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Building an Investor’s Library: 3 Books That Every American Investor Should Read

So, you are looking to build wealth for yourself. Investing will get you there. You can build a fortune from nothing. However, it will not be easy. Success does not happen overnight. Patience and persistence are necessary. If you do not know where to start, books are a fantastic place to begin. They will teach you how to build an investment portfolio from the ground up, and how to deal with your ambiguity and uncertainty. There are numerous books that can provide you a solid foundation in investing. Here are the top three you will want to add to your library.

1. The Essays of Warren Buffett: Lessons for Corporate America, by Warren Buffett

Warren Buffett is one of the very few investors who have achieved iconic status. We know him for many things–his daily reading habit, his desire to promote the welfare of others, and, most importantly, his value-focused investing. Warren Buffett has managed to avoid major mistakes. Rarely does he make a bad investment decision. If you are going to learn, learn from the very best. Read the 4th edition of the “Essays of Warren Buffett: Lessons for Corporate America”.

The book comprises the key learnings from the letters Warren Buffett writes to Berkshire Hathaway shareholders. Some lessons are strictly technical. The American business magnate is honest and open regarding the principles behind his investments. You learn how to invest wisely, which implies choosing your investments carefully and getting a good understanding of them. The central theme of the essays is centered on the fundamental valuation analysis, which guides Buffett’s investment practice. Sub-themes are lessons on accounting taxation, and mergers and acquisitions.

Warren Buffett insists on the fact that investing requires vigilance, dedication, and commitment. In the shareholder letter, he draws attention to the fact that he and his business partners eat their own cooking. Many of the things that the American investor asserts are the exact opposite of what they teach in business and law school, or what they practiced on Wall Street and Corporate America during the time. The book is a must-read because it is a goldmine of advice straight from the most successful investor of all time.

2. The Intelligent Investor, by Benjamin Graham

You do not need a high IQ to have a successful career as an investor. An intelligent investor needs to keep their emotions under control. This is what Benjamin Graham shows in his book, which was released all the way back in 1949. Few know that Benjamin Graham was Warren Buffett’s investing mentor. The American business magnate referred to the book in flattering terms, describing it as “the best book on investing ever written”. The Intelligent Investor talks about security analysis, teaching principles that stand the test of time.

If you read the book, you will discover there are two types of investors: defensive and enterprising. A defensive investor looks to protect their assets no matter what. An enterprising investor wants to assume the risk and grow what they have. That person will make decisions that directly impact their success, such as using life insurance to create wealth. It is important to figure out what kind of investor you strive to be, based on your aptitude for risk.

The Intelligent Investor deals with specific topics like asset allocation, inflation, portfolio policy, dividends, and market fluctuation. Benjamin Graham highlights investing principles and investor’s attitudes that are still valid today. Even though the book was written a long time ago, it still makes a large impact today. The book is 600-pages long, so make sure you find time for it.

3. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, by Burton G. Malkiel

Beginners, as well as experts, should indulge in this book. Burton G. Malkiel examines commonplace investing techniques, in addition to core concepts, making it easy for the beginner to understand. Examples include technical and fundamental analysis, which for most investors do not provide the desired results. Get access to the American economist’s insights on subject matters such as stocks and bonds, home ownership, tangible assets like gold, and real estate investing.

A Random Walk Down Wall Street helps you understand the jargon used on Wall Street so you can talk the talk. Also, it proves that the market mostly lacks predictability and indicators are of questionable value. Regardless of the investment vehicle that you opt for, you will get a relevant perspective. If you wish to increase your knowledge base, include this book in your library. Burton G. Malkiel illustrates how to calculate your return potential and opens up the doors to profitable investing.

After discussing stock valuation models in the beginning, the book proceeds to technical and fundamental analysis. Behavioral finance is introduced in the 9th chapter of the book. Malkiel shows the faults of methods such as managed mutual funds based upon past performance offering alternatives for successful investing. He emphasizes the fact that investors cause most of their problems, but explains how big money mistakes can be corrected.

The last part of the book offers a practical guide to investing. You can read about tax-deferred accounts, insurance, saving for a college education, bonds, cash reserves, real estate, etc. With copious amounts of advice and information, this book will not disappoint you. It represents an intelligent combination of the theoretical and the practical. So, take a random walk down Wall Street, will you?

To sum up, when you read good books on investing, they will align with your brain. Reading will help you increase focus and get you up to scratch on all things investing-related. Use the aforementioned suggestions to build an investor’s library. It will become your mental food!