Learn How To Invest Like Warren Buffett With These 6 Essential Books

Reading the right books can help you become a better investor by learning from other's successes and failures. Don Dion from The Street has complied 6 essential books that will teach you how to think and invest like genius investor, Warren Buffett. See the following article to learn more.

Amazon.com recently listed more than 200,000 titles under the keyword "investing." Some of those books are useful. Others are a waste of time. And many, designed to exploit our ignorance and greed, are downright dangerous.

How do you approach this slew of investment information without getting overwhelmed? Every month, financial writers and journalists churn out hundreds of articles that aim to explain the financial world to ordinary investors. The financial media is full of investment picks, ideas, strategies and other advice.

Books still play an important role, however, in mastering the art of intelligent investing. Selecting the right tome can be a daunting proposition. The first place to start is with the basics. The best investment books avoid the sleazy manipulation of the get-rich-quick schemes you'll find in many books, magazines and, newsletters. Instead, they seek to impart the hard-won wisdom of the great investors to readers like us.

Which books should you read?

Books can serve to strengthen your fundamental investing knowledge while providing you with an important historical prospective.

In addition to several guides and anthologies that offer timeless advice, a number of books about Warren Buffett's philosophy provide a valuable foundation for any long-term investor.

While Warren Buffett has never penned his own book of investing advice, several stand-out books have been written about his investing style.

Even if you stick to mutual funds, rather than picking individual stocks, Warren Buffett's method of stock selection can help you evaluate the skills and strategy of a mutual fund manager.

Here are some picks. The best investors, like Warren Buffett, use a strong understanding of the fundamentals to inform their personal investment philosophies. One good place to begin developing your own foundation is an anthology.

Charles Ellis, a money manager himself, compiled Classics: An Investor's Anthology for an audience of students and professional money managers. It includes many short pieces by respected investment thinkers -- the kind of material that has appeared in professional journals over the years.

When it comes to economic trends, history often repeats itself. Familiarizing yourself with the history of investment ideas is one of the most effective ways to prepare for the future.

The Only Investment Guide You'll Ever Need isn't quite what its title claims, but it's one of the books every investor should read. The book was written by Andrew Tobias and first published back in 1978, when very few readers sought out books about personal finance. It became a national best seller for two reasons: the book is funny and creative.

The revised version is worth reading whether you are a novice or an expert. Tobias' ideas about taxes, commodities, stocks, insurance and other financial matters will help you rethink some of the conventional wisdom that gets many investors in trouble.

Want a good story? Have a look at Buffett: The Making of an American Capitalist. This lively, well-researched biography is a great book about his life and his investment methods.

It's also great background for readers who want to dip into The Essays of Warren Buffett: Lessons for Corporate America that is edited by Lawrence A. Cunningham. Buffett has never written a book, but his annual letters to shareholders are famous for their wit and intelligence. Cunningham has compiled some of the best material in this slim book. This book serves as a window onto his methods and his beliefs.

Here's a brief sample: "I've said many times that when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. I just wish I hadn't been so energetic in creating examples. My behavior has matched that admitted by Mae West: 'I was Snow White, but I drifted.'"

The Snowball: Warren Buffett and the Business of Life is unique among other Buffett pieces. The author, Alice Schroeder, sits down with the legendary investor to discuss everything from Berkshire Hathaway(BRK.A Quote) to his family life. This book is the closest thing to a Buffett autobiography on shelves today.

To truly understand Buffett, the best place to start is with his inspiration. Buffett got his start as a student of Benjamin Graham, the father of securities analysis. Graham's 1934 classic, The Intelligent Investor, is a wonderful introduction to the master's methods. The book has sold more than a million copies in hardcover; more importantly, it offers insight into how Graham thought about investing -- in particular his notion of a margin of safety. Graham advocated buying cheap stocks of companies with sound financials, establishing a "margin of safety" by purchasing the stock below its intrinsic value.

The Intelligent Investor suggests that stocks can be prudent investments, given the right approach. That idea shocked people who had endured the stock market crash of 1929 and the ensuing Depression. Jason Zweig, a senior writer for Money magazine, has done an excellent job in the latest issue of the magazine of updating the book without undermining its essential wisdom.

