Learning about the stock market is a big deal. You may open Google and search for any particular term, but that sometimes ends up reading complicated articles adding more to confusion than anything else.
Here come the books in the light, because they are focused on one topic and elaborate everything around that in detail.
Books like The Intelligent Investor offers you deep insights into the stock market and stock investment in a very practical way.
If you are a beginner and searching for the best stock market books, go through this article as I have hand-picked the top 5 stock market books for beginners to help you make the final call.
Best Stock Market Books For Beginners in 2022
#1. The Intelligent Investor by Benjamin Graham
A must-have book for you if you want to learn the investing principles and various strategies for a safer stock investment and avoiding big risks.
The book explains practical concepts used in stock markets like “analyzing a company’s assets” with examples for better understanding.
Graham emphasizes the importance of picking undervalued stocks with a long investment time horizon for wealth creation. You get practical knowledge on how to pick undervalued high-quality stocks by learning about concepts like –
- How to understand a business,
- How to evaluate a company’s fundamentals
such time-tested principles help you pick the right stocks.
- Understanding a company’s business before investing is important rather than trying luck on random stocks
- Business conditions may change but your nature remains the same, understanding your mindset is crucial for a sound investment
- When price and value diverge, attractive investment opportunities appear
- Diversifying your portfolio reduces the risk of money loss
#2. The Little Book Of Common-sense Investing by John Bogle
Beginner investors who are afraid of investing in stocks, John C. Bogle introduces a safer option called index funds.
You learn about index funds and how they are an ideal investment alternative for beginner investors. You’ll also learn about the useful strategies to pick the right index fund as per your investment needs.
According to Bogle, actively managed funds suck as the portfolio management fee keeps on increasing over time that reduces the overall returns.
On the other hand, index funds mimic the market index which gives you positive returns over a longer period.
The book emphasizes diversifying the portfolio with low-cost index funds for better returns and reduced risk as well.
- Buying (even selling) the right fund at the appropriate time is the key to learn
- Diversification of investment in different types of index funds is important
- Choose low-cost index funds for better returns over the years
#3. How to Make Money in Stocks by William O’Neil
Neil shares his trademark CAN SLIM method of investing that he innovated by analyzing the last 100 years’ stock market patterns.
The CAN SLIM method includes 7 steps to maximize profits.
You’ll learn about different chart patterns like the “cup and hold” pattern to learn when to enter or exit a stock.
You’ll also learn about mutual funds and ETFs and how to pick properly to get benefits.
However, dedicating a full chapter to sell his newsletter is a turn-off. But if you ignore that chapter, you can learn practically with comprehensive examples mentioned in the book.
- 7 steps CAN SLIM method for making profits in stocks
- Historical stock market charts to understand the concept
- Learn different chart patterns to know the entry and exit in a stock
- Product and management team matters
- Buying cheap is usually a bad idea
- Relative strength matters because there’s a reason that any stock outperforms the market.
Also read – Best apps for stock market in India
#4. The Little Book That Beats The Market By Joel Greenblatt
If you need any magic formula to earn money in stocks, this book is for you. Jokes apart, Joel discusses a “Magic formula” in this book that he invented to pick the right stocks at low prices.
The magic formula comprises of two financial ratios-
- Return on capital – A company’s net income that is above the average cost it pays for its debt and equity capital.
- Earnings Yield – Earnings per share for the last 12-months divided by the current share price.
You learn how to use this low-risk formula to earn high profits.
The book emphasizes long-term investing which means investing in good stocks for years (not months) to beat market returns.
- Magic formula (tested for 17 years) to select profitable stocks at a bargain price
- Easy language ideal for a beginner investor
- Prepare a portfolio of 20-30 stocks, update the portfolio every year and you’ll beat the market in the long term.
#5. The Dhandho Investor – Mohnish Pabrai
Once you have gone through the above ones, then you can start this gem. Because you need a basic understanding to understand the framework discussed by Mohnish in this book.
Though written long back in 2007 for American investors (Don’t get fooled by book’s name), it has timeless wisdom that works in any financial market in the world.
The Dhandho investor teaches you about finding low-risk value investing with a motto “if you win, you win big, but if you lose, you don’t lose that much”.
“Dhandho” is a Gujarati word that means “endeavors that create wealth” or in simple language “Business”. So when you invest by understanding a business, your risk of losing reduces.
Mohnish emphasizes always buy a stock at a big discount to its intrinsic value, focus on the margin of safety, and arbitrage to increase your profits without taking big risks.
In the end, you learn about Kelly’s formula to understand how much to invest in stock (specifically) to reduce risk.
- Expands on the value investing principles of Benjamin Graham, Warren Buffett, and Charlie Munger.
- You should invest in businesses which you can easily understand
- Emphasize to focus on Margin of Safety and Arbitrage
- Teaches when to sell a stock
Also learn – How to start trading in stock market in India
If you are serious about long-term investment in stocks, The Intelligent Investor is a no-brainer. You’ll practically learn how to evaluate a company, pick the right stocks to earn money in the long run.
If you want a stock market book that doesn’t talk about stock investment but guides you about safer investment than stocks, go with The Little Book Of Common-sense Investing that will help you understand the index fund investing and how to pick low-cost index funds to increase your profit.