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Investments (2008 edition)
Zvi Bodie, Alex Kane, and Alan J. Marcus

Investments is the leading investment text at business schools. It is used at the nation's top business schools including Harvard, MIT, Chicago, Wharton, and Northwestern and has been translated into several foreign languages. See also Generally Accepted Investment Principles. Bodie is also coathor (with 1997 Nobel laureate Robert C. Merton) of the textbook FINANCE. Click here to order Investments

Investing for Dummies ( 2009 edition)
Eric Tyson

Investing For Dummies offers straightforward, simple advice in an easy-to-read and entertaining format. Tyson addresses the major elements of the investment process including a thorough discussion of risks and returns, all the major asset classes, tax issues, and investor specific factors like risk tolerance and time horizon. The book is structured so that any section can be read independently, but a reader would miss out if they didn't take the time to read it cover to cover. Tyson filled the book with analogies and real life stories that make even the less exciting subjects interesting. The book is also extremely well organized and formatted with helpful icons, tables, graphics and side notes of interest. Investing For Dummies is written for people with no background in investing, but even experienced and educated professionals will find useful advice and tidbits like how Federal Reserve officials invest their own money and the reason investment clubs are inappropriate for many individual investors. The combination of Tyson's background and excellent writing ability have resulted in a quality investment guide and reference. Tyson has also authored or coathored other acclaimed "For Dummies" books about Personal Finance, Mutual Funds, Taxes, Home Buying, and Home Selling. Click here to order Investing for Dummies

The Millionaire Next Door: The Surprising Secrets of America's Wealthy
Thomas Stanley and William Danko

     The Millionaire Next Door was originally released in 1996 but has been a consistent best seller into 1999. Stanley and Danko set out to study the traits and characteristics of Americas millionaires and many of their conclusions surprised the authors and contradicted many common stereotypes of wealthy people. Stanley and Danko make the general distinction between what they call a prodigious accumulator of wealth (PAW) and a under accumulator of wealth (UAW). The primary trait that most of the millionaires shared was the tendency for being "frugal" with their money rather than spending recklessly and flaunting their wealth. PAWs tend to be efficient rather than reckless with their money, time, and energy. The book includes studies of the types of cars, clothes, and typical spending habits of millionaires, as well as an interesting look at how wealthy parents tend to raise their children and the disturbing consequences of excessive gift giving and economic support . Interestingly, the authors also found that while millionaires do tend to own stocks, they tend not to trade often. In fact, in their most recent study they found that 42 percent had made no trades whatsoever in the prior year. Click here to order The Millionaire Next Door.

Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
John C. Bogle

John C. Bogle founded The Vanguard Group, Inc. of mutual funds in 1974. In this book, Bogle explains the basics of mutual fund investing and argues for asset allocation, diversification and long term investing in order to minimize risk and take advantage of compound interest. Click here to order Bogle on Mutual Funds

Index Mutual Funds: Profiting from an Investment Revolution
W. Scott Simon Index Mutual Funds web site

Most investors are aware of the fact that the S&P 500 has been embarrassing the vast majority of mutual funds, money managers, newsletters, etc., in recent years. This fact however, only represents one of many powerful arguments in favor of indexed or passive investing. In this thought-provoking and well documented book, Scott Simon methodically presents the arguments and empirical evidence that make "the case that index funds are the best investment choice for most people." The book includes thorough discussions of the efficient market theory, performance persistence, market timing, survivorship bias, the importance of asset allocation, taxes, and investment costs, as well as an intriguing look at Peter Lynch's track record at Fidelity. Did you know that Magellan underperformed the S&P 500 in three of Lynch's last seven years with the fund? Fans of indexing who purchase the book will be rewarded with an excellent reference that includes a list of institutional investors that use index funds, summaries of all the major indexes, descriptions of indexing techniques, and a section debunking the common myths about indexing. Click here to order Index Mutual Funds

The Warren Buffett Way: Investment Strategies of the World's Greatest Investor (2005 edition)
Robert G. Hagstrom

The major goal of the book is to help investors understand and employ the investment strategies that have made Warren Buffett successful. Hagstrom reviews Buffett's history and investment career and thoroughly analyzes most of Buffett's investments including the spectacularly successful ones as well as some that didn't work out as planned. Click here to order The Warren Buffet Way

