Books Every Investor Should Read
Malcolm Gladwell has argued that 10,000 hours of deliberate practice is required to become an expert in any given sport, artistic pursuit, or field of study. Although not necessarily the most scientifically sound premise, it’s hard to deny that developing expertise requires dedication and immersion in a subject matter – both inside and outside of the office. To that end, we asked the Active Quantitative Equity (AQE) team to share a book that they believe every investor would benefit from reading. Here are their top choices.
Olivia Engel, CFA
Global Chief Investment Officer
Thinking, Fast and Slow
Nudge: Improving Decisions about Health, Wealth, and Happiness
Richard Thaler and Cass R. Sunstein
Blink: The Power of Thinking Without Thinking and The Tipping Point: How Little Things Can Make a Big Difference
"There are so many good books about behavioral finance, behavioral biases, and behavioral economics – I couldn’t choose just one! Each of these books is great at illustrating why it’s so important to have discipline in investing, and introducing ideas on how to avoid making behavioral mistakes. It’s a fundamental part of our investment process in AQE, and each of these titles provided me with important learnings and considerations."
Simon Roe, CFA, IIMR
Co-Head of Portfolio Management
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
Nassim Nicholas Taleb
"So many different books came to mind, from the beautifully simple Little Book that Beats the Market, to some of the most nerdy quant tomes. However, the one that I enjoyed most and changed my perspective was this one about randomness, the human tendency to believe that we had an influence on random events, and the dangers of using small amounts of data to extrapolate randomness as truth. It is quite a humbling book, as you realize just how hard it is statistically to prove anything, from career decisions to active fund performance. A lot of what you think of as skill is actually pure chance. The moral is you can never have enough data – and more is always better than less."
Gary Lowe, CFA
Head of Process Management
When Genius Failed: The Rise and Fall of Long-Term Capital Management
"The New York Times book review noted that When Genius Failed is "a riveting account that reaches beyond the market landscape to say something universal about risk and triumph, about hubris and failure.” I could not agree more, and appreciated this book because it showed that thinking you’re smarter than everyone else around can be a dangerous venture."
The Rise and Fall of Nations: Forces of Change in the Post-Crisis World and Breakout Nations: In Pursuit of the Next Economic Miracles
"These are both excellent books for investors who are interested in emerging markets, and who are looking for suggestions on how to interpret and navigate all the complexities therein. Ruchir Sharma does a great job of presenting complicated material with a lot of history and helpful background, in a way that’s easy to understand."
The End of Accounting and the Path Forward for Investors and Managers
Brauch Lev and Feng Gu
Capitalism without Capital: The Rise of the Intangible Economy
Jonathan Haskel and Stian Westlake
“The End of Accounting explores why traditional financial reports have become less and less relevant for investors around the world, and argues that century-old accounting practices need to be updated. The authors demonstrate how the influence of traditional accounting data on stock prices has declined over time and illuminate the ignorance of intangible assets in current financial reporting frameworks – and explain why investors should care."
"Similarly, Capitalism without Capital investigates the consequences of rise of intangible assets. The authors propose that increased intangible investment can partially explain many of the economic issues that are particularly relevant today. This book provides additional perspective when read together with The End of Accounting, as it focuses more on the macro-level policy implications that stem from the increasing dominance of intangible assets."