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Margin of Safety by Seth Klarman book review

Book Review: Margin of Safety by Seth Klarman

Hi Investors. In this post, we are going to discuss the book review of Margin of safety by Seth Klarman (Originally published in 1991).

About the Author:

Seth Andrew Klarman is an American billionaire investor and hedge fund manager.

He is a graduate of Cornell University and has a business degree from Harvard Business School. Klarman is the founder of The Baupost Group, a Boston-based private investment partnership, that focuses on making value-based investments in the US public markets (founded in 1982). 

In the recent decade, Warren Buffett and his lieutenant Charlie Munger have voiced their support for his investment style and even went on to state that Seth Klarman would be one of their asset managers of choice to manage their personal portfolios. 

Besides, Klarman is also a close follower of the investment philosophy of Benjamin Graham.

Book Review of Margin of safety by Seth Klarman:

margin of safety -seth klaarman

The Margin of Safety by Seth Klarman covers a broad spectrum from providing sound education on the psychology of investing as well as developing the quantitative and qualitative aspects of value investing. It is sometimes said to be the most important book available on value investing after The Intelligent Investor by Benjamin Graham.

The book primarily explores three broad themes for the investor:

  • Firstly the futility of the efficient model hypothesis and the practice of finance professionals of over-relying on their models and estimates.
  • Secondly, it focuses on the concept of risk and the central role it plays in investment success
  • And finally on valuation and market opportunities for the retail investors

Klarman encourages investors to always assess their investments only after first evaluating the risks associated with a particular opportunity and then and only then the potential returns.

In his eyes, the key to a successful track record in investing comes not by achieving higher than average returns but by achieving below than average losses.

This strategy has seemingly worked for him and his investment fund, they have achieved a 19% CAGR for every dollar invested in them (despite maintaining close to 20% cash position in their portfolio for most of the years)

“The avoidance of loss is the surest way to ensure a profitable outcome. Loss avoidance must be the cornerstone of your investment philosophy” – Seth Klarman

The book illustrates this concept through the example of 2 people, say A and B, who invested in the market over a period of 5 years.

Assume A generate returns of 12% for 4 years while B generated only 10%. In the 5th year, due to a market downturn, A’s portfolio witnessed a drop of 10% while B witness a drop of 5%. Because of this significant drop in the down year in A’s portfolio, B ends up having a higher portfolio return in comparison to A.

Also read:

In the book, Klarman espouses that the value investment philosophy is based on three timeless pillars:  a bottoms-up approach to selecting investments one stock at a time, absolute performance orientation that enables one to buy and hold irrespective of short-term relative non-performance and paying attention to the real risk of capital loss, not beta (volatility).

Further, in the book margin of safety by Seth Klarman, the author consistently stresses on the need to focus only on one’s own analysis and to discard the market noise when making an investment decision.

Klarman also discusses the difficulty involved in the art of valuing a business and recommends arriving at a conservative but imprecise range of business value based on 3 or 4 techniques: Net Present Value of Free Cash Flows, Liquidation or Breakup value, and Stock Market Value.

(His book provides practical examples of his philosophy, we encourage our readers to take time to go through his work to improve their knowledge and skill in valuation)

“It would be a serious mistake to think that all the facts that describe a particular investment are or could be known. Even if everything could be known about an investment, the complicating reality is that business values are not carved in stone. If you cannot be certain of value, after all, then how can you be certain that you are buying at a discount? The truth is that you cannot” – Seth Klarman

Klarman closes his masterpiece with tips for retail investors on finding opportunities in the market namely catalysts, market inefficiencies, and institutional constraints, as well as then going on to provide detailed evaluation methods for thrifts and bankruptcy situations.

Also read: 10 Must Read Books For Stock Market Investors.

Bottomline:

In our view, Margin of Safety by Seth Klarman is a must read for all investors of all levels, besides strengthening foundations on the value methodology it also provides insights into how a seasoned investor stays apart from the chaos of the market to generate stable returns. Happy Investing.

Levin is a former investment banker and a hedge fund analyst. He is an NIT Warangal graduate with around 5 years experience in the share market.

7 Best Value Investing Books That You Cannot Afford to Miss

7 Best Value Investing Books That You Cannot Afford to Miss.

7 Best Value Investing Books That You Cannot Afford to Miss:

Hi there. Welcome to the day 24 of my ‘30 days, 30 posts’ challenge, where I’m writing one interesting investing article daily for the 30 consecutive days.

This post is based on the public demand. Past few weeks, I’ve received dozens of emails regarding the suggestions on best value investing books. That’s why I decided to write this blog discussing my personal favorite value investing books which I highly recommend to my readers to read.

Quick note: There may be chances that I might miss few amazing value investing books in this post. This can be either because I’ve never read that book or just because it might not be so popular with respect to Indian stock market. Nevertheless, if I missed any best value investing book that you think is worth mentioning for the readers, please recommend below in the comment box.

7 Best Value Investing Books That You Cannot Afford to Miss

Here is the list of best value investing books worth reading for the stock market investors.

1. The Intelligent Investor by Benjamin Graham

the intelligent investor -benjamin graham

Warren Buffett considers this one as the best book ever written on investing (check the cover with Warren Buffett’s comment). And, I agree!! This book contains tons of important concepts to build a foundation of value investing.

The author of this book- Benjamin Graham is considered as the father of investing. He’s famously credited for popularizing the concept of value investing in the investing population. Coincidentally, he was also the mentor of Warren Buffett at Columbia Business School. After graduation, Graham hired Warren Buffett to work (and learn) in his investing firm. Warren Buffett inherited the principles of value investing from Benjamin Graham, which later helped him to build a great fortune and becoming one of the most successful stock market investors of all time.

This book contains a number of time-tested lessons like investment vs speculation, the margin of safety, the concept of Mr market (the fictional manic-depressive character), different approaches for defensive and enterprise (aggressive) investors etc. Many people consider this book as the bible of value investing.

Overall, this is definitely one of the best value investing books and for the serious investors- this is a must read. If you want to build a strong value investing foundation, I’ll highly recommend you to read this book.

You can read the complete book review of The intelligent investor here.

Quick Note: Benjamin Graham has also authored another book named Security Analysis, which is also a best-seller. The first edition of this book was published in 1934, shortly after the Wall Street crash and start of the Great Depression in the US. The fact that Benjamin Graham survived the great depression (where dow fell nearly 90% in a stretched period of three years), itself adds credibility to his investing knowledge and experience.

2. The Little Book That Beats the Market by Joel Greenblatt

value investing books -the little book that beats the market -Joel Greenblatt

This is probably the shortest book that I’ve ever read on investing. You can easily finish this book in one sitting.

In this book, the author -Joel Greenblatt explains the concept of value investing and his approach to pick winning stocks. He also shares his strategy of ‘Magic Formula’ (that consists of two financial ratios- Return on capital and Earnings Yield) which helped him to pick fundamentally strong companies year-after-year.

Overall, it’s a nice read and an excellent place to start reading if you have never invested in stocks before. You can read the full book review of the little book that beats the market here.

3. The Warren Buffett Way by Robert Hagstrom

the warren buffett way -Robert

I started reading this book because I’m a fan of Warren Buffett and wanted to learn his value investing principles and strategies. The book contains all the things that it promises.

Hagstrom describes the necessary aspects to achieve similar success like Buffett that you can apply immediately to your own portfolio. The good thing about The Warren Buffett Way is the author tends to stay away from high faulting words that make it understandable to anyone willing to learn value investment.

The book begins by introducing Warren Buffett’s early life and education and also discusses his first investment at the age of 11 (and the lessons that he learned from it). In next chapter, the book covers his journey of how he read ‘The Intelligent Investor’, got influenced by the author Benjamin Graham, and later end up joining the Columbia Business School, just to learn to invest from Graham. The book also mentions Charlie Munger, the business partner of Warren Buffett and the Vice-Chairman of Berkshire Hathaway and how he influenced Warren Buffett’s investing style.

There are a number of key takeaways from this book on management, capital market and business, which can be applied to a wide variety of investing strategies. Overall, The Warren Buffett Way book is a definite guide that can help you to decide how to make critical decisions while researching any company to invest.

4. Value Investing and behavioral finance by Parag Parikh

value investing and behavioral finance -Parag Parikh

This is one of the best books written by an Indian author that I ever read. The book educates the readers about the much-needed topics that are ignored by most financial websites, books, and media.

The Value Investing and behavioral finance book is well structured and contains 12 chapters. Few of the best ones are- Understanding behavioral traits, Behavioural obstacles to value investing, Contrarian investing, Public sector units, Sector investing, Initial public offerings, Index investing & Bubble trap. I particularly enjoyed reading the chapters on Contrarian investing, IPOs and bubble trap.

If you want to get a good insight into value investing in the Indian stock market, then this book is a must-read. You can read the complete book review of Value Investing and behavioral finance book here.

5. The Little Book of Value Investing by Christopher H. Browne

the little book of value investing -christopher

Once you have read the lengthy 600-pages of The Intelligent Investor, this book might seem tiny one with similar powerful concepts.

In the book, Christopher Browne uses the analogy of supermarket shopping to explain the concept of buying stocks. At a supermarket, both glamorous and cheap products (on sale) are available. It totally depends on the buyer behavior whether he’ll buy a well packaged expensive product or will choose an undervalued product on sale. Only the value investors take the effort to dive into the market and look for items on discount.

There are a number of valuable investing concepts in this book like diversification of stocks, creating a margin of safety, preferring value over growth, shareholding, insider’s buying or selling pattern etc that can help you learn a lot of value investing strategies.

Overall, this little book will give you a lot of value investing tips and pieces of advice which can help you to shape your investing strategy.

6. The Dhandho Investor

the dhandho investor -Mohnish Pabrai

The concept of Dhandho Investing changed the way I look at investing. This is one of most simple yet influential book that I’ve ever read. The book is based on the central concept of “Heads  I win, tails I don’t lose much” i.e. ‘low risk, high return’.

