Recommended 8 classic investment books, a personal collection! (With brief introductions)

It is said that to invest, one must achieve the unity of knowledge and action, and knowledge is the prerequisite for action. You must first have knowledge in order to take action, which makes it possible to achieve the unity of knowledge and action.

So, if you want to make good investments, reading is the first step and is essential.

Charlie Munger once said: Reading has brought me countless benefits, and not a single smart person I've met in my life is not reading every day. Everyone is reading books; the number of books that Buffett and I have read may exceed your imagination, and even the children say: I am just a book with two legs.

Let's not say too much about that. In short, if you have the idea of systematically learning about investing through reading but don't know where to start, then this reading list is definitely something you can't miss.

1. "The Intelligent Investor"

The author Benjamin Graham is the investment mentor of "stock god" Warren Buffett, and this book is also one of his most representative works, known as the "Bible" of the investment world.

This book covers a wide range of investment topics, including analyses and introductions to stocks, bonds, and funds, and it also summarizes three very important investment concepts in the investment world, which are:

1. The fluctuation of price and value. Stocks have their intrinsic value, and their price always fluctuates around that intrinsic value. In Buffett's words, stock prices are like a little dog walking with its owner; the owner walks steadily along the path, while the little dog occasionally runs ahead and sometimes lags behind. When the owner reaches the destination, the little dog naturally follows. Throughout this process, the owner's direction is relatively clear, while the little dog runs around playfully and randomly. Therefore, one only needs to pay attention to how the owner walks, and there is no need to focus too much on how the little dog runs.

2. Circle of competence. Before making an investment, you must have a sufficient understanding of the product you are about to invest in, being able to roughly assess its intrinsic value, rather than just chasing after what's popular; you need to stick to your circle of competence.

3. Margin of Safety. Buying stocks when their prices are significantly lower than their intrinsic value provides a margin of safety; conversely, when they are not, there is no margin of safety. To put it simply, maintaining a margin of safety means buying something worth one dollar for just thirty cents.

The author says that not understanding the pricing mechanism of stocks, being unclear about one's own circle of competence, and ignoring the margin of safety are the main reasons why most investors incur losses. After reading this book, you have at least crossed the threshold into learning value investing.

2. "Letter to Shareholders from Buffett"

Another must-read book from Wall Street. When it comes to stock investment, I believe no one can avoid mentioning the "stock god" Buffett. There are many books that describe Buffett, such as "The Snowball," "Buffett: The Making of an American Capitalist," "The Warren Buffett Way," "Left Hand of Buffett, Right Hand of Soros," and so on. However, if I had to recommend one of Buffett's works, it would be this one.

The book contains a wealth of Q&A content from the Berkshire Hathaway shareholders' meetings, primarily discussing his views on corporate governance, financial investment, mergers and acquisitions, accounting, taxation, and a series of other matters. It allows us to clearly see the trajectory of the investment guru's growth, presenting Buffett's thoughts and philosophies during different periods of his decision-making, including how he made choices. This book is the best reflection of Buffett's investment philosophy.

The so-called "listen to their words, observe their actions"; after reading this book, you will truly feel why Buffett has been regarded as the "stock god" for decades. His core investment philosophy is cash flow-oriented, applying equity investment thinking to stock trading. In fact, the approach of investment masters is to continuously simplify investments.

3. "Guidelines for Active Asset Allocation"

This is a highly practical book that serves as a beacon for investment. If up until now you have been buying stocks by chasing market trends and speculating, like a headless fly flitting around, then you should quickly take a look at this book. It may tell you when to do what.

As mentioned in the book, the economy, like the four seasons of spring, summer, autumn, and winter, goes through four different cycles: recovery, overheating, stagnation, and recession. For investors, it is essential to understand the economic cycle and then make corresponding adjustments through the allocation of stocks, bonds, and commodities in response to the six different stages of investment. At the same time, it also includes the rotation of various stock industries and the corresponding investment valuation methods.

4. "The Most Important Thing to Invest"

This book promotes that even Buffett has read it at least twice and praised it highly. The book rarely discusses investment methods; it mainly talks about investment philosophy and values. Basically, many of the confusions we encounter in investing can be found in this book. Through this book, you will gain a deeper understanding of investment wisdom.

The book mainly introduces cycles, pendulum theory, the limitations of luck and prediction, etc. What impressed me the most was the second-level thinking in investment and the contemplation of risk issues.

1. Second-order thinking. It requires a dynamic investment mindset. For example, first-order thinking might suggest that this is a good company, so let's buy the stock. However, second-order thinking would tell you that while this is indeed a good company, everyone thinks it is a good company, and the price is no longer cheap. Therefore, it is no longer a good stock. In summary, first-order thinking is superficial and shallow, while second-order thinking considers more complex issues. It requires repeated analysis and verification through data, taking into account the gap between current psychological expectations and market consensus before reaching a conclusion. Only those who are adept at using second-order thinking can possess the ability to outperform the market.

