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Investing in stocks is one of the most lucrative business you can start. However, the stock market is known for its volatility and inconsistency.
In today’s article, I’ll be reviewing 6 books which will teach you how to make proper investments in the stock market. Let’s get started.
How to Make Money in Stocks by William J.O’Neil
Successful investing in stocks is no easy task. That’s why, How to Make Money in stocks by William J.O’Neil is the first book I have picked out for you.
Actually, O’Neil has developed his own investing system which he calls CANSLIM. This is a 7-step plan on how to benefit as much as possible without exposing yourself to too much risk. His system uses the data from a market study from 1880 to 2009. If you read carefully, you will most probably learn several major things:
- How to find the cheapest yet most winning stocks on the market
- How to increase your gains by buying the best stocks and mutual funds.
- Several strategies to avoid making common mistakes
- Graphics and charts which will help you navigate your way through the market
Now let’s take a look at the CANSLIM system in more detail. Each letter stands for something:
C-current quarterly earnings. When buying a stock, look at that indicator. Buy stocks whose CQE have increased by 25%
A- annual earnings growth. Is the company you are planning to invest in showing a strong growth?
N-new products. Winning stocks belong to companies which launch new and innovative products or services.
S-supply and demand. Look at how much the stock has been traded recently. Don’t be stuck with something you cannot sell.
L-leader. The word says it all. Look for companies that are leaders in the respective sector.
I-institutional sponsorship. This one refers to stocks owned by mutual funds or banks, funds or other institutions.
M-market direction. Follow the market! You cannot beat it, so follow its ups and downs and try to understand its behavior.
Trade Like A Stock Market Wizard
If you are still here, then you really want to know more about stock trading. Mark Minervini’s Trade Like a Stock Market Wizard is practical, useful and applicable book from which you can learn a lot from the guy who averaged 220% return from 1994 to 2000. How did he do it?
There are two main things on which the book focuses. The first one is how to successfully use technical and fundamental analyses in your investment strategy. The author, having been a diligent student of the intricacies of the market himself, gives a detailed application of each criterion. To be more precise and accurate, I have to say that Minervini, just like J.O’Neil has developed a trading system himself. It is called SEPA, which means Specific Entry Point Analysis. As previously mentioned, this system entirely relies on fundamental and technical criteria.
Keep in mind that in order to apply some of the things in the book you shouldn’t be lazy since fundamental and technical analyses need lots of calculations.
The other main emphasis in the book is risk management. According to Minervini, this is most probably the most important thing to have if you want to “superperform”. This is one of the quotes in the book regarding risk:
“To achieve consistent profitability, you must protect your profits and principal. As a matter of fact, I don’t differentiate between the two.”
Unshakeable – Financial Freedom Playbook by Toy Robbins
Welcome back from author Tony Robbins whose bestseller Money: Master the Game shook the financial world. He will take your hand and show you the way from the start to the finish line regardless of your age, status, salary and ambition.
Author Robbins develops the idea of the “unshakeable” investor, who is mentally strong and calm while benefiting from the uncertainty and volatility of the market. Key takeaways:
- Learn about the risk strategies from investors. They will help you minimize the risk associated with investments and also increase your profits.
- Learn how to make a simple but workable plan so that you can make right but also free choices.
- Think about your retirement; find out more info about a 401(k) savings account and benefit the most
- Learn about two main aspects of investing – how to minimize risk and achieve high returns.
- Learn how to benefit from hidden fees and how to maneuver through the depths of Wall Street, where the game is played all the time, non-stop
- Build a winning and successful attitude and get rid of the fears which stop you from succeeding.
If you want to invest in the stock market and make long-term profits while developing an unshakeable mindset, this book is a must-read. What’s more, the proceeds of the book go to charity, so you’ll kill two birds with one stone.
Market Wizards – Interviews with Top Traders by Jack D. Schweiger.
Market Wizards – Interviews with Top Traders by Jack Schweiger is a collection of interviews taken from the best traders and investors in the 1980-90s. These interviews are fraught with insight and real-life experiences. On the downside, do not expect to find specific strategies and step-by-step guides.
All interviews start with a short and simple question, a question most probably you ask yourself: Can the market be beaten?
According to most experts, including the Oracle of Omaha, the market cannot be beaten. It always wins. However, in this book, you as a reader will learn about people who have managed to beat the market for months and even years. What this book will show you are the real skills that successful traders possess in order to vanquish their “enemy” the market. There is no luck or magic involved it’s just knowledge and skills.
Let’s see what some of the traders advise you to do:
Bruce Kovner suggests that you avoid impulsive trading as well as understand irisk management in depth. He warns against buying more than 10% daily contracts.
Richard Dennis’s strategy focuses on the market trends: simply follow them. He says that you should minimize your losses so that you can use the accumulated cash to make a huge profit when the right time comes.
Gary Bielfeidt’s emphasis is on fundamental analyses. Get rid of your losses and follow the trends. Be patient and try to benefit in the long-run
Getting Started In Options by Michael C. Thomsett
What on Earth are options? How do you find them, which are the best? Many questions which all need answers. Getting Started in Options will most probably give them. The world of options is so crazy and dynamic that a little help and assistance won’t hurt, will they?
Options are relatively unknown stocks and people balk at them. But doesn’t that make them an attractive investment? According to Thomsett, yes it does. This book is easy to read and understand since the language is not strictly financial and incomprehensible.
- The introductory chapters focus on the market and the recent fluctuations as well as how important and underestimated options are
- There are sections which explore different types of options, including index options and futures contracts
- There are lots of examples, charts, and explanations which will help those who are not adept at financial terminology.
- Information on how to estimate the potential returns on options
Stock Investing for Dummies by Paul Mladjenovic
Since stocks are not so easy to understand and are a specific part of the financial world, all newbies are welcome to explore Paul Mladjenovic’s Stock Investing for Dummies. As the title suggests, there is no better book for green investors to learn all the basics about stock investing. The book is written to be understood even by dummies.
The book contains useful information on all aspects of investing, specifically stock markets:
- How to start buying and selling stocks as an inseparable part of your portfolio.
- How the market works and all the factors that affect it in order to make profits
- How to find the balance between high returns and low risk
- Learn more about different investment tools and opportunities.
- Understand taxes better and how to save money when investing in stocks
- How to find the way out in a declining market
The book begins by explaining complex concepts and terms such as ETFs, which are a safe alternative to other tools in the stock market. Mladenjovic also focuses on the new technologies and how they are shaping and will shape the financial world in the future.
“Dummies” will also learn about investment strategies targeted at improving your stock portfolio and making wise decisions. One of his strategies is the so-called covered-call writing could help you increase your returns on your portfolio.In conclusion, this book is easy to read, funny, humorous and educational at the same time. It is a great value for money!