The author of this book, Mohnish Pabrai is an Indian-American Investor, businessman, and Philanthropist. He is the Managing Director of Pabrai Investment funds, an investment fund based on the similar model to that of Warren Buffett’s Partnerships in the 1950s. Since inception in 1999, this investment fund has given an annualized return of over 28% and hence has consistently beaten the S&P 500 Index.

Moreover, Pabrai’s idea to invest in businesses with low risk and high returns makes perfect sense. Isn’t the main aim of any investment is to get the maximum returns with minimizing risks?

In the book, The Dhandho Investor, Mohnish Pabrai clearly explains his concept of ‘low risk and high returns’ with the help of few case studies in the first few chapters like Richard Branson of Virgin Company, Laxmipati Mittal of ArcelorMittal- world’s largest steelmaking company and few more.

Overall, this is an amazing book to deepen the basics of value investing principles. The book is quite simple to read and complex investing principles are simplified in an easy-to-understand manner. You can read the complete book review of The Dhandho investor here.

7. Warren Buffett letters to shareholders

letters to shareholders- warren buffett

This is not exactly a book but a collection of letters written by Warren Buffett to his shareholders at Berkshire Hathaway. Warren Buffett has been writing these letters for over the past 50 years. And if you merge all the letters, the learnings are more than that of 50 books combined.

Warren Buffett has never written a book himself. However, if you are interested to learn from him, these letters to shareholders serves the same purpose.

Learning from the wins and mistakes of the greatest investor of all time is itself very pleasing. Overall, it’s the definitive book summarizing the winning techniques of the world’s greatest investor.

Also read: 10 Must Read Books For Stock Market Investors.

Bonus 1: Margin of Safety by Seth Klarman

margin of safety -seth klaarman

This is one of the most recommended books online for value investing and is on my watchlist at Amazon for a long time. It was originally written in 1991 and definitely contains many time-tested principles.

However, I am not able to read it yet because the price of this book is way too high (at least with respect to Indian currency). Right now, I’m not sure whether I can generate enough ROI after reading this book or not. Anyways, feel free to check out this book here.

Quick Note: If anyone wants to gift me this book, I’ll be highly obliged 😀

Bonus 2: Book on valuation

The Little Book of Valuation: By Aswath Damodaran

the little book of valuation -Aswath Damodaran

A short yet comprehensive book to learn how to value a company, pick a Stock and make profits. The author of this book, Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University (NYU), where he teaches corporate finance and equity valuation.

There’s also a long version of the valuation concept written by the same author, named Valuation by Damodaran. Both these books are amazing to build the foundation of valuing stocks.

Besides, Aswath Damodaran is also quite active on his youtube channel (with over 72k subscribers) where he teaches valuation and business modeling. Feel free to check out his youtube channel here.

Bonus 3: Not exactly value investing books, but covers crucial concepts

One Up on Wall Street, Learn to Earn and Beating the street by Peter Lynch

one up on the wall street -Peter Lynch

Probably the simplest, enjoyable, interactive yet highly educative books that I read on investing. Initially, I started with one up on wall street, then fell in love with the way the author describes the share market and end up reading all the three books written by him.

Peter Lynch was a star mutual fund manager at Fidelity investment. He has an amazing track record on a consistent average annual return of 29.2% over a stretched duration of 13 years when he managed the Magellan fund. During this period, the asset under management of his fund which was originally $18 million in 1977 increased to $14 billion. He is one of the rare fund managers who gave a fairly good return to their investors for 13 years in a row.

In his books, Peter Lynch shares his learnings as a fund manager and stock investor. All three of Lynch’s books follow his common sense investing approach, which insists that individual investors if they take the time to do their homework, can perform just as well or even better than the experts.

Few of the top pieces of advice given by Peter Lynch in his books are-

  • Invest in companies, not the stock market.
  • ‘Only invest what you could afford to lose without that loss having any effect on your daily life in the foreseeable future’.
  • There are a few qualities which are required for a successful investor. They are Patience, self-reliance, common sense, open-mindedness, tolerance to pain, detachment, persistence, humility, flexibility, willingness to do independent research, an equal willingness to admit to mistakes, and an ability to ignore general panic.

You can read the complete book review of his book one up on wall street here.

Overall, all these three books written by Peter Lynch will guide you the concepts of investing in a simple, logical, pragmatic and replicable manner.

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

the dhandho investor book review summary

The Dhandho Investor- ‘Heads I win, Tails I don’t lose much’.

The Dhandho Investor- ‘Heads I win, Tails I don’t lose much’ – Book Review

Recently, I was traveling from Pune to Mumbai, a 3+ hour journey by bus. It was a beautiful journey with good scenery by the window seat and a decent road. But what made it even better was re-reading one of my favorite book on Investing- The Dhandho Investor’ by Mohnish Pabrai.

I choose to read this book because it is just 208 pages long and I was sure that I can read the book completely in one sitting. The book is very insightful and one cannot put it down once he had started reading this book.

In this post, I’m excited to give you the review of the same book- ‘The Dhandho Investor’ by Mohnish Pabrai.

About the author:

Mohnish Pabrai is an Indian-American Investor, businessman, and Philanthropist.

He is the Managing Director of Pabrai Investment funds, an investment fund based on the similar model to that of Warren Buffett’s Partnerships in the 1950s.

Since inception in 1999, this investment fund has given an annualized return of over 28% and hence has consistently beaten the S&P 500 Index.

What is ‘Dhandho’?

Dhandho is a Gujarati word, which means ‘Endeavour that creates wealth’. In simple words, a dhandho investor is a ‘wealth creator’.

“LOW RISK, HIGH RETURNS”

This is the central concept of this book.

The dhandho investor summaryMoreover, Mohnish Pabrai’s idea to invest in businesses with low risk and high returns makes perfect sense. Isn’t the main aim of any investment is to get the maximum returns with minimum risks?

Mohnish Pabrai explains this concept with the help of few case studies in the first few chapters. Here, he explained different successful investor who followed this low-risk framework to get highest returns.

The case studies include the stories of Patel’s that own over $40 billion in the motel assets in the United States, Richard Branson of Virgin Company, Laxmipati Mittal of ArcelorMittal- world’s largest steel making company and few more.

These stories presented in the book are really inspiring and broadens the reader’s eyes towards low-risk investing.

The Dhandho Framework:

In the book, Mohnish Pabrai describes 9 principles of the dhandho framework for low risk and high returns. Here are the principles:

  1. Focus on buying an existing business
  2. Invest in simple businesses
  3. Invest in distressed businesses
  4. Always invest in business with durable moats
  5. Few bets, big bets, and infrequent bets
  6. Fixate on arbitrage
  7. Margin of safety – always
  8. Invest in low-risk, high-uncertainty businesses
  9. Invest in the copycats rather than the innovators

I won’t go into detail about these principles here, as it will kill the fun of reading the book. Nevertheless, you have already got the basic idea of this framework.

Also read: 10 Must Read Books For Stock Market Investors.

What did I like about the Dhandho Investor?

The principle that I liked the most is ‘Few bets, big bets, and infrequent bets’. Here, Mohnish Pabrai suggests that every once in a while, you’ll encounter overwhelming odds in your favor. In such times, act decisively and place a large bet.

These are the scenarios where- “Heads I win; tails I don’t lose much”.

Bottom Line:

The Dhandho Investor is an amazing book to deepen the basics of value investing principles. The book is quite simple to read and complex investing principles are simplified in an easy-to-understand manner.

The Dhandho framework mentioned above helps in investing in low-risk businesses with high returns.

Overall, it’s a great read. I will highly recommend you to read this book to learn the principle of ‘low risk and high return’. You can buy this book on Amazon here

That’s all. I hope this book review on ‘THE DHANDHO INVESTOR’ by Mohnish Pabrai is useful. Happy Investing.

Tags: The dhandho investor book review, the dhandho investor book summary, Mohnish Pabrai Dhandho Investor, The dhandho investor summary

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

The Little Book That Beats the Market Book Summary

The Little Book That Beats the Market Book Summary

The Little Book That Beats the Market Book Summary:

“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”

― Joel Greenblatt, The Little Book That Beats the Market

The little book that beats the market is a classic value investing book, which was originally written in 2005.

This book educates a magic formula, which is simple yet effective and if patiently practiced, then is guaranteed to make profits in long run.

About the Author:

Joel Greenblatt is an American investor, hedge fund manager, and a writer. He started an investment company named ‘Gowtham capital’ in 1985. This firm has given an impressive 40% annualized return for a duration of 20 years from 1985 to 2006.

Joel has dedicated the book ‘The little book that beats the market’ to his children and hence is written in a simple story-telling format, which anyone can read and easily understand.

‘The little book that beats the market’ became an instant best-seller when published and over millions of copy of this book has been sold.

Joel is a long-term investor and generally holds the stocks for more than a year in his portfolio. He believes that the market can be erratic in short term, however, for the long-term stock market is quite efficient.

In addition, Joel has also created a website for magic formula investing which you can visit here.

The Little Book That Beats the Market Book Summary:

The book focuses on a magic formula which is based on two financial ratios- Return on capital and Earnings Yield.

1. Return on capital:

ROC = EBIT/ (Net working capital + Net Fixed capital).

Here, ROC is the ratio of the pre-tax operating earnings (EBIT) to tangible capital employed (Net working capital + Net fixed capital).

Joel Greenblatt has described why he used ROC in place of the commonly used financial ratios like ROE (Return on equity) or ROA (Return on assets). This is because, first of all, EBIT avoids the distortions arising from the differences in tax rates for different companies while comparing.

Second, net working capital plus net fixed capital is used in place of fixed assets as it actually tells how much capital is needed to conduct working of the company’s business.

Return on capital tells how efficient the company is in turning your investments into profits.

2. Earning yield:

Earning yield = EBIT / Enterprise value

Here, enterprise value is the market value of equity (including preferred shares) + net interest – bearing debt.

Earning yield how much money you can expect to make per year for each rupee you invest in the share.

Overall, ROC tells how good is the company and Earning yield tells how good is the price.