Buffett: The Making of an American Capitalist (2008 edition)
Roger Lowenstein

Lowenstein's book, which was released at roughly the same time as Hagstrom's, also provides insights into Buffett and his remarkable history. The book focuses of Buffett's long term value orientation including Buffett's "permanent" holdings (Cap Cities/ABC, Washington Post, and Geico). Click here to order Buffett
Also available
Benjamin Graham: The Memoirs of the Dean of Wall Street
Buffettology by Mary Buffett, David Clark
Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor by Janet C. Lowe

The New Finance: The Case Against Efficient Markets
Robert Haugen

Professor Haugen presents an interesting analysis of the stock market and recent empirical research that demonstrates strategies that investors may be able to use to beat the market. The book presents evidence of market inefficiencies and strategies for investors to use in attempting to take advantage of those opportunities. See announcement based effects. Click here to order The New Finance

Investment Policy: How to Win the Loser's Game (2009 edition)
Charles D. Ellis

This is a persuasive book by Charles D. Ellis (founder of Greenwich Research Associates) who argues that trying to beat the stock market is a loser's game. In a loser's game, the player who eliminates mistakes will win the game, while players attempting to outdo their opponents will inevitable fail. Ellis argues that professional investors are so talented and numerous, that its difficult for any of them to beat the others, particularly in the long run. Ellis uses numerous analogies in arguing that the best way to manage money in the stockmarket is to keep costs low, and avoid timing the markets and deviating from benchmarks. He argues that "The real purpose of investment management is not to 'beat the market,' but to do what is really right for a particular client." In his seminal article in the July/August 1975 issue of The Financial Analysts Journal, Ellis called investment management "The Loserís Game." The article included the following. "The investment management business is built upon a simple and basic premise: professional managers can beat the market. That premise appears to be false. The ultimate outcome (of the game) is determined by who can lose the fewest points, not who can win the most. Money management has been transformed from a Winnerís Game to a Loserís Game."Click here to order Investment Policy

Investment Gurus
Peter J. Tanous

In this book, Tanous (President of Lynx Investment Advisory, Inc.) interviews 18 well known investment professionals and academics. The book includes in depth discussions and debates about market efficiency, performance persistence, and market anomalies. In addition to the usual interviews with stock pickers (that you'd expect based on the title), Tanous includes thorough interviews with respected academics and passive investing proponents. Tanous does a nice job of interviewing individuals that argue opposing sides and he focuses on the important issues facing both individual and institutional investors. The "Gurus" interviewed in the book are Michael Price, Richard Driehaus, Mario Gabelli, William F. Sharpe, Peter Lynch, Laura Sloat, Scott Johnston, Eugene Fama, Bruce Sherman, Eric Ryback, Merton H. Miller, Foster Freiss, Van Schreiber, Rex Sinquefield, John Ballen, Roger Murray (coathor of Graham and Dodd's Security Analysis), Robert Gillam, and David E. Shaw. Click here to order Investment Gurus

Global Investing: The Professional's Guide to the World Capital Markets
Roger G. Ibbotson and Gary P. Brinson

An outstanding book about asset classes, investment theory, and international investing from two of the industry's most recognized individuals. Click here to order Global Investing

Investment Illusions: A Savvy Wall Street Pro Explodes Popular Misconceptions About the Markets
Martin Fridson

Martin S. Fridson, CFA, was chief high-yield strategist at Merrill Lynch & Company and serves on the editorial board of the Financial Analysts Journal. Investment Illusions is an entertaining book with dozens of sports, gambling, and other analogies. Fridson includes scores of examples of Wall Street's fallacies and misconceptions and offers advice on what not to do and what type of advice and advisors to avoid. Click here to order Investment Illusions

Everything You've Heard About Investing Is Wrong! (1997)
William H. Gross

William Gross is frequently described as "the Peter Lynch of bonds" and his firm PIMCO manages the largest bond fund. Everything you've heard about investing is wrong! is written in plain English and you'll likely find the book makes for quick and easy reading regardless of whether your an educated investor or a novice. Gross argues that "the old adage 'Stocks always outperform bonds' is pure bunk." Gross warns that "Equity investors who envision double-digit gains into the next century for the majority of stocks are dreaming of sugar plums. There is no basis in reality for such visions." The analogy and chapter about "How Not to Get Scalped" is a particularly vivid example of how Gross effectively uses real life experiences to illustrate his points and present his theories about how investors should proceed in attempting to take advantage of the scenario he anticipated. Click here to order Bill Gross' Book

