Investing has come a long way since its inception centuries ago when the Dutch East India company issued the first shares of stock back in 1602. Once merely the occupations of the wealthy few, technological innovations like computers and the internet have opened up investing to the masses. Now every day people are managing investment portfolios and even conducting complex stock and options trades all from their smartphones. This increased access brings new opportunities but also requires improved financial and investing education.
Thankfully, a wealth of information exists through the written word to teach valuable investing insights from some of history‘s greatest investors. Often considered the intellectual foundation for building investing acumen, these top investing books have stood the test of time. Their wisdom not only applied to earlier eras of the stock market trading floor and manual ticker symbols but transfers seamlessly into the high-speed computerized trading and digital investing landscape that dominates today‘s markets.
To highlight some of the key insights from these legendary investors that any investor can apply, here are the 10 best books to master investing in the computer age:
1. The Intelligent Investor by Benjamin Graham
Considered by many as the bible on value investing, The Intelligent Investor by Benjamin Graham distills lessons from Graham‘s 50+ years of investing experience. The book teaches investors how to filter out market noise and volatility to make rational decisions focused on a stock‘s underlying long term value. These analysis methods are just as critical, if not more so, in today‘s information overloaded context with infinite data at your fingertips. Key takeaways applicable to modern computerized trading include:
- Using quantitative valuation metrics like P/E ratios rather than qualitative impressions or emotions to determine stock value
- Rebalancing portfolios through unemotional buying and selling decisions dictated by changes in valuation
- Mitigating downside risk since market volatility has increased with computerized trading
This framework for thinking empowers investors to cut through short term price movements and leverage computing power to set up data-driven investment processes.
2. Common Stocks and Uncommon Profits by Philip A. Fisher
Considered one of the most influential investing texts ever written, Common Stocks and Uncommon Profits by Philip A. Fisher pioneered the investment theory of buying high quality growth companies you intend to hold for the long term, aptly named today as "buy and hold investing". Fisher advocated extensively researching a company‘s management, products, competitive advantages and growth potential to identify winners early on. With modern computing capabilities, individual investors have tools at their disposal like never before to analyze these aspects of potential investments and implement Fisher‘s timeless growth investing approach. Key ideas you learn include:
- Fisher‘s 15 point checklist for evaluating high quality growth stocks
- Taking advantage of market downturns as buying opportunities for great companies
- Understanding the competitive advantages that contribute to enduring growth stories
While speculation rather than fundamentals seem to move prices more these days, using Fisher‘s framework backed by data analysis can lead investors to compounding machines the market has yet to fully appreciate.
3. The Little Book of Common Sense Investing by John C. Bogle
As founder of the Vanguard Group and pioneer of index funds that match market returns at low fees, few have done more to champion everyday investors than John C. Bogle. His investing manifesto The Little Book of Common Sense Investing cuts through complex financial models to focus on the basics – owning the entire market through broad stock and bond index funds. As computers dominate Wall Street trading leading prices to rapidly reflect information, it‘s become nearly impossible to beat the market consistently on your own anyway. By leveraging index funds and the power of computing technology to automate disciplined portfolio rebalancing, Bogle shows investors an easy way to capture market returns without speculation. Key pointers include:
- Understanding index funds as the best way to match overall market performance
- Using index funds for global diversification across stocks, bonds and other assets
- Keeping fees ultra low through passive investing strategies
This common sense approach backed by the mathematical power of computerized tracking and trading of indices gives individual investors better tools than ever to implement Bogle‘s wise advice.
4. A Random Walk Down Wall Street by Burton Malkiel
A pioneering look at the theory of efficient markets, A Random Walk Down Wall Street by Burton Malkiel examines how rising adoption of computers to instantly transmit price and volume data across Wall Street was leading to more efficient markets. This meant future price movements were becoming completely random and unpredictable as more information was rapidly being reflected into stock prices. Malkiel argues that not even professional investors can outperform on a consistent basis under this paradigm. Some key ideas applicable today include:
- Understanding the random distribution of returns to make informed asset allocation decisions
- Using quantitative evidence over the past 80+ years to gauge the risk and return tradeoffs of various investing approaches
- Leveraging computing capabilities to automatically rebalance portfolios across various assets to maintain target allocations
While some question just how efficient information flows in certain less liquid assets, computerized trading has undoubtedly picked off most clear pricing errors in major securities markets. Malkiel‘s work teaches investors not to fight the tape and avoid emotions as much as possible by sticking to an plan backed by historical market data.
5. Stocks For The Long Run by Jeremy Siegel
Providing exhaustive statistical analysis on the performance of stocks over the past two centuries, Stocks For The Long Run by Jeremy Siegel details how stocks have vastly outperformed other financial assets like bonds or gold over time. These insights hold even greater importance for investors today. As computing technology has unlocked new innovations and productivity enhancements, the earnings power and value creation of great companies is compounding even faster than in past periods. Siegel data rich book teaches investors:
- How stocks act as claims on real assets that rise in value with economic growth
- To maintain a long run perspective and use volatility and downturns to accumulate more future earnings
- Utilize computing analysis to properly risk adjust portfolio allocations accounting for equities higher long term return potential
With technology supercharging business profits and the economy, Siegel‘s meticulous data presents a convincing case that stocks aligned with these trends still offer some of the best risk-return payoffs for patient investors.