Also read: 10 Must Read Books For Stock Market Investors.

Next, here are the three steps suggested by the author Joel Greenblatt in his book ‘the little book that beats the market’ to find companies for investment:

  1. Find the earning yields and return on capitals of the stock to evaluate stocks.
  2. Rank the companies according to the above two factors and combine them to find the best companies for investment.
  3. Have patience and remain invested for the long term. Lack of patience is why people fail to implement the magic formula.

the little book that beats the market

How to use magic formula?

  1. Find the Return on capital (ROC) and Earning yield (EY) for all the companies.
  2. Sort all the companies by ROC.
  3. Sort all the companies by EY.
  4. Invest in top 30 companies based on the combined factors.
COMPANY SYMBOL ROC (RANK) EY (RANK) COMBINED (RANK)
A 1 153 154
B 2 35 37
C 3 37 40
D 4 480 484
E 5 13 18
F 6 127 133
G 7 78 85
H 8 512 520

Here, we try to find the companies with lowest combined factor rank.

For example, for company A, although it ranks 1 for the Return on capital. However, its earning yield rank is quite low and that’s why it’s combined rank is quite high.

On the other hand, for the company E, both ROC and EY rank are decent and hence its combined rank is good for investment.

Joel Greenblatt has researched on the top stock picks using this magic formula and found consistent good returns over long term.

Also read: How to get RICH? Rich Dad’s Cashflow Quadrant Summary

Conclusion:

The little book that beats the market is a nice read and an excellent place to start reading if you have never invested in stocks before.

The book is written in a very simple language and the concepts described in the book are time-tested.

You might think that why should I read the book when I have already given you the magic formula. This is because I have just explained a single chapter from the book. Think how much knowledge you can gain by reading the entire book.

Moreover, as the name of the book suggests, it’s a very little book with just 179 pages. You can easily read the book over a weekend and strengthen your financial concepts.

I highly recommend you to read this book, especially if you are a beginner. You can buy the book from Amazon. Here’s the link.

That’s all. I hope that this post on ‘The Little Book That Beats the Market Book Summary’ is useful to the readers.

Do comment below which is the best share market book that you have ever read.

New to stocks? Here’s an amazing online course for the newbie investors: INVESTING IN STOCKS: THE COMPLETE COURSE FOR BEGINNERS. Check it out now!

Tags: The Little Book That Beats the Market Book Summary, The Little Book That Beats the Market magic formula, The Little Book That Beats the Market Book Summary and review, The Little Book That Beats the Market review, Joel Greenblatt The Little Book That Beats the Market Book Summary

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

How to get RICH? Rich Dad’s Cashflow Quadrant Review

How to get RICH? Rich Dad’s Cashflow Quadrant Summary

How to get RICH? Rich Dad’s Cashflow Quadrant Summary:

‘RICH’ always fascinates the people. The fact that the 5% of the population holds the 95% of the total wealth is really captivating. What engages the people more is why only a certain group of people are able to become rich?

There are a certain group of people who achieve financial freedom in their 30s. On the other hand, there are many people who never enjoy the rich life no matter how much hard work they do. Why does this happen?

The answer is amazingly described in Robert Kiyosaki’s book- ‘Rich Dad’s Cashflow quadrant’ which I’m going to discuss in this post.

The Cashflow Quadrant:

Our working society is broadly divided into 4 kinds of people depending upon the work they perform. They are:

  1. Employee – They have a job i.e. they work for someone
  2. Self-employed- They own the job
  3. Business owners- They own a system/process
  4. Investors- They make their money work for them

cashflow quadrant ESBI

Each quadrant has their own advantages and disadvantages. Moreover, our society needs all kind of these people to work efficiently.

Let’s discuss few of the characteristics of each cashflow quadrant to understand them better.

1. Employee:

Tagline: “I need a safe and secure job with benefits.”
Core-value: Security

Majority of people work in this quadrant. This is the default way of living and probably the most difficult quadrant to get rich.

The reason why most people work in employee quadrant is that they are programmed to do so from the childhood. Most of the people get the same suggestion from their Mom/Dad while growing up- “Study hard, find a high paying job and have a secured life.

There is very few proportions of children who get advice to open their own business or to start investing, from their parents.

Moreover, our school, colleges, and university are also designed to create employees, who need security, live from pay-check to pay-check and want allowances.

For this group of people, job security is more important than the financial freedom.

Although you can become RICH working in this quadrant also, however it’s quite tough compared to the other cashflow quadrants.

2. Self-Employed:

Tagline: “If you want to do it right, you’ve to do it by yourself.”
Core-value: Perfectionism 

They are sometimes also referred to ‘Solo-People’. They own their job and many a time do all their work as they believe is ‘perfectionism’ and do not trust anyone else with the job.

Few examples of self-employed are doctors, lawyers, retail shop owners, small company owners etc.

They trade their time for money.

As compared to employees, who enjoy the benefits of medical allowances and paid leaves, the earnings of a self-employed are affected in case he fell sick. The self-employed people have to devote more time if they want to earn more. Their income is directly dependent on how much work they can do.

Their time is money.

In addition, for the self-employed people, their freedom is more important than the financial success.

Also read: 3 Amazing Books to Read for a Successful Investing Mindset.

3. Business-owners:

Tagline: “I’m looking for the smartest people in my company”.
Core-value: Make people work for them

This is one of the best quadrants to get RICH. This group of people owns the system or process, where people work for them.

According to Forbes, big companies are the ones with over 500 employees. However, it the recent time, this rule is not completely valid. There are a number of big companies now, which do not require 500 employees to work. For example, WhatsApp is a multi-billion company with even less than 50 employees working there.

As compared to self-employed, who can’t stop working if he wants a regular income, the business owners do not need to trade his time with money as he owns the system. Even in their absence, their employee will work for them.

4. Investor:

Tagline: “I’m looking for a good investment.”
Core-value: Makes their money work

Investors are the forth and the highest level of the cashflow quadrant. You cannot jump into this quadrant without being successful in one of the three quadrants discussed above.

The investors are one of the most financially free group and they make their money work for them. They invest in businesses, stocks, real estates etc.

Most of the time, the investors do not need to get directly involved in the working of the business or assets where they invest, and hence they get plenty of time and freedom.

Which side of Cashflow Quadrant should you be?

Now that you have understood the core values of people from each of the quadrants, here is a quick difference between the people on the right side and the left side of the quadrant.

Left side of quadrant Right side of Quadrant
Employees (E), Self-employed (S) Business owners (B), Investors (I)
Difficult to get rich Easy to get rich
Their core value is Security. Their core value is FREEDOM.
This side consists of 95% of the population with less than 5% of total wealth. This side consists of 5% of the population with more than 95% of total wealth.
They trade time with money. Their money is not dependent on time. They make their money work.

rich-dad-cashflow-quadrant-robert-kiyosaki

Conclusion:

Here is the conclusion for the working class distribution in different quadrants:

  • If you have a job, then you are an Employee (E).
  • If you own a job, then you’re Self-Employed (S).
  • If you own a system/process where others work for you, then you’re a Business owner (B).
  • If your money works for you, then you’re an Investor (I).

It’s possible to become rich on all four quadrants or remain poor in any.

However, it’s comparatively easy and fast to become rich when you’re working on the right-hand side of the quadrant i.e. business owner and investor side.

Nevertheless, you do not need to shift to another quadrant entirely at once. You can keep your feet to two or more quadrants.

For example, if you are an employee, you can still jump to the right side by starting to invest. You can be

  • Employee + Investor
  • Employee + Business owner
  • Self-Employed + Investor

how to get rich

However, the best way to get rich is when you’re entirely on the right side of the cashflow quadrant i.e. you are a “BUSINESS OWNER + INVESTOR”.

In addition, when you try to jump quadrants, make sure to learn the new skills and mentality as every quadrant requires a specific skill. Depending on how long you’re in the last quadrant, it can be pretty tough to jump to next one.

Nevertheless, you can always acquire the new skill required to jump to the right side.

If you want to join the new rich and ready to start your learn to invest from scratch, feel free to check out my online course- INVESTING IN STOCKS: THE COMPLETE COURSE FOR BEGINNERS. I’m confident that it will kick-start your share market journey.

That’s all. I hope this post is useful to you.

Do comment below which quadrant you’re currently in and to which quadrant you want to see yourself in future.

Tags: Cashflow quadrant Robert Kiyosaki, cashflow quadrant review, cashflow quadrant summary, rich dad cashflow quadrant

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

Common stocks and uncommon profits book review

Common stocks and uncommon profits book review

Common stocks and uncommon profits book review

Hi investors! In this post, I’m going to give you the book review of ‘Common stocks and uncommon profits’ by Philip Fisher. The book is an evergreen classic and was originally published in 1958.

The author of the book, Philip Fisher was a very successful investment legend of his time. He had a great influence on Warren Buffet, the billionaire investor and one of the richest person on this planet. Buffett himself has stated he is “85% Graham and 15% Fisher.”

*Graham was Warren Buffett’s mentor and also the known as the father of value investing.

Also read: The Intelligent Investor by Benjamin Graham Summary & Book Review

Before we start the common stocks and uncommon profits book review, let me first give you a small introduction to Philip Fisher.

Phillip Fisher started his investment journey in 1928 after dropping out of the Stanford Business School to take a job of the securities analyst. He started his own company ‘Fisher and company’ in 1931 and worked there till 1999 at an age of 91.

Philip Fisher was interested in growth stocks. His philosophy was to invest in well managed high-quality growth stocks for long term.

Apart from ‘common stocks and uncommon profits’, the other famous writings of Philip Fisher are:

  1. Conservative investor sleep well (1975)
  2. Developing an investment philosophy (1980).

Now, that you have got little knowledge about the author Philip Fisher, let’s move to continue our book review.

Common stocks and uncommon profits book review:

The book ‘Common stocks and uncommon profits’ was a hit when first published and Philip’s idea of growth stock investing became instantly popular.

