7 Books Warren Buffett Says is a Must Read (for beginners)

Warren Buffett is an avid reader. He reads almost 500 to 600 pages every day! His annual letters to his shareholders always include a couple of book recommendations. He once told a group of MBA students at Columbia Business School in 2000 - 'Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not very many of you will do it.' In 2021, Forbes named him the richest man in the world! A major contributor to this wealth is his passion to read and learn. He aptly says…‘The more you learn, the more you earn.' According to Forbes 2021, he is one of the world’s richest men! His passion to read and learn certainly becomes an important contributing factor. To help you get into his brilliant mind, here are seven books Warren Buffett recommends. He claims that these are the books he read and learned a great deal of investing from. It's time to add these best investment books to your to-be-read pile.

1. Intelligent Investor by Benjamin Graham

Originally published in 1949 About the book: It is fitting to start this list of recommendations with a Benjamin Graham book. Warren Buffet considers this book as the bible of investing. When he was 19 years old when he first read this book by Graham.. He says, 'I owe so much of what I know about investing to him.' The Intelligent Investor is full of fundamental lessons one needs to learn to invest rationally. The purpose of this book is to form a value investing guide for a layman to understand. According to Graham, investors should focus on analysing a company's financial reports. We must ignore the outside noise and hoax fear. Analysing a company’s financial health is important to achieve our investment goals. It explains the emotional framework and analytical tools that are essential to financial success. The book consists of many core principles that explain the importance of long-term investing. Even though this book is over 70 years old, it still stays highly relevant. Lessons you will learn from this book:

1. How you can cut the odds of suffering irreversible investment losses?
2. How you can improve and maximize the chances of achieving sustainable gains?
3. How you can control your impulsive behavior that keeps most investors from reaching their goals?
4. Importance of value investing, margin of safety, and investment versus speculation.
5. Stock Selection for the defensive and enterprising investors.
6. Four extremely instructive case studies, histories, and more.
7. Comparison of eight pairs of companies.

Buffett's comment on this book: Buffett has praised The Intelligent Investor on several occasions. He mentioned it in his 2013 letter saying - 'I learned most of the thoughts in this investment discussion from Ben’s book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase. For me, the key points were laid out in what later editions labeled chapters 8 and 20. (The original 1949 edition numbered its chapters differently). These points guide my investing decisions today. I can’t remember what I paid for that first copy of The Intelligent Investor. Whatever the cost, it would underscore the truth of Ben’s adage: ‘Price is what you pay, value is what you get.' Of all the investments I ever made, buying Ben’s book was the best.' Quote: ‘No matter which techniques they use in picking stocks, successful investing professionals have two things in common. First, they are disciplined and consistent, refusing to change their approach even when it is unfashionable. Second, they think a great deal about what they do and how to do it, but they pay very little attention to what the market is doing.’

2. Security Analysis by Benjamin Graham and David Dodd

Originally published in 1934 About the book: Benjamin Graham is known as the Father of Value Investing. This book lays its founding principles. Security Analysis teaches readers the fundamental steps required to evaluate an investment. The first part of this book majorly focuses on the role of intrinsic value in analysis. It highlights how one can determine the intrinsic value of a company. It further explains how Graham's margin-of-safety principle can be used to make profits. It teaches us how stocks can be bought when the market price is way below its original value. Following such strategies can help investors earn good returns. The book also discusses the origin of corporate finance and financial analysis. Lessons you will learn from this book:

1. Approach to value investing
2. The concept of intrinsic value and how to benefit from it.
3. Implication of quantitative and qualitative factors.
4. Balance sheet and income account analysis.
5. Analysis of the dividend factor in common stock.
6. Technique of selecting preferred stocks for investment.
7. Various aspects of discrepancies in price and value of an investment.

Buffett's comment on this book: Buffett revealed that he has read this book at least four times! He once said ‘Security Analysis provided a road map for investing that I have now been following for 57 years.’ Quote: ‘As a rule of thumb, investors should spend the bulk of their time on the disclosures of the security under study, and they should spend significant time on the reports of competitors.’

3. Common Stocks and Uncommon Profits by Philip Fisher

Originally published in 1958 About the book: This book teaches investors to analyse the quality of a business. Fisher says that sticking to financial statements isn't enough. We also need to check a company’s operation and management. Check for the company’s ability to generate profits. It emphasizes on the concept of networking and gathering information via business contacts. Fisher recommends investing in companies that are growth-oriented. Especially the ones who are committed to research and development. He was famous for the depth of his research on companies with which he would invest. This book offers us an understanding of his investment philosophies. Lessons you will learn from this book:

1. Fisher shares his strategy of how he goes about finding a growth stock.
2. Various parameters to look for before buying stocks.
3. Ten points that an investor must be aware of to be a better investor.
4. Four dimensions of conservative investing (and how it helps you sleep well).

and much more. https://www.youtube.com/watch?time_continue=2&v=nQ9rtG6NhK0&feature=emb_logo Buffett's comment on this book: ‘I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits...When I met him, I was impressed by the man as by his ideas. A thorough understanding of the business, obtained by using Phil's techniques … enables one to make intelligent investment commitments. I am an eager reader of whatever Phil has to say, and I recommend him to you.’ Quote: 'Never promote someone who hasn't made some bad mistakes, because if you do, you are promoting someone who has never done anything.'

