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10 Finance Books All Investors Should Read

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Here's a list of books that address critical aspects of the marketplace.

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Editor's note: This article by Max Moore was originally published on See It Market.

Many of the books that have impacted the way I perceive the world and make decisions have come from the reading lists of others, so I thought I would share my top 10 finance books. Although many of the books and essays on my top ten reading list do not specifically address finance related topics, in my view, they address critical aspects of the marketplace.

Most importantly, they assist in understanding how people react in different situations. Personally, I love books that push my understanding of how the financial markets work, enhance my vision of where they are going, and relate these macro concepts to the micro world that I live in. Without a doubt, each of the items on my top 10 finance books have substantially contributed to my outlook on the world and life. Feel free to share your comments on this list, along with some of your favorite books and short-reads.

In no particular order:

My Top 10 Finance Books

Seeking Wisdom: From Darwin to Munger by Peter Bevelin

Although Seeking Wisdom is not explicitly a finance book, it is especially relevant to markets, as it deals with the psychology of the decision making process, common fallacies people make, and how it affects their behavior. It's very easy to switch on a Bloomberg terminal and look at an equity index, futures strip, or yield curve and get lost in the numbers while losing sight of the people behind those numbers. While they certainly are numbers, they are more accurately described as a representation of what people are doing and thinking. Seeking Wisdom fills that gap while helping you construct a framework of reasoning to identify with other's (and your own) misjudgments to improve your thinking. Although I found a cover-to-cover read very enjoyable, the book is also written such that it can be read selectively.

This Time Is Different: Eight Centuries of Financial Folly by Kenneth Rogoff and Carmen Reinhart

Carmen Reinhart and Kenneth Rogoff are the best economics professors I never had. This Time Is Different is a long, comprehensive review of the history of public finance in over sixty countries. Between the lines, this book is a textbook on sovereign balance sheet analysis, and a pasquinade of the 'wisdom' of many modern economists who consistently fail to study the past.

Many economists, notably Paul Krugman and Joe Stiglitz, always seem to have the prescription for all of our economic ills and spend a great deal of time prognosticating what will happen if those prescriptions aren't administered. Meanwhile, this book made my top 10 finance books because, simply said, Rogoff and Reinhart offer up what economists are supposed to do: observation and explanation. In doing so, they discover that the writing is on the wall when it comes to analyzing sovereign balance sheets and turn the lights on for all who are willing to read.

Principles by Ray Dalio

Ray Dalio is one of my hedge fund superheroes. Not because of his consistent alpha generation (in spite of an immense and growing portfolio), but because he understands the nature of success. Dalio starts his essay off by explaining the importance of having principles in life, what his principles are, and precisely how they apply to management (specifically at Bridgewater). The essay is a framework for answering three critical questions:
  • What do you want?
  • What is true?
  • What are you going to do about it?
This is a must-read for any recent graduate or current university student set on higher achievement in the field of finance; this was a no-brainer for me to include in my top 10 finance books and essays. Note that this essay is also available for free on the Bridgewater website (direct link here).

Thinking, Fast and Slow by Daniel Kahneman

The only way to improve the way you think and make decisions is to zoom out of your own mind and study it. Kahneman breaks down human thought into two groups: fast systems and slow systems. One is based on past experiences, emotions and intuition, while the other is based on facts and rationality (respectively). He explores the pros and cons of both, as well as how they affect our decision making in an economic context. This is a must-read for any active investor or trader.

Free to Choose: A Personal Statement by Milton and Rose Freidman

Despite not being alive for any portion of my lifespan where I was interested in economics, Milton Freidman joins the ranks of Rogoff and Reinhart as one of the best economics professors I never had. In Free to Choose: A Personal Statement, Milton and Rose present their views on equality, a laissez-faire marketplace and freedom. The topics covered in this book are more relevant today than ever, ranging from cradle to grave care (i.e. entitlements), inflation, labor unions, and the education system. Furthermore, the book highlights the anatomy of a crisis. Readers will find it hard to look at these issues in the same light after reading this exceptional book.
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