In the book, Philip Fisher described ‘what to buy’ for high-quality stocks, where he called these stocks as ‘Scuttlebutt’.

Scuttlebutts are those common stocks which have gone through a detailed analysis like the study of its promoters, suppliers, customers, stakeholders, employees, competitors etc to find out about company’s future prospect.

The most important chapter of the book is ‘What to buy’ where Philip Fisher described his famous ’15 points to look for a common stock’.

In this chapter, Philip Fisher describes the different factors to check for a common stock like validity of products/services for long life, management efficiency to continue growth and increase sales, Research and development center of the company w.r.t. its size, sales organization, profit margin, improving profit margin, labor & personnel relations, executive relations, cost analysis and accounting controls, competitors, and transparency & integrity of the management.

The next key chapter is ‘when to sell’ where Philip Fisher argues that the best time to sell a good stock is ‘never’ as long as the company behind the stock maintains its characteristics of a usually successful enterprise.

The other important chapters of the book is ‘When to buy’, ‘Hullabaloo about dividends’ (Philip Fisher suggests that the dividend consideration should be given the least, not the most, by those desiring to select outstanding shares), ‘Five don’ts for investors’, and ‘How I go about finding a growth stock’.

Summary:

The book attempts to show what to buy, when to buy and when to sell for those who are desiring to get uncommon returns on their investments.

Overall, this is a good read to understand the fundamentals of growth investing. I will definitely recommend reading this book.

Grab a copy of ‘Common stocks and uncommon profits’ on Amazon here.

philip fisher quote

That’s all. I hope this post on ‘Common stocks and uncommon profits book review’ is useful to the readers.

Also read: 10 Must Read Books For Stock Market Investors.

Further, comment below which is the best book on investing that you have ever read.

Tags: Common stocks and uncommon profits book review, Common stocks and uncommon profits book review by Philip Fisher, Common stocks and uncommon profits book, Common stocks and uncommon profits by Philip fisher, Common stocks and uncommon profits summary

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

Value Investing and Behavioral finance by Parag Parikh- Book Review

Value Investing and behavioral finance by Parag Parikh- Book Review

Hi Investors! Today I’m going to give you the book review of ‘Value Investing and behavioral finance by Parag Parikh’. I have been reading this book for last few days and now that I have completed it, here is the book review. Stay tuned.

Related post: 10 Must Read Books For Stock Market Investors.

Value Investing and behavioral finance by Parag Parikh- Book Review

“Those who do not learn from history are condemned to repeat it” – Santayana

This book is quite compelling for value investors and covers a number of fundamental concepts.

The best part is that the book focuses on Indian stock market and all the chapters are explained with the help of Indian stocks.

The book is well structured and contains 12 chapters. Here are they:

  • Success and failure
  • Understanding behavioral traits
  • Behavioural obstacles to value investing
  • Contrarian investing
  • Growth Trap
  • Commodity investing
  • Public sector units
  • Sector investing
  • Initial public offerings
  • Index investing
  • Bubble trap
  • Investor behavior based finance.

Although there are great learnings from every chapter, however, I am going to give you the brief summary of few of them, so that it won’t kill the fun when you read the book.

In the first chapters, Parag Parikh explains why people fail while investing. He gives the explanation using the human nature of laziness, greed, self-interest, ignorance etc. One of the main reason for the failure of people that he explained is ‘unwillingness to delay gratification’. The instant gratification causes the vast majority of people to indulge themselves in short-term gain for long-term pain.

A new term about investing that I learned from this book by Parag Parikh is ‘Heuristics’.

Heuristics is the shortcut that brain takes when processing information. Our brain does not process full information. This leads to cognitive bias. Some common valuation heuristics are- Price to earnings heuristics, Price to book value heuristics and price to sales heuristics.

Contrarian Investing:

The fourth chapter is an interesting one and covers the concept of contrarian investing.

A contrarian investor can be defined as the one who attempts to profit by betting against conventional wisdom, but only when consensual opinion appears to be wrong. What really differs a contrarian investor is his emphasis on looking for opportunities where the sensual opinion has led to mispricing.

Parag Parikh explains how contrarian investors have outperformed the other investors in a long run. He clarifies the difference between a value and contrarian investor. Further, he also suggests why it’s difficult to follow contrarian investing with the behavioral reasons of group thinking, false consensus effects, ambiguity effect, herding etc.

Growth Trap:

In the chapter growth trap, Parag Parikh supports the concept of value investing over growth. He argues that many investors get trapped in growth investing without totally understanding the history and behavior of growth stocks. He explains the various reasons for growth trap like going with the herd, peer pressure effect, overconfidence bias, bystander effect etc.

Also read: Growth Stocks vs Value stocks – A logical Comparison

The myth of IPO investing:

The concept of IPO investing is explained in chapter 9 of this book. Parag Parikh suggests that there has always been the craze of new things among the public like the latest dress, latest bikes, latest cars etc. He argues that even the investors are not free from this behavior and easily get influenced by the listing of a new company or a new emerging sector.

However, investing in IPOs is not a good idea for the value investors. Parag Parikh explains this with the help of a study he conducted on the long-term performance of IPOs from 1991 to 2006. The study showed a disappointing picture.

From a total of 3122 IPOs which got their initial public offering in this period, only 1540 managed to remain listed. More than 50% of the companies either got delisted, merged, bankrupted or vanished.

Further, more than 56% companies from this list of 1540, gave negative returns in the long term. Only 15% of 1540 companies gave return more than Sensex.

Parag Parikh concluded that the IPOs are the byproducts of the bull market and a long-term investor should be very cautionary while investing in IPOs.

Commodity, PSUs, and Sector Investing:

There are also full chapters on commodity, PSUs, and sector investing.

In the public sector units chapter, Parag Parikh explains the common perception of the stock market towards PSUs, advantages, and disadvantages of investing in PSUs etc.

In the sector investing chapter, he coverers top-down analysis approach and sector investing. Here, Parag Parikh analyzed different sectors like automobile, banking, real-estate, telecommunications, FMCG etc and explained its past performance with future expectations. It’s a good read for all those who want to study the performance of different sectors or are interested in investing in a particular sector.

In the index investing chapter, Parag Parikh argues how the market index, over the long term, has given a better return than over 90% of actively managed mutual funds. He explained this with the help of returns from the indexes- Sensex and nifty.

Also read: What is Nifty? Nifty Meaning Explained for Beginners.

Conclusion:

Overall, In this book- ‘Value investing and behavioral finance’, Parag Parikh focused on value investing and manifests that over the long term, value stocks have given best returns to its investors.

The book educates the readers about the much-needed topics that are ignored by most financial websites, books, and media. It’s definitely one of the best books on value investing based on Indian stock market.

I highly recommend the readers to read this book to get the best insights into Indian stock market. And its surely worthwhile reading it.

Grab a copy of ‘Value Investing and behavioral finance by Parag Parikh’ on Amazon here.

That’s all. I hope that this post on ‘Value Investing and behavioral finance by Parag Parikh- Book Review’ is useful and entertaining for the readers.

Please comment below- which is your favorite book on investing?

Tags: Parag Parikh, Value Investing and Behavioural finance, Value Investing and behavioral finance by Parag Parikh Book Review, Value Investing and Behavioral finance book Review, Value Investing and Behavioral finance book summary, Value Investing and behavioral finance by Parag Parikh book review and summary, Parag Parikh Value Investing and Behavioural finance Book Review, Value Investing and behavioral finance by Parag Parikh short review

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

Best seller author Prasenjit Paul on stock investing

Exclusive Interview: Best seller author Prasenjit Paul on stock investing

Exclusive Interview: Best seller author Prasenjit Paul on stock investing

Hello investors. Today we have a very special guest with us.

He is an investor, entrepreneur, and a best-selling author. His book ‘How to avoid loss and earn consistently in the stock market?’ is currently the best-selling book on Amazon.

I would like to welcome- Prasenjit Paul!!

Let me give you a brief introduction about Prasenjit. He is a software engineer by qualification with bachelors of engineering degree from IIEST, Shibpur.

He started investing from an age of 18. Due to his passion for stock market, he left his job at IBM on the first day to pursue his dreams in the investing world. Fast forward few years, and today he is running a successful equity advisory firm- Paul asset with clients from over 18 countries.

Guys, I would like you to join in the inspiring journey of Prasenjit Paul.

Q. Hi Prasenjit. My first question to you is an obvious one- How did you enter the world of investing?

While I was 18, my father told me about the stock market. After that reading books like “Rich Dad Poor Dad” and few others made me determined for taking the stock market very seriously.

Since then, I had spent my entire college life learning various aspects of the stock market. Although I was pursuing B. Tech in Information Technology, still I had completed around 25-30 books and countless websites related to the stock market.

Even I had started offering equity advisory service on Trial basis while I was in the final year. Thus even before my career took off in the IT field, I was ready for the career in the stock market solely through self-learning.

Q. Why did you quit IBM on your first day?

I had accepted the offer from IBM just to gather an idea of the working culture of the corporate world.

Once I interacted with few employees and visiting the office I was sure that I couldn’t give my 100% to an IT job. Moreover, even after spending in an IT job for 5-10 years, I didn’t foresee financial freedom or any meaningful reward.

Thus, I made my mind to take the risk of quitting fixed salary routine.

It was a very tough choice because of two reasons. Firstly, my parents, relatives and others were never in support of business instead all of them favoured corporate job. Secondly, during that time, I was not earning even fraction of the amount that IBM was offered.

However, I took that risk and later it paid off very well!

Q. When did you start ‘Paul Asset’ and how long were you running the business before you started paying yourself?

I had an edge because I started Paul Asset during my college days and during those days I have no such compulsion of paying myself.

Even after leaving college I had no liabilities like EMIs, paying to parents, rent etc. So, even with any amount of money, my target was to just stick to the target.

I was confident that with true dedication sooner or later your hard work pays off. So, the point is the earlier you start, the higher would be the reward.

Every aspiring entrepreneur should begin the journey during their teenage or during the early twenties. With the growing age, it becomes difficult.