2. Risk Control. Risks are often hidden; it's not just the visible risks that are considered risk. The reason outstanding investors are exceptional is not because they generate a lot of returns, but because they manage to control risks to a minimum while achieving the same returns. As the saying goes, it’s easy to triple your money in one year, but difficult to double it in three years. Many currently high-performing investors may simply have capitalized on favorable market conditions, while those true masters of navigating bull and bear markets are not necessarily the ones who buy the most hot stocks. Take Buffett for example; even though he may have missed out on major stocks like Microsoft, Apple, and Google, he has remained the "Oracle of Omaha" for decades. The key to his success lies in his outstanding risk control ability, as he has never faced significant drawdowns throughout his decades-long investment career.

5. "Reminiscences of a Stock Operator"

This book is considered the most classic must-read stock market book in the past 100 years, and it has been strongly recommended by Buffett and Soros. I believe this book doesn't need much more introduction from me, as most people should have already read it.

The book mainly tells the story of the protagonist, Li Fomoer, who started with 5 dollars, experienced three rises and three falls, and fully demonstrated what greed is, what fear is, and what great ups and downs are. Finally, at the age of 40, he achieved 100 million dollars (at that time, 100 million was at least equivalent to 10 billion today), becoming the legendary figure of the first person in a century in the U.S. stock market.

Although this book is quite old, many of the operational methods introduced in it still have a strong guiding effect for today's stock investors. Moreover, since this book was written by the author in his later years, it can more freely expose many of the dark secrets of the stock market at that time. In the end, the author also advises everyone not to believe in insider information, as those things are actively spread to you by the traders.

6. "Trading Psychology Analysis"

The author of this book, Douglas, has long dominated the sales charts in the investment section of Amazon and is also one of Wall Street's classic readings.

The core idea of the book is: anything is possible in the market, and we should not always view the market through our own predictions; those who drown can swim. As long as there is trading, it involves risk, but we cannot avoid it just because of its existence; instead, we need to actively manage risk and embrace it. Consider it through the lens of win rate thinking; after you have contemplated the consequences of failure and made sufficient preparations, all that remains is to do what is most correct and necessary in the present.

In addition, the book discusses many psychological weaknesses that general investors may commonly encounter during trading, and it resonates with many people's hearts. I believe that once you finish reading this book, you will basically be able to resolve psychological issues in trading, and you will know how to think like a professional investor.

7. "The Long-term Investment Guide to the Stock Market"

The author is the renowned Professor Siegel, and the vast amount of data in this book continues to be referenced by major investment literature to this day. It is a timeless classic on Wall Street and is hailed as one of the ten best investment books of all time.

The book mainly reviews the financial development history from 1802 to 2012, focusing on the United States and the world, revealing the general规律 of investment through a large amount of data. In summary, there are three main points:

1. In the long term, stocks have an absolute return advantage over investment products such as bonds and gold, making them the best investment type.

2. Long-term holding of index funds can basically beat 90% of investors in the market.

3. The difficulty of investing lies in its contrarian nature; you must dare to overcome those psychological barriers in the market.

8, "The Art of War"

The seven investment books I recommended earlier are all foreign ones. Finally, I am recommending one from the domestic market, but unfortunately, it is not directly related to investment. One thing we must admit is that investment books from Europe and America indeed have a deeper understanding, after all, their capital markets have been operating for a century, accumulating more depth; while we have been around for less than thirty years, most investment-related books are still somewhat superficial. Perhaps only the Xueqiu series is worth a look.

Although this "The Art of War" discusses military strategy, I believe that investing and warfare share many similarities; both involve the game of human nature. To achieve victory, one needs not only certain skills but also a great deal of wisdom.

Those who think of "The Art of War" as merely a treatise on attack and killing do not truly understand its core wisdom. In fact, "The Art of War" speaks more about the "method of invincibility" rather than the "method of victory". It warns us not to always think about defeating the enemy in battle, but rather to first ensure our own position of invincibility before seeking the right opportunity to win decisively. In this regard, the same principle applies to investment philosophy.

Therefore, investment should be like warfare as described in the art of war; it should not be about seeking victory through risky maneuvers (playing tricks), nor should it be about one against a hundred (small bets for large returns). Instead, it should involve calculating various probabilities and possibilities through the "Five Affairs and Seven Strategies." Only when you have sufficient chances of winning should you rely on strength to achieve victory.

Finally
Brothers, reading is an accumulative process. After you've read enough investment-related books, you'll find that the knowledge of investing is actually quite limited. Most viewpoints are quite similar, and the challenge lies in reconciling this knowledge with human nature. It requires extensive reading to eradicate past erroneous thoughts, and then to prune the newly sprouted branches. Through repeated practice and refinement, you will naturally elevate the correct investment experiences taught by these masters to a level of belief, until you travel further and further down the right path of investment.

There are many investment books on the market, but there are too few good ones. If you want to establish an investment framework for yourself, I think the eight books mentioned above complement each other from different investment perspectives and will definitely be of great help to you. At least each of these books has had a significant impact on my personal understanding of investment.

Finally, I advise my brothers to spend less time watching the market and more time reading. The investment market will reward you with money for your continuous hard work.