Five book recommendations on investing and stocks

One important facet of investing that many people neglect is investing in one's own financial literacy. If I had known even half of what I know now from my informal studies (which isn't much -- yet) I could have avoided the huge loss on my very first stock trade. Then again, nothing beats learning the hard (expensive) way.

I cannot stress this enough - investing isn't easy.

Yes, you may get by with just a little knowledge. And maybe even make decent gains every now and then with just luck. But if you are serious about long term investing and building wealth, you have got to know money like you know the pimples on your face.

Financial literacy is key. To succeed, it is absolutely essential.

There's many ways you can build on your financial literacy -- free seminars from brokers, chart reading sessions, conversations with financial advisors, the wealth channel in SkyCable Cebu, countless websites -- the list is long.

But you can't beat good books. They are comprehensive and you can go back to them again and again. A good book can be had for around P1,000 nowadays but I consider them money well spent. Like money in your trading account, money spent on books will pay dividends going forward.

Here are five titles in no particular order that I have or am currently reading that I suggest you look up:

1. How I Made $2,000,000 in the Stock Market by Nicolas Darvas
Don't let the unoriginal title fool you. This is actually a Wall Street classic written by the unlikeliest of traders -- a professional dancer! Darvas stumbled into trading simply by accident. By sheer smarts, he was able to develop his own successful trading system.

What fascinated me to his story was that he traded in the 50's while he toured the world using the crudest of communications -- telegrams. Wha'ts more, even though he is a technical analyst, he did not draw charts. He merely visualised the price movements in his head. In this age where charts are live and by the minute, his knack at seeing things clearly merely from a string of numbers puts all technical analysts to shame.

2. Buffet: The Making of an American Capitalist by Roger Lowenstein

I started reading this last night and couldn't put it down. I had to force myself to stop at 4am, not because I was sleepy already, but because I have a day job and had to sleep. Warren Buffet's story is absolutely riveting! An entertaining portrait of a Wall Street genius who worked out of Omaha. But more than the colorful stories, the narrative enriched my understanding of modern fundamental analysis that Buffet practically defined.

3. Rich Dad, Poor Dad by Robert T. Kiyosaki

This is a very popular book and for a good reason. It teaches and it teaches well the right mindset to become rich. It's a very easy read, although it may not be written particularly well. The lessons here though are very real, practical and very applicable.








4. Trading Secrets: 20 Hard and Fast Rules to Help You Beat the Market by Simon Thompson

This may be for the more advanced investor and offers insight mainly for those investing in the US and UK stock markets. I plan to open a US trading account around the 3rd quarter of this year as part of my strategy. This book gave me really good ideas on trading strategies. Surprisingly, the language isn't at all too technical. On the whole, it is really just studies of past stock behavior and where you can profit from their tendencies. Have you heard of the Santa Clause Rally? The effect of Friday the 13th on stocks? The triple witching effect? They're all described and explained here and more.




5. Trading for a Living by Dr. Alexander Elder

For those who would like to study technical analysis, this is a good place to start. Charts and explanations are easy to digest if you are like me, a very visual person. But even for those who can't recognize a "head and shoulders" formation on a chart even if it winked at you, the introduction and the first two chapters alone are worth your money for the whole book. Buy it.