Q. Walk me through the step-by-step process that you went through after quitting your job, to get to where you are today?

Actually, I had started the journey much before quitting my job.

Apart from Paul Asset, I had even attempted two other business ventures during college days and failed badly. My target was to become an entrepreneur so within the college life itself I had attempted various ventures and later Paul Asset clicked while rest others failed.

So, the point is to keep trying. No matter how talented you are, you can’t be successful in business with just one attempt. I just stick to the basics. Irrespective of failures, setbacks, depression, monetary loss, you have to keep trying with full dedication while keeping morals intact.

Sooner or later Success will be yours.

Q. When did you decide to write a book? Tell us about your journey from a novice to the author of the best-selling book on stock market investing.

I had purchased the domain www.paulasset.com in the year of 2011 while I was in the 2nd year of my Engineering. Initially, the target was to write blogs on the Stock Market and monetise via Google Adwords.

Fortunately, Google rejected few times while I submitted my blog and that inspired for starting subscription-based advisory service.

Today, the advisory revenue is so big that I can’t even consider Google Adwords. Inspite of rejection from Google, I noticed that almost all of my readers liked my writing style. That inspired me writing a book to reach the larger audience.

It took me more than two years to complete the book “How to Avoid Loss and Earn Consistently in the Stock Market”. The way people liked the book was also beyond my imagination.

Since the last few years daily on average 50+ copies are being sold!

Writing a book is very difficult because you need months-long concentration and patience, unlike a blog post that can be completed in one day itself.

After the massive success of my first book, I am also working on the second book (not directly related to the stock market but related to the Money). However, due to my current schedule, I can rarely concentrate over a very long duration of few weeks and be realising the real challenge of writing books!

If you haven’t checked out his book ‘How to avoid loss and earn consistently in stock market’ yet, here is a link on amazon. I personally recommend you to read this book if you want to learn investing in Indian stock market from scratch.- Kritesh

Q. How do you start your workday? What’s like a day in the world of an investor?

I have a relaxed work schedule.

Although with the growing business, I have to look after so many things, work on multiple things simultaneously still it never created pressure on me. I never keep sitting in front of trading terminal.

Daily price fluctuation doesn’t affect me at all.

I start my day with reading newspaper or magazines and then as usual. What I learnt from my own experience is that to become a successful investor you must have a calm and cool head.

Every day you will come across so many news, so many contradicting views. Many times your stocks won’t perform, you would stare at loss. In spite of all those, you have to keep your basics intact.

I also idolise MS Dhoni and try learning a lot from his temperament.

Q. What’s your investment strategy?

I prefer growth over value. While you are investing in one of the world’s fastest-growing major economy like India, you must have to put higher focus on the growth over value.

I generally prefer bottom-up analysis with long-term investing approach. I like companies where market size is huge enough to maintain the high growth rate with free cash flow generation while keeping light balance sheet.

And I never attempted short term, intraday trading, Futures and Options etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.

Q. Who do you admire the most in stock market world?

I can’t take one or two names. I admire and try to learn a little bit from many renowned personalities including sports person, businessman, authors and even politicians. There is something to learn from any successful persons in any field.

Among Indian investors, I admire Ramdeo Agarwal, Vijay Kedia, Porinju Veliyath and Basant Maheswari.

Outside India, I have deep respect for Warren Buffet, Charlie Munger, Peter Lynch and many others.

Having said that I never attempted following any particular investor’s principles because I know I can’t be another Warren Buffet or Ramdeo Agarwal. So, I must have to be myself, and that is very important. Thus, I admire many successful personalities, try learning a little bit from all of them and finally be myself.

Related post: 3 Insanely Successful Stock Market Investors in India that you need to Know.

Q. What are your favourite books on stock market?

Again, I can’t name any single book. I try to keep learning from many books, magazines, websites etc.

Few of my favourites books are, “One Up on Wall Street“, “The Intelligent Investor“, “The Little Book of Valuation“, “Dhando Investor” etc.

Although not directly related to the stock market but the book “Rich Dad Poor Dad” motivated me a lot for starting my investment journey during college days. I strongly recommend the book “Rich Dad Poor Dad” to all youths.

Even outside stock market, I owe much of my success to the authors like Robin Sharma, Shiv Khera, Robert Kiyosaki and many others.

Also read: 10 Must Read Books For Stock Market Investors.

Q. What is still your biggest challenge?

The biggest challenge is to maintain the performance and reputation.

Since 2012, the brand Paul Asset helped many retail investors for the wealth creation. It makes me happy while I come to know that we helped many investors in reaching their personal goals like house, car, child’s education, marriage etc.

The biggest challenge is to maintain our own past performance for the next many decades. It is easy to score a century on three consecutive matches but very difficult to maintain 50+ batting average over few decades long Cricket career. Success is a journey, not a destination.

Q. If a newbie investor walked up to asking for your advice and you only had a few minutes to give ‘em your best tip, what would it be?

Practice, Practice and Practice.

You can’t be a successful investor just by reading 2-3 books. If you do, then it is only you are lucky in few particular instances, and it can’t be repeated, i.e. you can’t maintain the consistency.

Remember from Nursery to Graduation you have spent 18+ years to become successful in your current profession. So, there is no shortcut. With the advent of internet, everything at your fingertips but you have to work hard and give time to master any art.

Q. What’s next for you?

From the beginning, my target was to add values while keeping morals intact. Name, fame and money would automatically follow. So, the next is also value creation keeping the morals intact. Everything else would automatically follow.

Q. Thank you so much Prasenjit, for sharing your valuable time and knowledge. Anything else that you would like to share with our readers?

Keep doing whatever you believe for yourself. Successful journeys are always filled with obstacles. Successful peoples are not Lucky. Instead, Luck is attracted towards them for their honest dedication and hard work.

Whatever you are today is the result of your last 5-10 years. So, if you really want a better future for yourself on any field, make sure to dedicate at least 5-10 years while keeping morals intact. Good Luck!

———————————————————

Thank you so much Prasenjit for sharing your time. Your journey is truly inspiring for all the new and old investors.

Let me quickly summarize few of the learnings from Prasenjit Paul:

On life and goals:

  • Follow your dream.
  • Start as early as possible.

On investing:

  • Many times your stocks won’t perform, you would stare at loss. In spite of all those, you have to keep your basics intact.
  • Prefer growth over value. While you are investing in one of the world’s fastest-growing major economy like India, you must have to put higher focus on the growth over value.
  • Avoid short term, intraday trading, Futures and Options etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.
  • Finally, Practice, Practice and Practice.

That’s all. I hope this interview is encouraging for all our readers to take their next step in the investment world.

Also read: How to Invest in Share Market? A Beginner’s guide

Do comment below if you have any questions. Will love to answer. 

#Happy Investing.

Tags: Prasenjit paul, how to avoid loss and earn consistently in stock market, interview with Prasenjit Paul, Paul asset, Prasenjit paul asset advisory firm

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

3 Amazing Books to Read for a Successful Investing Mindset

3 Amazing Books to Read for a Successful Investing Mindset.

3 Amazing Books to Read for a Successful Investing Mindset:

Hi Investors! Today we are going to discuss something different from my usual posts.

In the past few years, since I started investing, I have met a number of people who asked me why I am investing in stocks on my own. Why don’t I just choose a SIP or mutual fund? Why do I put so much work in my brain when someone else can do it?

While I try to explain them the importance of managing their own financials, I find it little difficult with few people.

This is not because of lack of education or their background in different industry/sector. Many of my friends with similar qualifications like me are ignorant towards their own financial situation.

The main reason for these people having such struggles is an unhealthy (or unwilling) mindset towards investing. Their mind is untrained towards the importance of investing and the wonders investing can do in creating wealth.

Therefore, today I am going to suggest 3 amazing books to read for a successful investing mindset.

These books will guide you, motivate you and open your eyes for a healthy mindset for investing.

Here are the 3 books that we are going to discuss in this post.

  1. Think and grow rich by Napoleon Hill
  2. The Richest man in Babylon by George Clason
  3. Rich Dad Poor Dad by Robert Kiyosaki

I personally recommend you to read all of these books as the principles & lesson described in these books can help you a lot to tackle financial problems throughout your lifetime.

3 Amazing Books to Read for a Successful Investing Mindset

1. Think and Grow Rich

think and grow rich by napoleon hill

Think and grow rich is a 1930’s classic that is still the best selling in 2017. The lessons from this book proved out to be time-tested i.e. applicable at any time.

The first edition of this book was originally published in 1937. This book was written by Napoleon Hill at the suggestion of Andrew Carnegie.

Andrew Carnegie proposed to Napoleon Hill to interview 500 greatest men in the 20th century who were rich and successful in their industry. Carnegie offered to provide the fund for traveling and meeting these personalities in exchange of Hill’s time. He wanted Napoleon to study the common traits among all these rich and successful peoples.

It took Napoleon Hill almost 20 years to interview all the 500 people. He interviewed Henry Ford, JP Morgan, Alexander graham bell, Thomas Edison, Theodore Roosevelt and many other famous personalities. He finally summarised his studies from the interview in the book- ‘Think and grow rich’.

In this book, the author Napolean Hill educates 13 principles required in a person in order to become RICH.

Thirteen Principles: The Power of thought, Desire, Faith, Auto-suggestion, Specialized knowledge, Imagination, Organized planning, Decision, Persistence, the Power of the mastermind, the Mystery of sex transmutation, the Subconscious mind, and the Sixth sense.

Let me cover two principles described in the book here. I won’t be covering all as it will kill the fun of reading it:

A) The Power of Thought:

power of thought

In this section, Napoleon Hill describes how your thought can help you achieve what so ever you want in your life.

To explain this, he gave an example of Edwin Barnes, who wanted to do a partnership with Thomas Edition. Let me be clear here. he wanted to do partnership- not ‘work with’ or ‘work for’ Thomas edition.

When the thought was originally generated in his mind, he didn’t know Edison. He lived miles away from where Edison lived. He didn’t have money or resource to meet Edison.

