By Dan Ferris, editor, Extreme Value

Friday, May 27, 2016

If you search "investing" in Amazon's books department, you'll get more than 115,000 results.

But here's what Amazon – and almost everyone else – won't tell you about your search...

More than 99% of the investing books out there aren't worth the time it takes to read them.

Some books are just magazine articles that book publishers expanded into hundreds of pages of fluff. Some books are full of academic blather that doesn't apply to the real world. Some books are OK, but don't hold a candle to the best ones... so they aren't worth your time.

This is a major problem for people who want to build a basic investment education.

You want to build a foundation of basic stock market knowledge, but with tens of thousands of titles out there, where do you start?

If you're someone who realizes the power of education, I've written this list for you. Below is a list of the best easy-to-read books about how to identify great businesses... how much you should pay for them... and how you can use them to safely compound your wealth for a long, long time.

•	The very first investing book I recommend anyone read is The Elements of Investing, by Burton Malkiel and Charles Ellis. This is the only book I've encountered on the basics of investing that begins with the correct first investment topic: saving money.

	Hanging on to a big sum of money without blowing it is by far the single most important investment skill of them all. That is the one skill without which you simply can never be an investor. Other essential topics in the book include compounding, diversification, avoiding blunders, and keeping your investment strategy simple. Every word of this book is essential reading for the novice stock market investor looking to start out on the right foot. Amazon price: $11.99.

•	Then be sure to read Peter Lynch's book One Up on Wall Street. It'll teach you how to think about the overall stock market and how to spot good businesses to buy.

	Lynch is famous for encouraging investors to buy what they understand. For example, just about anyone can go to the grocery store and look around at various products, comparing those he likes with those he doesn't like. Lynch's stock market approach is similar. Amazon price: $13.99.

•	Lynch's next book, Beating the Street, is great, too. It goes into detail about specific industries – like retail, real estate, savings and loan, cyclical industries, and restaurants. Lynch also offers his 25 golden rules of investing, which are incredibly valuable. Amazon price: $12.99.

•	Now you're ready to get into the nitty-gritty of business valuation. Start with Joel Greenblatt's The Little Book That Still Beats the Market. It's easy to read and easy to understand.

	It'll teach you a simple investment approach that boils down to: Buy good businesses at cheap prices. Amazon price: $10.99.

•	Then read Joe Ponzio's F Wall Street. This is a must-read mostly on the strength of the second section, called "How to Approach Investing from a Business Perspective." It has a great chapter called "How to Value a Business." This chapter boils business valuation down to two core sources of value creation (cash flow and net worth).

	Ponzio says if a business isn't causing one or both of these sources of value creation to increase, forget it and move on. That's great advice. You don't want to waste time with a business that's shrinking. Amazon price: $9.99.

•	If you told me you only had time for one book from this whole list, I'd tell you to read The Most Important Thing by Howard Marks. In conversations with clients over many years, Marks would find himself saying, "The most important thing is..." and then filling in the blank with one of the 18 topics in this book. That's right, 18 topics. Marks spends three chapters on risk, which tells you how important it is relative to other investing topics.

	Marks doesn't try to make investing easy. He succeeds in demonstrating in clear, simple language just how difficult it really is, for him, you, me... everyone. This is my No. 1 must-read... It's the book I go back to more often than any other. Amazon price: $9.57.

•	Lastly, I'd recommend Greenblatt's You Can Be a Stock Market Genius. It has specific approaches that show you how to find great stocks. It's where I learned about the value of spinoffs – when a company distributes the stock of a subsidiary, making it into a separate publicly traded company.

	The book covers other types of stocks, too. It's considered required reading in the hedge-fund industry. Amazon price: $12.99.

Keep in mind: There are a few other great investment books out there. Chapters 8 and 20 of Ben Graham's The Intelligent Investor and Warren Buffett's Berkshire Hathaway letters are world-class educational material.

But the above list will get you started on the right path. It's a list focused on the best easy-to-read books that explain how to identify and value great businesses. You can buy the Kindle versions of all of them (which you can read on your computer, tablet, or smartphone) for $82.51... and you can spend much less if you buy used hard copies.

If you're interested in building long-term wealth in stocks, read these books and forget the rest.

Good investing,

Dan Ferris

Further Reading:

If you're looking to add to your reading list, be sure to check out some of Steve's favorite investing books here and here.

Mike Barrett recently shared 13 must-read resources that will make you a better investor. See the list here.

Market Notes

MORE GAINS FOR THIS 'BORING' BUSINESS

Today's chart shows that yet again, "boring" works...

Regular readers know you don't need to invest in flashy "story stocks" like Twitter to make a fortune in the market. Companies that make inexpensive consumer products that folks always need – like toothpaste, trash bags, or deodorant – often make for the best investments.

Another benefit of the boom in "boring" is WD-40 Company (WDFC). You probably have a can of its signature product lying around the house. It has literally hundreds of uses and is good for everything from fixing a squeaky door to removing pesky stickers.

As you can see, people continue to buy cans of WD-40. Shares are up more than 100% over the last three years, hitting a fresh 52-week high this week. It may not be sexy, but investing in boring companies works...

Joel Greenblatt's magic formula for beating the market...

Joel Greenblatt's The Little Book That Still Beats the Market is probably the simplest read on Dan's list... and potentially the most valuable...

Click here to get immediate access.

A World-Class Investment Education for $82.51

Market Notes

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