6. The Most Important Thing Illuminated by Howard Marks
Transitioning to a more philosophical perspective on investing, The Most Important Thing Illuminated by Howard Marks compiles years worth of investor memo wisdom into an elegant treatise on contrarian thinking to navigate markets. Marks highlights how crowd psychology has only grown more unpredictable and amplified in the digital age. By objectively evaluating equations relating the price you pay and intrinsic value received, investors can make rational decisions amid volatile times. Key insights that resonate in today‘s complex markets include:
- Taking calculated risks and not following the herd when odds tilt favorably
- Controlling emotions even more diligently in the face of information overload
- Utilizing computing capabilities to coldly assess risk-reward math and act accordingly
While markets have always been driven by fear and greed, computers and information flow introduce new considerations. But the timeless principles of discipline, patience and independent thinking Marks shares ultimately empower investors.
7. The Little Book of Value Investing by Christopher H. Browne
Distilling the acclaimed value investing strategy initially put forth by Benjamin Graham down to easily digestible concepts, The Little Book of Value Investing by Christopher Browne with graphic illustrations is perfect for beginners. It teaches investors a step-by-step process to research, value and ultimately invest in underpriced stocks trading below intrinsic value that leaves margin of safety. Key lessons relevant to navigating today‘s markets include:
- Using quantitative valuations to make more informed rick-reward decisions
- Learning how great investors like Warren Buffet apply value investing principles
- Recognizing the short-term market volatility that frequently disconnects prices from underlying value
Value investing represents one of the purest embodiments of utilizing computing analysis to exploit information asymmetry and take advantage of mispriced assets. This book gives modern investors the blueprint to follow this proven wealth building strategy.
8. Unconventional Success by David F. Swensen
As manager of the Yale endowment fund, David Swensen pioneered the modern asset allocation approach emphasizing diversification across more complex alternative assets like private equity, hedge funds and real estate besides just stocks and bonds. This unconventional portfolio structuring laid out in Unconventional Success led to Yale‘s industry leading returns over the past 25+ years. Key insights from Swensen that investors today can apply include:
- Asset allocation, not individual security selection, as the main driver of returns
- Properly assessing how different assets work together to produce a whole greater than the parts
- Rebalancing portfolios through unemotional, data driven decisions
While Swensen specialized in sophisticated institutional money management, the wisdom and principles of disciplined asset allocation based on computing power analytics translates directly to individual investors as well. Algorithms can crunch the numbers to constantly keep your portfolio aligned with targets.
9. Investment Psychology Explained by Martin J. Pring
Even with the most sophisticated computing algorithms, human emotion still drives investment decisions and asset prices. In Investment Psychology Explained, acclaimed technical analyst Martin J. Pring combines psychology concepts with historical stock charts to examine how fear and greed tendencies manifest themselves in price waves and cycles. Key takeaways to help investors today include:
- Common psychological traps that lead to buying high and selling low
- Historical examples stretching back over 100 years of the same patterns playing out
- Techniques to objectively follow the data points and override emotions
Understanding repeating historical patterns made clearer than ever through computing analytics represents another weapon for investors to deploy in tumultuous times. By better appreciating market psychology and quantifying indicators, data driven processes can take emotion out of decision making.
10. The Essays of Warren Buffet by Warren Buffett
And finally, who better to learn from than Warren Buffet – the most successful investor of all time with an unparalleled track record of value investing skill and discipline. While not a formal book, The Essays of Warren Buffett compiles years of Buffet‘s investor letters packed full of witty wisdom and guidance for shareholders. Key ideas that translate well in the technology focused markets of today include:
- Taking advantage of short-term price folly to secure stakes in great companies at good prices
- Blocking out market noise to focus on long run business fundamentals and value
- Mastering temperament and inner psychology needed to be a successful investor
Warren Buffet built his fortune before algorithms and high frequency trading dominated Wall Street so his core principles centered around understanding business values transcend modern markets. Wise investors can still use computing faculties to gain the upper hand.
While hundreds of investing books exist with compelling lessons, these 10 books represent some of the seminal works that have best stood the test of ever-evolving markets. They provide timeless, foundational investing principles and frameworks applicable through any technological innovation or investing trend. But readers must take care to properly digest the wisdom from these masters and apply with discretion – blindly following even sage advice without understanding can prove disastrous.
As computing machines increasingly influence business activities and markets, having strong financial knowledge cements an investor‘s advantage. I hope this reading list lights the path not just to grow your portfolio but to armor your mind with wisdom that enables better investing judgment and decisions for the road ahead.