However, the thought was so persistent that even after facing a number of obstacles, several years later, he became partners with Thomas Edison.

He had a partnership in the Edison’s dictating machine as a distributor. In short, his thoughts provoked his desires to achieve what he truly wanted in his life.

B) Burning Desire:

burning desire

Napoleon Hill considers this trait as the most important of all to become rich and successful.

A burning desire is not about wishing, it is about wanting.

A wish might not get fulfilled, however if you want something passionately, you will find a way to get it.

In this section, Hill conveys the readers to ensure that the ‘want’ becomes ‘desire’.

Further, Hill proposes to develop a clear and concise statement of desire – What do you want and when you want it.

If you want money, then be specific about the amount that you want and time frame when you want it. For example, if you want to become a crorepati, be specific that you want to earn 1 crore by 1st January 2020.

Besides, you need to revisit the desire often to imprint it in your mind. Read the statement twice daily, in the morning and in evening.

In addition, you need to create a specific plan to reach your goal and you need to start taking steps immediately.

If you want to meet your desire, you have to sacrifice something. This might be your time, money, fun with friends or anything worthy.

TEMPLATE:
I want to earn ____________ by ______________ and for that I am will to _________________.

Overall, create a burning desire of what you want if you want to become successful.

These are the two out of thirteen principles taught in the book. Apart, there are many important lessons in the book that will help you to develop your mindset for a successful life ahead.

2. The Richest Man in Babylon

The Richest Man in Babylon is one of the best classic personal finance books that I have ever read.

The lessons in this book are pretty simple and effective.

The book consists of different stories from the Babylonian days. Few of stories for the collection are- The richest man in Babylon, Goddess of good luck, The gold lender of Babylon, The camel trader of Babylon etc.

The one story that I particularly liked was the story of a Babylonian slave who was extremely poor with lots of debt. He later learned the rules of gold and with the newly acquired wisdom, he turned out to be one of the richest men in Babylon.

Here are three of my favorite lessons learned from this book:

1- Pay yourself first.

gold

Save at least 10% of what you earn. You have earned the money from your hard work and it’s your right to pay yourself first.

Pay yourself first, and then you give it to anyone you want to, like your landlord, your maid, restaurant owner, laundry guy etc. This is the rule no 1 of money.

Here is an abstract from the book about this rule:

“‘I found the road to wealth when I decided that a part of all I earned was mine to keep.’

‘But all I earn is mine to keep, is it not?’, I demanded.

‘Far from it,’ he replied.  ‘Do you not pay the garment-maker?  Do you not pay the sandal-maker?  And Do you not pay for the things you eat?  Can you live in Babylon without spending?  What have you to show for your earnings of the past month?  What for the past year?  Fool!  You pay to everyone but yourself.  Dullard, you labor for others.  As well be a slave and work for what your master gives you to eat and wear.  If you did keep for yourself one-tenth of all you earn, how much would you have in ten years?’ “

2- Only seek advice from those that are wise and knowledgeable in the subject.

Take the counsel of the better men and learn from their mistakes. Here is an abstract about this rule from the book:

“Counsel with wise men.  Seek the advice of men whose daily work is handling money.  Let them save you from such an error as I myself made in entrusting my money in the judgment of Azmur, the brickmaker.  A small return and a safe one is far more desirable than risk.”

3- “Better a Little Caution Than a Great Regret.”

A little caution with the money can stop you from lots of trouble in future. This rule advocates the readers to invest intelligently as it’s no good regretting later.

Books to read:The Intelligent Investor by Benjamin Graham Summary & Book Review

 In addition, the book also describes the laws of gold, which like the law of gravity is applicable everywhere and in every time period.

Here are the 7 simple rules of money:

  1. Start thy purse to fattening: Save money.
  2. Control thy expenditures: Live under your means. Do not overspend.
  3. Make thy gold multiply: Invest intelligently.
  4. Guard thy treasures from loss: Avoid bad investments.
  5. Make of thy dwelling a profitable investment: Own the property/house you live in.
  6. Ensure a future income: Have insurances.
  7. Improve thy ability to earn: Keep developing. Become wiser and knowledgable

Also read: 10 Must Read Books For Stock Market Investors.

All the lessons learned in this book are effective an easily implementable. I have read this book a number of times and is my personal favorite personal finance book.

I definitely recommend you to read this book. Check out more about ‘The Richest Man In Babylon’ by George S. Clason from Amazon here.

3. RICH DAD POOR DAD

This is the first mind-opening book that I read during my freshmen year in college. The book is a life changer. It made me realize the importance of financial education and how I have been ignoring this all my life.

The book describes the lack of financial education given to the kids. The problem with financial education is that it isn’t taught in school. Hence, the family has the responsibility to teach it.

However, the trouble is that unless your parents are in top 1%, they are going to teach you how to be poor. This is not because the poor don’t love their kids. It’s because they don’t know what they are teaching.

In the book, the author has two fathers. One his original father, who was poor. And the other was his friend’s father, who was rich. Kiyosaki describes how the lessons given by both his fathers were totally contrasting.

rich people

At a very young age, Robert Kiyosaki decided to listen his RICH dad instead of his highly educated POOR dad.

Few of the important lessons learned by Kayosaki from his rich dad are:

1. Always invest in assets: You should increase your assets and reduce liabilities. According to Robert Kiyosaki

  • An asset is anything that puts money in your pocket.
  • A liability is anything that takes money from your pocket.

Assets can be a business, real estate, paper assets like stocks, bonds etc. Whereas liabilities can be your expensive car, the big house bought on the mortgage, iPhone etc.

2. Poor work for money and Rich make their money work for them.

3. Poor only have expenses, middle-class people buy liabilities and rich invests in assets.

Related Post: Rich Dad Poor Dad Summary- Lessons by Robert Kiyosaki

Apart, there are many important lessons in this book which will teach you why Rich are getting richer, and poor will remain poor.

This is an amazing classic by Robert Kiyosaki and highly recommendable to read.

Conclusion:

All the three books mentioned in this post is classic and time-tested. They will open your eye towards the personal finance and help you to create a successful investing mindset. I highly recommend you to grab a copy of each one of them and start reading.

That’s all for today. I hope this post on “3 Amazing Books to Read for a Successful Investing Mindset” is useful to the readers.

Do comment below which one is your favorite personal finance/ self-help book?

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

One up on Wall Street By Peter Lynch

One up on Wall Street By Peter Lynch Book Review.

One up on Wall Street By Peter Lynch Book Review:

“Invest in what you know”

“Investing without research is like playing poker and never looking at cards.”

“Invest in what you know. It leaves out the role of serious fundamental stock research. People buy a stock and they know nothing about it. That’s gambling and it’s not good.”

-Peter Lynch

This book is one of the best book published on stock market investing and an all-time best seller. The book was originally published in 1989 by Peter Lynch.

First of all, let me give you an introduction to Peter Lynch if you already do not know him so. Peter Lynch is an American Investor and a former fund manager.  He was the manager of the Magellan fund at Fidelity Investments between 1977 and 1990. During this period, Lynch averaged a 29.2% annual return on the investments. This return was consistently double than the market index. Apart, during this period of 13 years, the asset under the management which was originally $18 million in 1977 increased to $14 billion. He is one of the rare fund managers who gave a fairly good return to their investors for 13 years in a row.

Also Read: 10 Must Read Books For Stock Market Investors

One up on the Wall Street By Peter Lynch book reviewIn the book ONE UP ON WALL STREET, Peter Lynch gives advice about how a common person can get great returns from his investment in the stock market. Lynch believes that with a little research and steady discipline, every common person can surpass the so-called investment gurus.

Peter Lynch is advocates the idea of ‘Invest in what you know’. He suggests that many great investments could be right under the nose. Common people just have to look around to grab those opportunities. An average person is exposed to interesting local companies and products years before the professional investors and if they invest in what they already know, they will surely get good returns.

Now let us understand what ‘Invest in what you know’ really means:

Suppose, you are a doctor. You are interested in buying a stock. Then you went back home and searched a petroleum stock, that you think is good and invested in it.Assume, there is another investor who works in a petroleum rig and he is also interested in investing. He also goes back home and searched for an appealing pharmacy stock and invested his money in it.

What do you think the outcome of both the investments will be?

It’s most likely that both these investors will give below average returns. The doctor, who has a good knowledge of pharmacy sectors and knows which new medicines are doing great for patients, invested in the petroleum stocks.

On the other hand, the person who works on a rig, and knows a great deal about oil & gas sector, his competitors, the future of the sector, which petroleum company is doing great etc decided to invest in pharmacy instead of oil and gas sector.

If only, they have invested in what they know, it’s highly likely to get a decent return for both the investors.

Peter Lynch further calls this as ‘taking advantage of what you already know’.

One up on Wall Street By Peter Lynch Key Advises:

There are a number of great investing advises given by Peter Lynch in this book. Here a couple of those advises:

  1. ‘Only invest what you could afford to lose without that loss having any effect on your daily life in the foreseeable future’.
  2. There are few qualities which are required for a successful investor. They are Patience, self-reliance, common sense, open-mindedness, tolerance to pain, detachment, persistence, humility, flexibility, willingness to do independent research, an equal willingness to admit to mistakes, and an ability to ignore general panic.
  3. Invest in companies, not the stock market.
  4. Ignore short-term fluctuations.
  5. Do not try to predict the economy. A great many personalities have failed. Predicting the economy is futile.
  6. Large profits can be made in the stock market. Large losses can be made in the stock market.
  7. ‘If you want to avoid a single stock, it would be the hottest stock in the hottest industry’. Boring stocks gives the best results.

Further, in this book, Peter Lynch also describes 6 types of stocks which are found in any market. I have also written a post about the different type and you can read more about it here: Six Different Types of Stock in Indian Market according to Peter Lynch.

Other Key  Points:

Peter Lynch also gives describes how to choose a stock and the things to consider before buying the stock. In his ‘The two minute drill’ in the book, Lynch gives a simple drill that every common investor should use before buying the stocks. This book also gives advice about how long to invest and when to sell. Alongside, in chapter 18, one of the best chapters in the book, he narrates about the twelve silliest (and most dangerous) people say about the stock market.

