By Simon Brownmarketplace invest DIY
INVESTMENT STRATEGIES
18 finweek 24 October 2019 http://www.fin24.com/finweekBack to basics
Reading won’t necessarily turn you into a top trader, but it will help you direct your thoughts around your own
investment strategies. Simon Brown revisits some of his favourite reads.Photos: Shutterstock I http://www.amazon.comw
ith markets looking
precarious and
portfolios under
pressure, it’s always
a good idea to head back to the basics.
That’s why I want to revisit my list
of preferred books for investors and
traders. A good book can reaffirm what
we’re trying to do in the markets –
which is to have a plan and to not panic.
The first book on the list
is One Up on Wall Street by
Peter Lynch. First published
back in the 1980s, it
remains as relevant today
as ever. Lynch writes in
a style that is easy to
understand. He covers a
number of methods for
selecting winning stocks
that are practical and that
we can easily integrate
into our investing.
The second book on the list is
Effective Investor by Franco Busetti.
This is a more advanced read than
One Up on Wall Street, but it is well
worth the effort. Being a local book,
the examples are all companies that
we know and understand. What I really
like about this book is that Busetti
pokes a lot of holes in conventional
investing wisdom. For example, he pulls
apart economists’ ability to predict the
future. Using the rand/dollar exchange
rate over a decade, he shows that
projections for future levels of the
currency were simply never correct –
not once. Now, sure, he was socking it
to economists, but the theory applies to
anybody trying to predict the future.
Intelligent Investor by Benjamin
Graham would be on many lists, but
I find it a dry book with little practical
use these days (regular scans of the
market using his methods return few, if
any, investable stocks). Warren Buffett
started life as a value investor, but he
is now a Fisher disciple and a follower
of the book Common Stocks and
Uncommon Profits by Philip Fisher.This is a great practical book that really
delves into finding awesome stocks
to invest in, again like Lynch, using
practical theories that do not require an
advanced degree to understand.
Nassim Taleb is best known for his
book Black Swan, but the earlier Fooled
by Randomness is way better. The latter
deals with the role that luck plays in our
lives and in investing. It’s a powerful
lesson: We need to recognise
luck for what it is and not
attribute it to our ability.
Then some books for
traders: The first is Trading
in the Zone by Mark Douglas.
More than anything, trading
is about psychology and
nobody explains it better than
Douglas. Again, this book isn’t
easy to read, with no funny
anecdotes. But it remains the
most important trading book
I have ever read. I reread it every year-
end holiday to keep me on track.
Trend Following by Michael Covel
is another great read for traders. I am
a firm believer in trading the trend and
this book lays out the case for trend
trading with many examples. But it also
warns of the shortfalls in the concept. Be
cautioned here: He does try to sell you
his systems, which I do not recommend
spending the money on.
Perhaps my favourite is
Reminiscences of a Stock Operator,
which covers the trading life of Jessie
Livermore from over a hundred years
ago. This book is full of excellent
lessons for traders that are easy to
understand and will without a doubt
make you a better trader.
Of course this list is not exhaustive,
and no book will turn you into a top trader
or investor. But we can learn a lot from
them. And, more importantly, reading
gets us thinking, and thinking will help
us define our own personal strategies for
the markets and help distract us from the
current market woes. ■
[email protected]Reading gets
us thinking, and
thinking will
help us define
our own personal
strategies for
the markets and
help distract us
from the current
market woes.