According to the GoBankingRates survey has provided astonishing results (see the snapshot)-
- 55% of Americans think they don’t have enough money to invest
- 15% don’t even want to invest
- 9% of US people don’t know how to invest
- 8% don’t trust the stock market
The reason the majority of people are confused about investing is because they don’t know the power of value investing. How investing at right time in the right stock for a long time brings you wealth.
You don’t need thousands of bucks to start your investment journey. You can start small even with $100 and keep on investing a small amount to let it grow with time and the compounding effect will grow your money over years.
A $100 monthly investment for 30 years at 8% interest will become $140,000 approx. That’s the power of compounding.
You can empower yourself to invest your money by acquiring the fundamental knowledge of the stock market. For that, books are the best guide to improve your value investing basics and let you make profitable investment decisions.
We have shortlisted 5 best value investing books that would guide you to learn company fundamental analysis, picking profitable stocks, and safer investment methods like index funds as well.
Without any fluff, let’s start our discussion on the best value investing books below.
Best Value Investing Books in 2022
#1. The Intelligent Investor By Benjamin Graham
The Intelligent Investor is one of the best books on investing that will help you practically learn about value investing in the stock market.
Graham guides us to focus on the company’s business performance rather than reacting to the market’s sentiments. You can analyze company assets, revenues, expenses, and dividend payouts to understand how the stock will become profitable for you or not.
You’ll also learn about the “margin of safety” which focuses on diversification of portfolio to avoid any monetary loss in stock investment.
Graham focuses on how to find undervalued stocks using concepts like finding intrinsic value, to make big profits in the long run.
- Focus on the company’s business performance rather than market sentiments
- The margin of safety is a must to avoid the risk of money loss
- Diversification of portfolio helps you minimize risk
- Find undervalued stocks to make bigger profits in the long run
#2. The Little Book That Beats the Market by Joel Greenblatt
If the lengthy “The intelligent investor” book (contains 600 pages) is not your cup of tea, go with this small marvel on value investing that is merely 179 pages long containing 13 chapters.
In the Little Book, you’ll learn about Joel’s “magic formula” to select undervalued stocks for long-term investment which he has implemented for years to maintain the high-yield portfolio.
The magic formula consists of two components –
- Return on capital – that describes how profitable a company is to invest money
- Earnings yield – tells you how much return you can expect per year on your investment
So you would learn practical tips on how to choose profitable stocks and earn in the long term.
- Emphasizes the long term wealth generation than short term quick gains
- Offers magic formula to pick profitable stocks
- Particle self-implemented approach explained
- Precise knowledge without talking fluff
Also read – Rakesh Jhunjhunwala latest portfolio
#3. Value Investing and Behavioral Finance by Parag Parikh
Prag Parikh’s book covers every aspect of value investing. You would learn the fundamentals of investing in equity shares, commodities, index investing, and even investing in IPOs.
Parag starts with why people fail in investing and talks about the behavioral traits like laziness, greed, ignorance responsible for the investment failures.
You would also learn about “Contrarian Investing” a concept in which Parag explains finding opportunities opposite to consensual opinion and why it’s difficult for a regular investor.
You’ll also enjoy learning about IPOs and Parag would explain why IPOs are not good for a value investor based on the study he conducted for 15 years.
- Explains fundamentals of value investing in Indian markets
- Talks about the behavioral traits responsible for investment failures
- Guides about Contrarian Investing concept against the consensual opinion
- Talks about why IPOs are not good for value investors
- Discusses growth trap in value investing
Also read – What is face value of a share
#3. The Simple Path To Wealth by J L Collin
If you are looking for a book that not only talks about value investing but also throws light on paying off debt and handling finances, then The simple path to wealth is a gem.
JL Collins advises you to spend less, invest more, and start early investment to become financially independent.
You would learn about paying off debt at the earliest otherwise you won’t be left with surplus money to invest because the interest on the debt will consume your savings. You would also learn the techniques to prioritize debt and pay it off first to save your money.
Regarding value investing, you would learn straight about index fund investment which Collin explains as the safest way to build wealth without perplexing stock analysis jargon.
- Guides on how to pay off debt early
- Emphasizes spending less and investing surplus money
- Explains how to invest in index funds as safe investments
- Avoid investing in international stocks
You may like to read the difference between bonus shares and stock split.
#5. The Little Book Of Common Sense Investing By John C. Bogle
J.C. Bogle’s book throws light on investing in index funds to safely achieve your financial goals, ideal for beginner investors.
You will also learn how to find low-cost index funds aligned with your goals. The book doesn’t stop here, it further explains to you how to diversify your portfolio with different index funds at low cost.
Bogle rules out the need of investing in stocks or active mutual funds for wealth generation.
If you see individual stock as a business, then business comes and goes, but the market always remains there. This means investing in individual stocks could be loss-making but if you invest in a broad spectrum like index funds, it doesn’t make you lose in the long run.
Because index funds are highly diversified being they cover every sector itself and don’t fail until there’s a market collapse. Even in case of the market collapse, index funds tend to recover with time which may or may not be possible with individual stocks.
Bogle shares the latest market data to validate his points and also tells you how to select index funds that would generate wealth in the long run.
Bogle also elaborates why paying money to fund managers is not required when you have low-cost mutual funds options available like index funds.
- Invest in low-cost index funds
- Focus on diversification and broad spectrum
- Individual businesses may come and go which could lead to loss-making
- Selecting the right funds and switching between funds from time to time generates better returns
Check out – Book value vs liquidation value
The Intelligent Investor is the overall best book for investing in stocks (value investing) because of its in-depth practical knowledge to analyze businesses behind the company stocks to pick the profitable stocks.
If you need a small, precise book that covers practical formulas like the magic formula to pick undervalued stocks for wealth generation over a long time, then read The Little Book That Beats the Market.
If you want to invest in Indian markets, and looking for a deep but easy-to-understand guide, then read Value Investing and Behavioral Finance that covers everything like behavioral investment, contrarian investing, commodities, and many more that you need to understand before starting your value investing journey.