15 Best Finance Books For Advanced Active Investing

15 Best Finance Books For Advanced Active Investing

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    We’ve written a blog post on the best personal finance books, but kept getting asked how to learn about financial products and understand Wall Street. This page isn’t for someone who wants to follow the Bogleheads way of passive investing, but rather for people who want to learn how to value securities and fixed income so they can actively invest.

Related:

The Intelligent Investor

best finance books: the intelligent investor

Warren Buffet idolized Benjamin Graham, the author of The Intelligent Investor. Graham pioneered the concept of value investing and this book teaches you that theory. The concept of value investing is incredibly simple to understand, yet difficult to execute due to human behavioral bias.

The Black Swan

best finance books: the black swan

One of Taleb’s most important points in The Black Swan is that the market doesn’t follow a normal distribution. The great news is that this provides a lot of mispricing in options space due to long tail-risk.

Market Wizards

best finance books: market wizards

For those of you who love tales on how Soros bet against the pound and won, here are more tales about the time traders took on risk and won. The world of finance is usually closed-off, but Schrager interviews some of the most famous traders there are.

Barbarians At The Gate

best finance books: barbarians at the gate

Possibly one of the most famous investment banking deals gone wrong, RJR Nabisco’s Leveraged Buyout (LBO) disaster is chronicled in this book. The book gives a higher level of detail of finance than a Michael Lewis book would, and has a huge cast of characters.

When Genius Failed

best finance books: when genius failed

What happens when Nobel prize winners join a hedge fund? Long Term Capital Management had the smartest people in the world, but they didn’t understand the market differed from theoretical math. When Genius Failed chronicles the failure of one of the most heralded hedge funds in the world and how it nearly caused a financial crisis. The story is often quoted in finance when dealing with risk management.

Liar’s Poker

best finance books: liar's poker

Michael Lewis profiles what Wall Street finance was like in back in the 80s. Though it won’t teach you technical or theoretical aspects of investing, it will give you a mindset into the trading floor.

Thinking, Fast, and Slow

best finance books: thinking, fast, and slow

One of your biggest detriments to investing is your own behavioral bias. Thinking, Fast, and Slow shows you how to correct these behavioral biases and how to recognize them.

Big Debt Crisis

best finance books: big debt crises

Ray Dalio spent his life building Bridgewater, a hedge fund with $125 Billion assets under management (AUM) whose investing thesis is risk parity and algorithmic decisions. Dalio illustrates the life cycle of debt through his second book. Check out his first book as well, Principles, which is more for personal development.

The Big Short

best finance books: the big short

The best colloquial explanation of the financial crisis there is. The book was later made into a movie and I definitely recommend watching the movie — the trading floor isn’t super accurate, but it’s still a great movie.

Flash Boys

best finance books: flash boys

Michael Lewis loves covering financial stories — and this one of the best. When the Royal Bank Of Canada (the nice Wall Street bank, seriously) discovers an unidentified buyer is buying up stocks a split second before their order is executed every time, he discovers the concept of high-frequency trading. Flash Boys takes you through his journey and actually ends with a good result, something seemingly rare on Wall Street.

Against The Gods? The Remarkable Story Of Risk

best finance books: against the gods

Ever wonder how the market prices things? Against the Gods takes you through the basics of probability and how traders might use it to model the price. A beginner look at how finance works before you move on to the quantative books at the end of this post.

Margin Of Safety

best finance books: margin of safety

 

 

While you can’t buy this out of print book for less than $3,000, there are places where you can get the pdf. However, due to the legality of where they are hosted, we aren’t linking to them here.

Extraordinary Popular Delusions

best finance books: extraordinary popular delusions

Mackay was a popular financial journalist that wrote on the topics of bubbles a few centuries ago. Yes, this was published in 1841. Yes, it is still a great book. We tend to forget financial history past a few decades so this book is a great reminder of historical bubbles.

Irrational Exuberance

best finance books: irrational exuberance

Nobel prize winner Robert Schiller writes a book on the opposite of market panic — irrational exuberance. The book describes the start and symptoms of a bubble in the modern era.

The Essays Of Warren Buffet

best finance books: the essays of warren buffet

Though you can find these essays for free in the form of annual reports on Berkshire Hathaway’s website, these were more useful to me. The book organizes the essays by topics instead of by year, so I could learn about a certain topic at a time.

The Courage To Act

best finance books: the courage to act

Bernanke’s memoir of his actions during the 2008 financial crisis takes us through the history of the US banks all the way to how the Fed intervened in 2008. The book is an advanced level of what happened during 2008 from the lens of the Fed.

A Random Walk Down Wall Street

best finance books: a random walk down wall street

All the other books above are active investing tools, but this one is an argument for passive investing. The book argues market prices are randomly derived and priced fairly. If you believe this, you should check out our books on personal finance for passive investing.

 

The below books are our favorite technical and quantitative books for understanding equities and fixed income. These are best suited for those who are looking to work in finance or have their own family office.

The Book Of Fixed Income Securities

best finance books: the handbook of fixed income securities

When I rotated into securitized products, this was the handbook everyone lived by. The book is incredibly comprehensive and by the end, you’ll come out a master of modeling.

Interest Rate Markets

best finance books: interest rate markets

This book is great for beginners looking to understand how interest rate products are priced and the nuances of the rates market.

Security Analysis

best finance books: security analysis

Benjamin Graham’s second appearance on this list, Security Analysis is the more advanced book of valuing securities. If you’re a novice investor, it might be a good idea to read The Intelligent Investor first. In our opinion, the 1962 edition of Security Analysis is the best.

Options Volatility And Pricing

best finance books: option volatility and pricing

Even on Wall Street, traders read this for a basic understanding of options. Be sure to get the first edition as we found some issues with the edition after that. If you’re looking to trade options for long tail-risk, a combination of the Black Swan and this book will be extremely helpful.

Which ones are your favorite? Which finance books have you read before?

Author: Olivia

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