4. The Little Book of Common-Sense Investing by John C. Bogle

Originally published in 2007 About the book: This is a classic guide to learn about the stock market. John C. Bogle is the founder and chief executive of The Vanguard Group. In this book, he reveals his key to getting more out of low-cost index fund investing. He narrates the simplest and most effective investment strategy. It mainly focuses on how to build wealth over the long term. The book extensively talks about index funds and the magic of compounding. It is a book about why long-term investing is a far better option than short-term speculation. The latest edition of this book consists of two new chapters to provide further guidance –

1. About asset allocation
2. About retirement investing

Lessons you will learn from this book:

1. How to build a diversified and low-cost portfolio?
2. How to focus on real-world and forget about the false hype created in the market?
3. Understand stock returns generated by dividend yield, earnings growth, and change in market valuation.
4. Learn how to establish rational expectations for stock returns?
5. Recognize that in the long run, business reality beats market expectations.
6. Learn how to use the magic of compounding by minimizing the unreasonable costs?

Buffett's comment on this book: In 2014’s annual letter, Buffet said - ‘There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common-Sense Investing.’ Quotes: ‘Buying funds based purely on their past performance is one of the stupidest things an investor can do.’

5. A Few Lessons for Investors and Managers from Warren Buffett

Originally published in 2019 About the book: This book is a must-read for investors looking to read about the timeless wisdom from the Oracle of Omaha. It explains in a short and easy-to-read way about what we can learn from him. This is a collection of timeless wisdom where you will read about his philosophies. Buffett explains how to think about various investment options. You will also read about his thoughts on business valuation and qualities. Buffett has always emphasised on how he prefers to do business with people he trusts. The same is explored in great detail in this book. Lessons you will learn from this book: For managers, this collection of essays specifically conveys what happens when you think more like an investor than a manager. Buffett's comment on this book: Buffet wrote in 2011’s annual letter - ‘I think you’ll also like a short book that Peter Bevelin has put together explaining Berkshire’s investment and operating principles. It sums up what Charlie and I have been saying over the years in annual reports and at annual meetings.’

6. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger

Originally published in: 2005 About the book: This is Buffett's business partner - Charlie Munger's biography. He is the long-serving vice-chairman of Berkshire Hathaway. Poor Charlie’s Almanack brings together his investing thoughts. It includes the talks and speeches that Charlie gave on various occasions. The book majorly focuses on the 25 cognitive biases. He explained and discusses each one of them in great detail. Why we're so psychologically flawed, leading to mistakes in our decision. If you enjoy Buffett’s unique insights, you’ll certainly love these 550 pages long book of financial wisdom. Lessons you will learn from this book:

1. How behavior finance influences our every move?
2. Why we're so psychologically flawed and commit investment mistakes in our decision?
3. Practical Thought About Practical Thought.
4. Investment Practices of Leading Charitable Foundations.
5. The Great Financial Scandal of 2003.

and much more Buffett's comment on this book: In his 2010 shareholder letter, Buffet humorously said - ‘… Chinese language edition of Poor Charlie’s Almanack, the ever-popular book about my partner. So, what if you can’t read Chinese? Just buy a copy and carry it around; it will make you look urbane and erudite.’ Quotes: ‘In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. You'd be amazed at how much Warren reads--and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.’ ‘What are the secret of success? -one word answer: rational’

7. Business Adventures: Twelve Classic Tales from the World of Wall Street by John Brooks

Originally published in 1969 About the book: Bill Gates said, ‘In terms of its longevity, Business Adventures stands alongside Benjamin Graham’s The Intelligent Investor.' Gates asked Buffett back in 1991 what his favorite business book was. Buffett responded by sending his personal copy of Business Adventures. The book consists of Twelve Classic Tales from the World of Wall Street. The majority of the chapters focus on business strategies and management. But the first chapter 'fluctuations', stands out for every investor. It talks about the volatile nature of the world of finance. The chapter is full of critical details on the astounding market crash of 1962. It gives you an hour-by-hour reportage on how a panic situation destroyed about US $20 billion worth of stock value. It took three days for the entire market to make a full recovery. By the time the situation was under control, investors lost majority of their savings. It shows how unpredictable the stock market is. It gives you a real picture of how our mood and behaviour can destroy our wealth within days. Lessons you will learn from this book:

1. A thorough case study of the 1962's market crash.
2. The irrational and unpredictable reason behind the crash.
3. What it was like at the wall Street’s office in those three long dreadful days.
4. 11 other detailed case studies on business and management.

Buffett's comment on this book: Warren Buffet sent his personal copy to Bill Gates. Gates still has the copy on his bookshelf and considers as one of his best reads. Quotes: ‘In the stock market, however, as de la Vega points out, the news is often of little value in the short run, the mood of the investors is what counts.’ ‘It is foolish to think that you can withdraw from the Exchange after you have tasted the sweetness of the honey.’

End Note:

Warren Buffet once said - 'I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So, I do more reading and thinking and make fewer impulse decisions than most people in business. I do it because I like this kind of life.' These were few books that helped him to be a successful investor. Every book and advice comes down to three main points –

1. Invest for long term
2. Do your own homework before you invest
3. Focus on fundamentals and ignore outside noise

Buffet learned these points early on in his life. Following them consistently helped him compound his investments. The best way to learn and become a disciplined investor is by having practical knowledge. Investment is simple but not easy. Your first step is to learn the basics of investing. Gather and learn from every source. Learn from the best in the field. Watch our show – The Right Choices with Oracles of Dalal Street and learn from market experts. The show focuses on curating insightful strategies from real-world stock market heroes. Tune in every Saturday at 11 AM on our YouTube channel.