A collection of books for the new investor's portfolio
So your granddaddy left you some stock. And now you've got an investment itch. Knowing Ol' Granddad, he would probably have suggested you read a book or two before he'd let you near his precious IBM holdings. In keeping with his wishes, the following collection of books was compiled for the neophyte investor.
How to Buy Stocks, by Louis Engel and Brendan Boyd (Little, Brown, $15, Bantam paperback $3.95), is an excellent primer for green traders. Written in 1953 and updated in 1982, this engaging and easy-to-read book takes you from the garden-variety common stock, to how the stock exchange works, to initiating trades, to mutual funds, and even passes along some stock market folklore.
William Pike, a portfolio manager at the Fidelity Investment Group, and longtime teacher of a beginning investment course offered by the Boston Security Analysts Society, recommends the Engel and Boyd book in tandem with another publication for a well-rounded starting point. The second book is Understanding Wall Street, by Jeffrey B. Little and Lucien Rhodes (Liberty, $7.95).
Another primer frequently mentioned by financial folks, is Gaining on the Market, by Charles Rolo (Little, Brown, $16.95). Rolo, a former stockbroker and analyst, provides a careful look at some of the common stock-picking strategies used by the professionals.
While the above primers explain terminology quite well, a good encyclopedia and/or dictionary could be useful -- although not critical -- to an understanding of stocks, bonds, and various hybrid financial securities.
From annuities to zero-coupon bonds, The Investor's Encyclopedia, by Associated Press business writer Chet Currier (Franklin Watts, $24.95), describes each investment, citing costs, risks, potential gains, and tax implications.
Also, a small but thorough pocket tome, the Dictionary of Finance and Investment Terms, by John Downes and Jordan Elliot Goodman, is published by Barron's ($6.95).
Having whetted your appetite for this subject with a primer or two, you'll probably hunger for more financial knowledge. You might want to consider some weightier textbook-type publications.
A nice bridge between a primer and the classic financial texts, is the book produced by Mr. Pike at Fidelity from his class notes: Why Stocks Go Up (and Down) (Dow Jones-Irwin, $19.95).
Mr. Pike personally recommends that those interested in understanding stocks and bonds take a financial accounting course. Indeed, his own book begins with some accounting basics and traces the Polaroid Corporation through 18 years of ups (and downs).
One of the best-known books on stock analysis is The Intelligent Investor, by Benjamin Graham (Harper & Row, $15.95). Penned by the father of modern security analysis, this classic elucidates the principles of seeking out undervalued stocks -- usually those with low price/earnings ratios.
A more recent treatment along similar lines is David Dreman's The New Contrarian Investment Strategy (Random House, $16.95).
If you want to investigate the predictive value of charting stock prices, or just eschew the fundamental method, you can try a technical analysis book.
E. F. Hutton's chief technical analyst, Newton Zinder, recommends Martin Pring's Technical Analysis Explained (McGraw-Hill, $39.95). And one of the traditional favorites on this topic, is Technical Analysis of Stock Trends, by Robert D. Edwards and John Magee (John Magee Inc., Boston, $75).
Finally, if you want something to read on the train or while soaking in the tub, consider John Train's Money Masters (Harper & Row $14.95; Penguin paperback, $6.95). His book details the strategies of nine well-known successful investors, including Warren Buffet.
If you find yourself smitten by a particular investment strategy or perhaps caught up in the euphoria of a rally, pick up a copy of Burton G. Malkiel's A Random Walk Down Wall Street (Norton, $22.95), now in its fourth printing.
Mr. Malkiel shows just how foolish intelligent men and women can be when it comes to the stock market. And Granddaddy would probably approve of Malkiel's sobering challenge to the idea that stock prices can be predicted. He advocates a buy-and-hold strategy.