Overall, ONE UP ON WALL STREET by Peter Lynch is a must read the book for all the stock market beginner investors. Peter Lynch’s thesis in the book is simple, logical, pragmatic and easily replicable. All the common investors can get great benefits by reading this book.

If you want to buy this book, I will highly recommend you to buy it from this Amazon link. The book is selling on the best price currently at Amazon:
One Up On Wall Street: How To Use What You Already Know To Make Money In the Market

I hope the post ‘ONE UP ON WALL STREET By Peter Lynch Book Review’ is useful for the readers. If you have any doubts or suggestions, feel free to comment below. I will be happy to get a feedback.

One up on the Wall Street By Peter Lynch trade brains

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Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

rich dad poor dad book review

Rich Dad Poor Dad Summary- Lessons by Robert Kiyosaki

RICH DAD POOR DAD Summary- Lessons by Robert Kiyosaki: In the book ‘Rich Dad Poor Dad’, Robert Kiyosaki describes about his two fathers. The Poor dad was his real dad and the Rich dad was his friend’s dad. Here are the characteristics of his both fathers:

POOR DAD RICH DAD
He was a highly educated person with a PhD degree. He never finished his 8th Grade.
The Poor Dad gained a good substantial salary from his job. The Rich Dad used to acquire and run businesses.
He was financially ignorant and used to struggle financially. He was going to become one of the richest men in Hawaii.
The Poor dad always said ‘I cannot afford it’. The RICH dad used to say ‘How can I afford it?’
He was going to leave huge bills to be paid for his next generation. He was going to leave a huge fortune for his next generation.

At a very young age, Robert Kiyosaki decided to learn from his RICH dad instead of his highly educated POOR dad.

The book describes about the lack of financial education given to the kids. The problem with financial education is that it isn’t taught in school. Hence, the family has the responsibility to teach it. However, the trouble is that unless your parents are in top 1%, they are going to teach you how to be poor. This is not because the poor don’t love their kids. It’s because they don’t know what they are teaching.

Therefore, let us learn from Robert Kiyosaki about financial knowledge that he learnt from his RICH Dad.

First we need to know about financial statements. Here is how the RICH Dad taught Robert about the difference between an asset and a liability in simple terms:

  • An asset is anything that puts money in your pocket.
  • A liability is anything that takes money from your pocket.

Easy, Right? Now, the trouble is, anything can be an asset or a liability. In the book Robert argues that ‘Your house is not always your asset’. Let us understand what he means by this.

If you own a house and you pay expenses for running the house like electricity bill, water bill etc, then it is a liability. The house is taking money out of your pocket. However, if you own a house and it brings thousands of rupees a month by renting it, then it is an asset. The house is putting money in your pocket.

The RICH Dad taught Robert Kiyosaki to always invest in assets. Assets can be a business, real estate, paper assets like stocks, bonds etc. Whereas liabilities can be your expensive car, big house bought on mortgage, iPhone etc.

RICH DAD POOR DAD SUMMARY: THREE MOST IMPORTANT LESSONS

LESSON 1: WHAT KIND OF EDUCATION TO GET?

Poor RICH
·Poor Dad advised Robert to get a good education so that he can get a high paying job.

·POOR believe in conventional education.

·RICH Dad advised Robert to get a great education so that he can start his own business or buy businesses.

·RICH believe in financial education.

 LESSON 2: WHAT KIND WORK YOU SHOULD DO?

POOR RICH
·POOR work for money {believes is getting a job and work entire life}.

·They work for employer, government & bank.

·They are driven by FEAR & GREED. Fear of losing the job and greed of their next pay check.

·RICH do not work for money.

·They make money work for them. RICH owns business and leverages employees, government & bank for their advantages.

·They are driven by themselves.

 LESSON 3: HOW TO INVEST AND SPEND YOUR MONEY?

POOR MIDDLE CLASS RICH
·The poor only have expenses.

·They don’t pay themselves.

·The middle class buy liabilities that they think as assets.

·They pay themselves last.

·The Rich only buys assets.

·They pay themselves first.

RICH DAD POOR DAD BOOK REVIEW

RICH always pays themselves first. That’s the key point that the RICH Dad taught Robert. Further, he also taught, “It’s not how much you make, it’s how much you keep.”

So, that’s the summary of the book. The book helps all those who do not have a RICH Dad and want to learn what the rich teach their kids about money – which the poor and the middle class do not.

If you haven’t read the book, I highly recommend you to buy ‘RICH DAD POOR DAD’ through amazon at this link. It is currently selling on best price here only through Amazon. Rich Dad Poor Dad: What the Rich Teach their Kids About Money that the Poor and Middle Class Do Not!

Conclusion:

RICH DAD POOR DAD Summary:

  • Financial Literacy is just as equal important as professional education.
  • Do not work for money. Make your money work for you.
  • Invest in Assets, not liabilities.

I hope this post ‘RICH DAD POOR DAD Summary- Lessons by Robert Kiyosaki’ is useful to the readers.

Do comment below what do you think about the lessons from this book.

Tags: Rich Dad Poor Dad Book Review, Rich Dad poor dad summary, Rich Dad Poor Dad Book review and summary, Key points Rich Dad Poor Dad Book review, rich dad poor dad summary and book review

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

The Intelligent Investor by Benjamin Graham Summary & Book Review COVER

The Intelligent Investor by Benjamin Graham Summary & Book Review

The Intelligent Investor by Benjamin Graham Summary & Book Review-

The Intelligent Investor by Benjamin Graham, also referred as the bible of the stock market, was originally written in 1949 by Benjamin Graham, a legendary investor and also known as the father of value investing.

Ben Graham was also the mentor and professor of well-known billionaire investor, Warren Buffett.

The 2006 revised edition of the book ‘The Intelligent Investor’ has added commentary by Jason Zweig, a famous wall-street investor, and editor. These added commentaries are used to relate Graham’s idea to the present world. It highlights that the book has time-tested techniques. The book has over 600 pages (although originally around 450-500 page but the added commentaries in revised edition increased the width of the book). Overall, it’s a classic book with added quick notes.

Why You Should Read This Book:

Warren Buffett (worth over 73.1 billion dollars) says- ‘This book is by far the best book on investing ever written’. Needless to mention that this book is Warren Buffett’s all-time favorite. He also admitted that the book helped him in developing a conceptual framework for his future investments and capital allocations. Further, he made the following remarks about the book in its preface:

  • Investing doesn’t require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework.
  • Pay special attention to chapters 8 & 20.
  • Outstanding results are based on three things – Effort, Research, amplitudes of the market (This book will allow you to profit from them, not participate)

NOTE: If you want to buy this book, I highly recommend you to buy through Amazon at this link. It’s currently on sale here- THE INTELLIGENT INVESTOR by Benjamin Graham

The Intelligent Investor by Benjamin Graham book has many valuable concepts and a must read for all the stock market investors. The first few chapters of the book are dedicated to the general concepts of the market. As the book was originally written in 1949, the book also consists of lots of details about the bonds, preferred stocks & inflation.

The next few chapters describe the methods to analyze stocks using ratios, balance sheet, cash flow etc. The second half of the book is of more importance for the stock investors as it explains the different strategies of the defensive & enterprising investors, along with chapters on management, dividend policy, and case studies.

Please also read: 10 Must Read books for the Stock Market Investors

The three main points covered in the books:

Although there are lots of proven concepts covered in the book, however, the key three points in the book- the intelligent investor by Benjamin Graham is summarized here:

1. Investing vs. Speculating:

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” – Benjamin Graham

Let’s understand this concept with the help of an example. Imagine you are planning to buy a printing press. Now, to buy this company you can use two approaches.

First, you visited the company, calculated the asset value of the printing shops, checked the total income and cash flow of the company, verified the effectiveness of the managers, calculated the total assets & liabilities and then lastly come up with a final price for the printing company.

The second approach is that you met with the owner and decided to pay the price whatever he is asking for.

From the example, we can establish the difference between an investor and a speculator. The Investor follows the first approach while the speculator follows the other. Here is the key difference between these two:

Investor Speculator
1.       Goes through proper analysis Does not meet these standards.
2.       Considers the safety of principle
3.       Gets adequate returns


Here is the quote about Speculators by Benjamin Graham:

the intelligent investor summary 5

2. The margin of Safety:

This is another one of the pronounced concept introduced by Benjamin Franklin. He says that one should always invest with a margin of safety. Let us understand this by an example.

Imagine you are in a construction business. You took an order to make a bridge, which can hold up to 8 tons. Now, as a constructor, you might consider making the bridge with an additional 2 tons of holding capacity so that it will not collapse in some extraordinary situation. Overall, you will make the bridge with a total of 10 tons of holding capacity.

Here, your additional 2 tons is the margin of safety.

In the same way, while investing we should consider this margin of safety. It is the central concept of value investing.  If you think a stock is valued at Rs 100 per share (fairly), there is no harm in giving yourself some benefit of the doubt that you may be wrong with this calculation. And hence, you should buy at Rs 70, Rs 80 or Rs 90 instead of Rs 100. Here, the difference in the calculated amount and your final price is your margin of safety.

Here is the quote about the importance of margin of safety by Benjamin Graham:

The Intelligent Investor by Benjamin Graham

3. Mr. Market

In the book ‘The Intelligent Investor’, Graham tells a story about a man he calls Mr. Market. In the story, Mr. Market is a business partner of yours (Investors). Every day Mr. Market comes to your door and offers to either buy your stake of the partnership or sell you his stake to you.

But here’s the catch: Mr. Market is an emotional man who lets his enthusiasm and despair affect the price he is willing to buy/sell shares on any given day. Because of this, on some days he’ll come to the door feeling jubilant and will offer you a high price for your share of the business and demand a similarly high price if you want to buy his. On other days, Mr. Market will be inconsolably depressed and will be willing to sell you his stake for a very low price, but will also only give you the same lowball offer if you want to sell your stake.

