing securities that generations have followed and relied on till now. This book provides the principles and techniques of security valuation, and asset valuation which can enlighten readers with an insight into the net worth of companies.
You can get tips to take judicious financial decisions irrespective of your knowledge and profession. This book is filled with various illustrations and is aimed at investors playing the investment game.
4) Poor Charlie’s Almanac
Poor Charlie Almanac, compiled by Peter D. Kaufman is basically all the speeches by Charlie Munger. This book focuses on the ‘Multiple Mental Models’ approach to decision making.
This book is written with ideas and pictures to assist them which is in sync with Munger’s idea to “make the mind reach out to the idea” thereby increasing retention of ideas in memory.
The “Lollapalooza Effect” is Munger’s term for the confluence of multiple biases; according to Munger, the tendency toward extremism results from such confluences.
The 25 Cognitive Biases is also explained in the book. Munger explains why we’re so psychologically flawed, leading to mistakes in our decision.
With Charlie himself as a teacher, you will learn about better investment, decision making, and thinking about the world and life in general.
Charlie’s ‘multidisciplinary’ approach, is a self-developed model for clear and simple thinking while being far from simplistic itself.
He takes clues from writers of the 18th and 19th centuries to put forward his ideas while simultaneously bringing his own handy experiences and knowledge to the table.
5) One up on Wall Street by Peter Lynch
Peter Lynch, the author has stated the process behind finding profitable companies by looking for a few minutes of the financial investor.
Peter Lynch is one of the most successful fund managers and in his book, he lays down his ideas on stock classifications, quick drills, famous numbers, and how one should design a portfolio.
This book deals basically in investing in cyclical, turnaround, and fast-growing companies which are akin to startups in the last stages to becoming profitable.
Lynch has tried to simplify the complicated investment methodology and succeeded in doing so. The book helps the average investors over professionals to achieve financial success.
6) The little book that beats the Market by Joel Greenblatt
Joe Greenblatt launched formula investing around 2009. The site was focused on an online money management firm looking at various investment strategies. The book is derivative of the strategy deployed by Greenblatt in order to beat the market.
He provides a “magic formula” that is easy to use and helps in the automatic purchase of shares of good companies at a bargain.
Greenblatt uses simple language and adds slight humor to the content to make the reading more enjoyable. The book provides a low-risk approach on how to beat the market and professional managers by a wide margin.
The author explains clearly how to view the stock market, why most people become unsuccessful in the stock market, and how the techniques devised in the book will work even if the book makes them public.
Greenblatt suggests purchasing 30 good companies with a high earnings yield and a high return on capital.
He further instigates that the formula explained in the book beats the stock market 96% of the time and generated compounded annual returns of 30.8% over a 17-years record.
The book also explores the basic principles of stock market investing and explains why success eludes almost all individual and professional investors.
7) Narrative and Numbers by Aswath Damodaran
Aswath Damodaran is Mr. valuation and synonymous with valuation techniques he applies thoroughly with all investment propositions.
In the book, Narrative, and Numbers, Mr. Damodaran describes how storytellers can better incorporate and narrate numbers. He has explained Uber in the stock market and how the narratives have driven the valuations.
He investigates why Twitter and Facebook were valued in huge dollars at their public offerings, and why Twitter has declined while Facebook has grown.
Damodaran also looks at more established business models such as Apple and Amazon to demonstrate how a company’s history can both enrich and constrain its narrative.
The author is of the notion that stories create good connections with readers and help them understand the complicated financial and psychological theories.
However, humans for a long time connect success with precise numbers. Imprecise stories do drive the valuations, that’s what the book is about.
The author has begun the book by studying the history of numbers, tracing the origins of financial models applied today using quantitative data.
Damodaran explains the techniques to use such data and how development has taken over in the last three decades making it easier to collect and analyze such data.
