I am looking to learn how to invest better. Currently I follow the Motley Fool recommendations and have done quite well that way, but I'd like to educate myself better so that I can make better decisions.

I have picked up the following books:

I started reading The Intelligent Investor and had trouble with some of the concepts. Is there a pre-requisite book you recommend? What order would you recommend I read these books in?

I like the ideas of motley fool--buy good companies, and hold hold hold!

So any additional books? What order should I read them in?

1 Answer 1


You are smart to read books to better inform yourself of the investment process. I recommend reading some of the passive investment classics before focusing on active investment books:

If you still feel like you can generate after-tax / after-expenses alpha (returns in excess of the market returns), take a shot at some active investing. If you actively invest, I recommend the Core & Satellite approach: invest most of your money in a well diversified basket of stocks via index funds and actively manage a small portion of your account. Carefully track the expenses and returns of the active portion of your account and see if you are one of the lucky few that can generate excess returns.

To truly understand a text like The Intelligent Investor, you need to understand finance and accounting. For example, the price to earnings ratio is the equity value of an enterprise (total shares outstanding times price per share) divided by the earnings of the business. At a high level, earnings are just revenue, less COGS, less operating expenses, less taxes and interest. Earnings depend on a company's revenue recognition, inventory accounting methods (FIFO, LIFO), purchase price allocations from acquisitions, etc. If you don't have a business degree / business background, I don't think books are going to provide you with the requisite knowledge (unless you have the discipline to read textbooks). I learned these concepts by completing the Chartered Financial Analyst program.

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