The Alchemy of Finance: Reading the Mind of the Market
George Soros

Long before Soros became publicly famous for his $1 Billion profit on a single currency trade, he was already a hugely successful investor. In this thought provoking and complex book originally released in 1987, Soros presents his "theory of reflexivity" and other thoughts on politics, economics, and investments and leads the reader through his experimentation and trading during the Reagan administration. Click here to order Alchemy of Finance

Soros on Soros: Staying Ahead of the Curve
George Soros, Byron Wien, and Krisztina Koenen

Soros on Soros is written as a series of dialogues between Soros and his questioners. The book traces Soros' journey from Holocaust survivor to being one of the most powerful and successful investors in history. In it Soros explains how he made the decision to short the British Pound in 1992 (a trade that earned his funds over $1 Billion) and much more about his background and motives. Click here to order Soros on Soros

Competitive Advantage
Michael E. Porter

Harvard professor Michael Porter is the authority on competitive advantage and strategy among companies, industries, and countries. Competitive Strategy (originally published in 1980) includes detailed and comprehensive analysis of techniques that companies need for successful competition. The three generic competitive strategies (cost leadership, differentiation, and focus) are explained in detail. Competitive Advantage (originally published in 1985) picks up where Strategy left off. He describes how companies can create and sustain advantage and how companies can evaluate their position and implement steps to improve it. In The Competitive Advantage of Nations (originally published in 1990), Porter takes his previous work one step further in analyzing what makes a nation's industries and companies competitive in global markets and its effects on the nations economy. The leading nations and hundreds of specific industries are examined and analyzed. This book is recommended reading for international investors in particular.
Click here to order Competitive Advantage
Click here to order Competitive Strategy
Click here to order The Competitive Advantage of Nations

The New Contrarian Investment Strategy
David Dreman - out of print.

This book (published in 1982) was a sequel to Dreman's Contrarian Investment Strategy. In this book, Dreman presents the argument for investing in low-P/E stocks and advises investors to buy sound companies that are currently out of favor.

Fortune and Folly: The Wealth and Power of Institutional Investing
William M. O'Barr, John M. Conley

This book by O'Barr and Conley generated a great deal of controversy when it was published because the authors argued that managers of large pension plans were motivated by culture, diffusion of responsibility, and blame deflection in forming and implementing their investment strategy. The authors who have backgrounds in anthropology were also criticized for their techniques. Click here to order Fortune & Folly

The Motley Fool Investment Guide
David & Tom Gardner

The Motley Fool Investment Guide is the first book from Motley Fool founders David and Tom Gardner (followed by You Have More Than You Think - January 98). The Gardners recommend investing 100% of investment funds with a horizon of five or more years in stocks. In MFIG, the Gardners take aim at mutual funds and seem to be making the case for passive investing and The Vanguard Group's S&P 500 Index Fund. But they then flip-flop in "strongly advising against your investing in the Vanguard Index fund." They recommend their "Foolish Four" variation of the Dow-10 strategy as well as investing in small capitalization stocks and short-selling. Of course, the arguments for passive investing apply equally to mutual funds and individual investors (See "The Arithmetic of Active Management" from Nobel Laureate William Sharpe). To see how they've done so far with their own money go to Evaluating The Motley Fool Portfolios. The Gardners are at their best in pointing out Wall Street's problems and in exposing investment professionals and claims that don't measure up. They recommend using some stock screens which are supported by academic studies and their appraisal of Wall Street Research Analysts and how to interpret their recommendations is on target, but some of their own advice is questionable. For instance, the Gardners imply that investors can hope for returns in the 30% range which would rank higher than actual returns from most of the world's greatest investors. They appropriately point out conflicts of interest in the investment business, but they also recommend that readers use their stock boards (advice that they stand to gain financially from). Click here to order The Motley Fool Investment Guide

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