Reminiscences of a Stock Operator by Edwin Lefèvre
This novel [a thinly disguised biography of famous trader Jesse Livermore] was published in 1923 and is about a trader who worked in bucket shops and managed to set up a trust fund for his wife and children before he was 29.He would go both long and short and worked through a number of crashes, such as 1897, and lost his fortune three or four times.
It describes how a game had developed between insiders and outsiders when it came to buying and selling stocks, and this is something that you can still see today, for example with what happened with the Facebook flotation.
He developed a system of technical charting, made up of things like trend following and support and resistance, and this is something that Bloomberg still uses.
He showed that investing was a mixture of market sentiment and formal mathematic approach.
Richard Parfect, manager of CF Midas Balanced Income
The Trouble with Markets by Roger Bootle
This is a really relevant book in the era of deleveraging. He has some really salient points although they can sometimes take some time to manifest themselves. Its main theme is that markets stay rational for a long time, both on the way up and on the way down and tend to reward investors with a long-term outlook rather than the ones who allow themselves to be bashed around by sentiment.
The global economy is dictated by numbers and you can’t escape them. This is especially the case with times like you’re seeing at the moment.
If during periods of volatility you invest in a quality company that is backed up by strong numbers, and hang on, you can look stupid the next day – and sometimes we have trouble explaining moves to clients – but over time the investments justify themselves.
Alan Miller, co-founder of SCM Private
Monkey with a Pin by Pete Comley
The best recent (and free) investment book written is Monkey with a Pin by Pete Comley, who because he is not from the investment industry, has managed to reveal many of the home truths within it, exposing how most private investors perform in real life. It shows they are likely to be 6 per cent a year worse off than the industry’s theoretical predictions of their returns (whether using funds or direct investing).
The book reveals that many have earned less than if they had saved in a building society. Part one of the book looks in detail at reasons why investors underperform: poor skill, charges and survivorship bias.
The second part turns to the implications for the private investor, the finance industry and regulators.
However the best book on the subject is Benjamin Graham’s The Intelligent Investor. First published in 1949 it has been described by Warren Buffet as "by far the best book on investing ever written".
James von Simson, portfolio manager at Thurleigh Investment Managers
Extreme Money: The Masters of the Universe and the Cult of Risk by Satyajit Das
According to Satyajit Das, there is a great difference between what we know and what we understand. Money is no longer a unit of account, a medium of exchange or simply a store of value. It has become endless, capable of infinite multiplication and completely unreal. As with icebergs, where only 10 per cent lies above the surface, Das explains how the financial engineering behind the “age of Ponzi prosperity” is the real risk in the investment landscape.
Extreme Money is part text book, part historical treatise, part rueful overview of modern finance. Highly informative and highly amusing.
Julian Chillingworth, chief investment officer at Rathbones
The Little Book that Beats the Market by Joel Greenblatt
This is a short study into investor psychology that you can pick up and read very quickly. We’ve used it to develop a screen for cash flow and stock market analysis. It has proved to be a very useful tool for our strategy.
Another more off-the-wall suggestion would be The Old Man and the Sea by Ernest Hemingway, which is really about tenacity and struggling against the odds.