On any given day, you can obviously buy or sell to Mr. Market. But, you also have the option of completely ignoring him i.e. you don’t need to trade at all with Mr. Market. If you do ignore him, he never holds it against you and always comes back the following day.

The intelligent investor will attempt to take advantage of Mr. Market by buying low and selling high.  There is no need to feel guilty for ripping off Mr. Market; after all, he is setting the price. As an intelligent investor, you are doing business with him only when it’s to your advantage. That’s all.

The key point to note here is that though Mr. Market offers some great deals from time to time. Investors just have to remain alert and ready when the offers come up.

Mr. Market and Stock Market:

Now, like Mr. Market, the stock market also behaves in the same manner. The market swings give an intelligent investor the opportunities to buy low and sell high. Every day we can pull up quotes for various stocks or for the entire market as a whole. If you think the prices are low in relation to value, you can buy. If you think prices are high in relation to value, you can sell. Lastly, if prices fall somewhere in the grey area in between, you’re never forced to do either.

So, this is a value-oriented disciplined investing. Don’t fall victim to irrational exuberance if the underlying fundamentals of the company is strong. In short, do not react to the hyperboles of the market’s daily fluctuations. Don’t panic, don’t sell.

The Intelligent Investor by Benjamin Graham

Other key points from the book The Intelligent Investor by Benjamin Graham on the Investor and market fluctuations:

  • A common stock portfolio is certain to fluctuate over any period of time. The investor should be prepared financially and psychologically for this fluctuation. Investors might want to make a profit from market level changes. But this can lead to speculative attitudes and activities which can be dangerous. Anyways, if you want to speculate do so with eyes open, and knowledge that you will probably lose money in the end.
  • Graham’s Opinion on aggressive investing: The low probability of aggressive picks will out-weigh the gains collected over a long period of time. ‘The aggressive investor will expect to fare better than his passive equivalent, but his results may well be worse.’

That’s all. I hope this post about the ‘The Intelligent Investor Summary & Book Review’ is helpful to you. I will highly recommend you to get a copy of this book and start reading. There are many valuable concepts by Benjamin Graham that new and old stock investors should learn.

If you need any further help with the book or have any doubts- feel free to comment below. I will be happy to help you. Happy Investing!

The Intelligent Investor by Benjamin Graham

The Intelligent Investor by Benjamin Graham

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Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

10 Must Read Books For Stock Market Investors.

10 Must Read Books For Stock Market Investors

Although there are tons of website and millions of books on the topic ‘stock market’, however for the beginners (and sometimes even for the seasoned investors), it’s really hard to find a decent book that can build good fundamental knowledge on the stock market basics.

It’s really important to understand the basics regarding stocks before entering the market as lack of knowledge in this field almost always leads to a huge financial loss. Further, many times, loss of capital also leads to a decline in the morale of the investor.

Therefore, today I am going to present the names of 10 must read books for the stock market investors. So, be with me for the next few minutes while I give you a brief introduction (and short review) for each of the 10 must read books for stock market investors that are listed in this post. Here it goes:

Note: Please read this article until the end as there is a bonus waiting for you in the last section.

10 Must Read Books For Stock Market Investors:

1. One Up On Wall Street

This book is ranked one on my list of 10 must read books for stock market investors.

Peter Lynch, the author of this book, is one of the most successful fund managers with an average annual return of 30% on his portfolio for a period of 13 years. (A great record for a mutual fund manager).

This classic book explains all the important basics that a beginner should know before investing. From preparing to invest, how, when, whys to the long-term investment approach, everything is covered in this book. Here, Peter Lynch describes his stock picking approach for winning stocks.

In the book, Peter Lynch also describes the 6 different types of stocks in the market and how to approach them. You can read regarding the Peter lynch’s stock categories in details here: Six Different Types of Stock in Indian Market according to Peter Lynch

In short, go to amazon and buy this book. This book needs to be in your hand if you want to learn all about stock investment basics from scratch.

You can read a detailed review of this book here.

2. The Intelligent Investor


This is also known as the bible of the stock market. A must-read book written by the legendary Benjamin Graham, a.k.a. the mentor of the greatest investor of all time- Warren Buffet.

The book explains the fundamentals of the stock market from the view-point of value investors. There are three main concepts covered in this book.

First, the investing approach for a defensive investor and enterprising (aggressive) investor. The other two concepts introduced by Graham in this book are- Mr. Market and Margin of Safety for easy explanation of the market behavior and risk management.

I will highly recommend you to read this evergreen classic book on the stock market. There are many concepts that you can learn by reading this book. I have already read this book 2 times.

A little advise. This is the oldest book in my list of ’10 Must Read Books For Stock Market Investors’, compared to the publication date of other books. As this book was written way back, you might feel like reading the 1940’s story. Further, it might be a little tough to maintain the momentum in the starting as few chapters are irrelevant to Indian stock market (you can ignore those chapters). However, the knowledge gained from completing the book will be worth it.

You can read a detailed review of ‘The Intelligent Investor’ here.

3. Beating the street


Another classic by Peter Lynch, the star mutual fund manager of the Magellan fund at Fidelity Investments. An Excellent book for individual investors looking to tap the stock market for long-term value investment opportunities. A good reference to go back to when trying out investing on your own.

It explains the fundamentals of picking your stock in a very simple language and hence listed in my 10 must read books for the stock market investors.

4. Common Stocks and Uncommon Profits


One of my favorite book regarding growth stock investment appraoch. This book was published almost the same time as ‘The Intelligent Investor’ by Ben Graham.

  • The book explains the investment philosophy of how ‘Philip Fisher’ finds growth stocks that lead to massive gains if held for long term.
  • The important chapters is the book- What to buy, where to buy & When to sell.
  • Philip Fisher also explains about the 15 points to look for in a common stock.
  • A great read for growth stock investors.

When most of the stock market investors were focusing on value, Philip Fisher was the one of the first investors to focus more on growth. I won’t go into too much detail as to spoil the fun reading this book. This amazing book finds forth rank in my list of the 10 must read books for stock market investors.

You can read a detailed review of this book here.

5. The little book that beats the market


The book ‘The little book that beats the market’ describes a ‘MAGIC FORMULA’ for selecting stocks. This formula gave brilliant returns when applied by determined and patient investors.

The magic formula given by the author is an efficient way of selecting the stocks. The formula consists of two key factors. They are: Earning yield & Return on Capital. If you consider these two key factors for any stock market before investing, then the result will surely be amazing. Bdw, this formula is also applicable in the Indian stock market.

(Note: The book is really small with just 176 pages and hence the smallest book in our list of 10 must read books for stock market investors. A good read for short vacation or a weekend.)

You can read a detailed review of this little book here.

6. The Warren Buffet Way


This was one of the best books to learn Warren Buffett investing strategy! It gives a deep insight into the Warren Buffett way of investing in stocks.

Hagstrom covers all the necessary aspects to achieve similar success like Buffett that you can apply immediately to your own portfolio. The good thing about The Warren Buffett Way is the author tends to stay away from high faulting words that makes it understandable to anyone willing learn value investment.

With the classic Warren buffett investment strategies, the book found its way in the list of the 10 must read books for the stock market investors.

7. Stocks to Riches


A must-read book for Indian Investors. This book is written in a very simple and understandable language. The author ‘Parag Parikh’, writes the whole truth about stock markets in this book.

If you want to avoid the stock market beginner’s mistakes, then you should definitely read this book before entering the market. Remember, learning from your own mistakes is not free in the stock market world as a lot of money is at the stake.

This book is written in such a manner that even a fifth grader can understand. This makes this book a classic book of all time and in my list of 10 must read books for stock market investors.

8. Learn to Earn


This book gives you a great insight into the market, economy, and capitalization. Very well written & can be easily understood by people who don’t have commerce background. A great book to read if you are starting your journey in the stock market world.

9. How to avoid loss and earn consistently in the stock market


The author of the book Prasenjit Paul, explains the scenario of the Indian stock market and the winning strategies used by him for consistent returns from the market.

The book explains the basic of Investing in Stock in very simple and lucid terms. It also gives you a 2-min strategy to shorlist/reject stocks before detailed analysis. It’s good to first read this book and then invest. The book found a definite spot on our list of 10 must read books for the stock market investors.

Note: You can read a detailed interview with the author Prasenjit Paul here.

10. Stocks for the long run


One of the best book for the practical advice on investment which includes valuable excursion into the history of markets –

  • A good read for anyone wanting to invest for their long-term future without going to the other extreme of ‘buy and hold’ forever.
  • The book gives the reader a deep appreciation of the historical returns on stocks and bonds.
  • The author, Jeremy Siegel, makes a convincing case, that for long-term growth stocks are the best asset class to hold.
  • The book also states that actively managing a portfolio or trying to time the market is counterproductive, which can be indicated by historical returns of actively managed funds versus passive indices.

A very informative book and the last book in my top 10 must read books for stock market investors list.

Summary:

Here is a quick recap of all the books listed above.

Feel free to share it with your friends who you think can get benefits from this video:

Note: If you want to buy these books, I highly recommend you purchase online through Amazon at this affiliate link. They are currently at best price at sale here only through Amazon.

Books Amazon Link
One up on the wall street Buy Now
The Intelligent Investor Buy Now
Beating the Street Buy Now
Common Stocks and Uncommon Profits Buy Now
The Little Book That Beats the Street Buy Now
The Warren Buffet Way Buy Now
Stocks to Riches Buy Now
Learn to Earn Buy Now
How to Avoid Loss & Earn Consistently Buy Now
Stocks for the Long Run Buy Now

BONUS:

Here are few other books for investors which are also worth checking out. (Although this post is about 10 must-read books, however, I just cannot miss mentioning these books here).

Also read: 3 Amazing Books to Read for a Successful Investing Mindset.

That’s all. I hope that this post is useful to the readers.

If you think I missed any important book or recommend any additional book in the list, feel free to comment below. I will be happy to read it and write a review about it.

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst. I’m 23-year old and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting