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Ask HN: Introductory Books on the Stock Market?

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Re: Ask HN: Introductory Books on the Stock Market?

#15

Post by _odey »

The book that provided me with the proper knowledge about investing in the stock market would be:

The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

The reason I recommend this is because it teaches you how to read IFRS Financial Reports and calculate Discounted Free Cash Flow, with practical examples.

Fun fact: many people have asked me over the years what my secret to investing was, and I've always pointed them to the book, and told them it's basically just about reading and understanding each line the financial reports. It takes a lot of time to do this, and you have to do it every quarter, for all stocks you own, want to own, and keep an eye on. With time you will learn what sections to skip and it gets faster, easier. But you have to get your information from the reports themselves. To this day not even one of those people has followed my advice and read the book. I guess the thought of putting in effort scared them away as they were also asking me if they can find the reports summarized on some website and use that as their source if information, or if they can pay for some service to calculate discounted free cash flow for them. To me, having the summary and calculation alone is pointless, and it's also the fastest part of the process. What's important is to understand the reason behind the data in the report, something which the summary eliminates. I have not yet attended a Shareholders Meeting for any company, but this also helps with understanding the reasons behind the data.

Re: Ask HN: Introductory Books on the Stock Market?

#20

Post by WnZ39p0Dgydaz1 »

The reason you may not be getting the answers you want is because your question is not particularly precise. It's kind of like asking "which programming books are good?" - Well, it depends on what you want to build. Some people will recommend Assembly books, some LISP books, some Python, and others Javascript, depending on what they fancy. Building a web application is different from building a compiler. There is some overlap, but what you need to know to be successful is different.

Trading is kind of like that. Long-term value investing, portfolio management, day trading, options trading, quantitative strategies, high-frequency trading, etc, are vastly different approaches, ranging from "assembly" to using a drag and drop website builder. All these can be used to make money, but what you need to know, and how you approach the problem, is different. Books will be useful for one, and totally useless for other approaches. Just like an assembly book won't teach you how to make a website.

You may want to think about what "kind" of trading you're interested in, and then ask for specific recommendations related to that. Otherwise you will just get people recommending random stuff they have some personal relationship with, like recommending SICP to learn programming. Looking at the answers in this thread, this is what's happening. They are all over the places at different levels of abstraction.

EDIT: Also, few people explicitly make these distinctions. Most traders I've talked to are "locked into" their approach and will talk about it as if there were no others. That's becuase of the bias they have. E.g. someone trading on fundamentals may talk to you about earnings reports but will likely not even be aware of techniques using ML models to optimize order execution or fancy order types. Just like many web developers will not be aware of how TCP/IP works, but only vaguely know that it exists somewhere.

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