The nine best books on investing I've read.

The Zurich Axioms, by Max Gunther

This is the first book on investing I read. The premise is one I just could not say no to, like a free glass of aged Bordeaux or pawn-shop-priced mint, mid-sixties Telecaster for $100. It goes like this: Max, the author, is the son of a Swiss banker and one day he asks his dad a question, "Why do you and your buddies do so well investing money while most people don't?" The answer, or answers, are presented as axioms, or rules to follow to do well. As with most rules about investing, the Zurich axioms are simple at heart but fiendishly difficult to follow for the simple reason that we are ruled by our emotions and acting rationally is requires SEAL levels of discipline.

Investing, The Last Liberal Art, by Robert G. Hagstrom Even though this book was not the second investing tome I read, I'm placing it right after Zurich Axioms and here's why: in my opinion, there are two types of investing books, namely how to invest and how to think about investing. Zurich Axioms is the former and this one is the latter. Of the two styles, I definitely prefer the think about style and this book delivers in spades. It looks at the stock market through eight lenses (physics, biology, sociology, psychology, philosophy, literature, mathematics and decision making) and shows how these eight ways of looking at the stock market can help set you on the path of building what Charlie Munger calls a latticework of mental models. Munger believes such a  latticework is essential to understanding why an investment might succeed or fail that is every bit the equal of knowing your numbers. I agree.

The Wall Street Self-Defense Manual, A Consumer's Guide, by Henry Blodget Of all the books I've read on investing, and I've read quite a few more than I've listed here, this one has had by far the biggest influence on me. A brief history of Henry Blodget is the best place to explain why. Blodget has the unique distinction of being both one of the most listened-to stock analysts ever (he, along with Mary Meeker and a few others were the analysts on whose words the market hung for the dot com boom) and one of the most ignored (after the dot com bust, Blodget was banned from trading by the SEC because of emails he wrote "privately" which contradicted his public enthusiasm). As a result, he has a point of view that is absolutely worth listening to. And his POV is that if you really believe you're going to beat the street in your spare time you're delusional; far better to buy an index fund. Another potent aspect of this book is that it was published in 2007, just before the market cratered. I think I read it in late 2008-9 and being bruised, bloodied and battered by the market's crash, the message of this book truly hit home, which can be summed up very quickly: buy a passive index fund that covers a broad swath of the market. You won't get rich quick, but over time your wealth will build. I could not agree more, and even though I still pick stocks, the bulk of my "fortune" is with low-cost Vanguard index funds.

Fooled by Randomness, by Nassim Nicolas Taleb 

The investing world -- hell, the whole world -- is riddled with filthy rich people who confidently ascribe their success to their steely discipline and uncanny insight. According to this book, however, these people are delusional, because what they think happened as a result of their genius and grit, happened by pure chance, the result of something random. Sure, with 20/20 hindsight these fools can guide you through all the decisions they made and show you the results but ask them to do it again. And again. And again. I mean, if these folks are so smart they can turn $2000 into $2,000,000 then surely they can do it again and again or, better yet, turn $2,000,000 into two $2,000,000,000, right? Please, of course not. They got LUCKY. There are exceptions, I admit, Buffett, Munger, Peter Lynch, a few others, have a knack for laying golden eggs but they're the exceptions, true freaks of nature, especially Buffett. The rest of us, no so much.

The Black Swan, by Nassim Nicolas Taleb
The premise of this book, which builds on Fooled by Randomness, is simple. Swans are white so where the hell did this black swan come from? In the investing world, all this means is that you can make all kinds of decisions and mitigate risk as you build your wealth and then out of nowhere a black swan flies over you and relieves itself on your head. What could you have done? Nothing. That's the whole point, the thing you never see coming suddenly slams into you, shattering your confidence and sending your bank account up in smoke. Wait, I just thought of a better way to summarize this book: "Life is what happens to you while you're busing making other plans." - John Lennon 

Antifragile, by Nassim Nicolas Taleb

"Antifragile" is Taleb's term for systems/organisms/portfolios that get stronger under siege. It's an interesting idea but what really makes this book great is the mind boggling number of ideas Taleb uses to arrive at his definition of antifragile. To cut to the quick, if you're pursuing a strategy based on any kind of perceived pattern two things will happen: you will "blow up", Wall Street parlance for going bust; you will not see your demise coming. So if you're a day trader or chartist or dogmatic acolyte of an algorithm, STOP. Sell everything and either buy an index fund or, fine, pick stocks, but do it based on principles more sound than superstitions.

The Snowball, by Alice Schroeder

This book disabused me completely of my delusional notion that I could be like Buffett, as an investor. Starting with Buffett's earliest days as a newspaper delivery boy, Schroeder describes is preternatural ability to suss out, simplify and work insanely hard at picking investments. BTW, yes, Buffett is known for his stock picking prowess, but in truth he buys a lot more than stocks: he buys entire businesses, bails out big companies with creative loans that earn Buffett beefy bucks, runs a huge a insurance company and aggressively invests the float (now that takes guts!). Oh, and the lore about him showing up at megadeals with nothing but his brain and a note pad? True.

Reminiscences of a Stock Operator, Edwin Lefevre
This book is a fictionalized biography of Jesse Livermore, considered by many to be the greatest stock trader of all time. Now, I know I just wrote above that if you are trading based on patters you're going to be a pauper, but Livermore became one of the world's richest people trading on his gut. If he got a feeling, he tested it a bit and then bet BIG. Here's a quote attributed to him to defend his point of view on patterns: "All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis." Who am I to argue with a guy who made $100 million (over a billion in today's dollars) in 1929??? (He bet against the market.)

Charlie Munger, The Complete Investor, by Tren Griffin

If you only read two of these books, read The Wall Street Self-Defense Manual and this one. Munger is crystal clear on why he believes what he believes and pulls no punches in describing the sheer idiocy of most investors. To Munger, being a successful investor means building a "lattice work" of knowledge by reading, reading, reading and reading some more. The knowledge is out there, you don't have to learn it all through personal experience (you won't live long enough!), take the shortcut and bone up on what others have already figured out. And if you think I'm talking about about investing knowledge, I'm not. I'm talking about physics and philosophy and psychology, the liberal arts. Once you have built a decent lattice work, use it and know when you are outside your circle of competence. As with all other great advice, easier said than done, but worth trying.