It was Graham's lessons that helped Buffett find winning companies such as Coca-Cola(KO Quote), Burlington Northern Santa Fe(BNI Quote), Goldman Sachs(GS Quote) and Nalco(NLC Quote).

For a little hint to readers who may find the 368-page book daunting, Buffett has gone on the record saying that the most crucial chapters in "The Intelligent Investor" are 8 and 20.

Navigating through the sea of investment advice books can be a daunting task. The Buffett basics are a good place to start, and the wisest investors will stay on top of new investing trends while keeping in mind the fundamentals.

Please leave your picks for the best investing books in the comments below.

This post has been republished from The Street, an investment news and analysis site.
Image from Wikipedia Commons.

Warren Buffet Wrong On Stock Market Prediction

The Oracle of Omaha may have made a rare incorrect prediction when he encouraged investors to buy stocks 9 months ago when the Dow was at 9,000. Today, the Dow is still at about 9,000 so Buffett went on record to reiterate his faith in US stocks. See the following post by Tim Iacono for more.

Don't get me wrong, Warren Buffet is admired around here quite a bit - more so than just about any other billionaire investor - but, going on CNBC this morning and being portrayed as a raging bull probably didn't do him any good in the eyes of those who are a bit more skeptical of the current market rally than is the CNBC staff.

His appearance today comes nine months after his memorable op-ed piece in the NY Times urging investors to buy shares. Coincidentally, the Dow was at about 9,000 back then too.



It's kind of hard to reconcile the "buy when there's blood in the streets" mantra that sounded so good last fall (even though the results weren't so hot) with a similar recommendation today, given the bubbly nature of stock markets around the world where, after the early-July bounce, investors appear to be loaded with optimism once again.

From CNBC this morning:

Warren Buffett tells CNBC that the economy still isn't showing any signs of life but that doesn't mean investors should stay away from stocks for the long-term.

In a live interview on Squawk Box this morning, Buffett says "business is still flat." But he stresses that doesn't mean he's negative on stocks, predicting the market will revive before the economy does.

"The market is very, very likely to turn up before business. But I don't try and time stocks. I try to price stocks."

He repeats his advice from his "Buy American" op-ed in The New York Times last fall: don't wait to buy stocks until the economy improves. By then, he says, you will have missed the biggest stock gains.

Even with the Dow hitting highs for the year around 9000, Buffett repeats his belief that stocks will outperform cash investments, such as Treasury notes, over the long-term. "I would much rather own equities at 9000 on the Dow than have a long investment in government bonds or a continuously rolling investment in short-term money."

From last year's editorial:

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

At least he's done a heck of a lot better with his Goldman Sachs shares than most retail investors have done with their mutual funds since last fall.

This post was republished from Tim Iacono's blog, The Mess That Greenspan Made.

Warren Buffett Shares His Wisdom On The Current Economic Environment

The amazing Warren Buffett says he likes to spend $5 on lunch, but lunch with Buffett can cost much more. Last year a Chinese businessman bid $2.1 million to have lunch with Buffett. However, you can get some of Mr. Buffett's wisdom for free in the following post.

Berkshire Hathaway CEO Warren Buffett talks with FOX Business Network’s Liz Claman about expensive lunches, his Goldman Sachs investments, the economy, and more.



Some highlights from the Oracle of Omaha after a $5 hamburger...

On whether he will cash out of Goldman Sachs:

No, no, no. I will keep those Goldman warrants right through their full -- they've got four and a quarter years or so to run. But I think we'll make a lot of money out of those.

On the possibility of the United States losing its AAA Rating:

As long as you're issuing money and you're issuing debt in your own currency, you can print money. The U.S. -- no, I think we will have a AAA for not only as long as I live, but as long as you live, which is more important.

Here's part 2...


On whether unemployment will continue to rise:

It’s going higher—business has not bounced back. We have not come off the bottom yet. It will work out in the end. Since 1776 it’s been a mistake to bet against America . America solves its problems. How soon, nobody knows. But we have not come off the bottom yet. And it will work out in the end.

On inflation in the United States :

What we’re doing raises the probability significantly of very significant inflation down the road—not this year or next year or the year after that, but we’ve taken actions and they were appropriate actions… it will have consequences and nobody knows exactly what they will be and how effective we will be at draining a system we’ve been flooding, but the probability of significant inflation has gone up.