10 Great Investment Books For 2014 and Beyond

stalking the black swanThese great investment books will help you navigate the challenging environment of 2014, and beyond.

The last several years have been ones of uncertainty, economic shocks, and extreme market volatility. What’s more, many economists and financial markets experts warn that this environment is likely to continue for some time. It can be a frustrating and difficult environment to invest in for even the very best of wall-street’s traders. For your average retail investor, it can be an utter nightmare.

And it is with navigating this challenging environment in mind that we present below 10 great investment books for 2012, and beyond.

Stock Trader’s Almanac 2012

The Stock Trader’s Almanac 2012 is a general reference book that is widely used by serious traders and considered a must have by many. This is a great book for both experienced traders and those just getting started. Like all the best Almanacs it is crammed with useful, currently relevant information. Much of which can lead to actionable investment ideas. You will find inside: graphs, historical charts, market data, forecasts, economic announcements, and a calendar of events. Along with plenty of commentary and analysis. One of the most useful aspects of the almanac is its ability to help you identify specific trends that tend to happen on a yearly or cyclical basis and assess the probability of whether or not a similar trend could take place in the current period.

Commodity Trader’s Almanac 2012
The Commodity Trader’s Almanac is a great companion to the above recommended book. It has all the same great content as the Stock Trader’s Almanac but for the commodities. For commodities traders it is a priceless reference. For those who don’t dabble in commodities it can still give great insights into relationships between commodity and equities prices and patterns. Definitely worth picking up and both this and its companion are frequent go to books in my daily analysis work.

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications

Whether trader, long-term investor, or both technical analysis is a must for your toolbox. This is the best modern all-around technical analysis books out there and my personal copy has so many “post-it” notes sticking out of it that they should probably be numbered like pages. This book is more like a reference textbook for a college course on technical analysis than a “book” in the usual sense. It is packed with all things technical and countless traders have been using it for over a decade now for very good reason. If you have a question about any technical indicator or concept in technical analysis you can most likely find the answer here. The only Technical Analysis (TA) reference book you will ever need. Not much else need be said about this book. Outstanding.

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits

Overhyped title aside, this is a great investment book folks. Fund manager Joel Greenblatt has been beating the Dow (with returns of 50 percent a year) for more than a decade. In this insightful book Greenblatt brings you into a world of special situations from which you can profit.

Special situations in which big profits are possible, including:
* Spin-offs * Restructurings * Merger Securities
* Mergers * Rights Offerings * Recapitalizations
* Bankruptcies * Risk Arbitrage

The author’s approach is an event-driven one and he gives an outstanding overview of these special situations and how you can take advantage of the fact that they are so often overlooked by other investors. This certainly isn’t a book for beginners–who should concentrate on building solid foundation on the basics first–but if you are an experienced investor and you haven’t yet read this book you should do so. You’ll be glad you did. However, while it is a book for the serious investor it is also written for the retail investor and professionals involved in event-driven investing would probably find little they didn’t already know here.

The best endorsement of the book that I can give comes straight from the book itself. It comes in the form of publication of the his firm’s audited returns over a decade-long period at the end of the book. No pure theorist here and the firm’s impressive returns show that in spades. We’re talking 45-55% average returns over a ten-year period! Not bad, not bad at all. Pick this one up at your soonest opportunity.

Short Term Trading Strategies That Work

Sticking with the theme of volatility which is, after all, the theme of the last few years and a theme which is likely to continue for several more; we bring you Short Term Trading Strategies That Work. Author, trader, CEO, and founder of TradingMarkets, Larry Connors gets it right with this one. It is a no-nonsense, clearly penned book. Published in 2008 it is still one of the best books out there for short term market traders. This is more true than ever in these volatile and uncertain times.

In this book Connors lays out 16 straightforward strategies that every trader, and I mean every trader should have in their toolbox if they want to be a successful trader. He shows back-testing results that go back several years but also includes live-trading results from Connors and his team under various market conditions.

Connors adheres to two major themes throughout the book and all else in it extends from those themes:
1. Always Trust long term momentum
2. Buy short-term lows, sell short-term highs.

Connors doesn’t stick to patterns on a chart though. No. Like our previous author Connors explores areas that most traders and financial pundits know little about. Better yet he constructs strategies with simple rules that any experienced trader can utilize.

I do really think this book is for experienced, serious traders though and that novices will probably be let down; and left uncertain on how to actually act on the great insights contained in this book. The experienced, serious trader on the other hand will find graet value here and shouldn’t have any problem translating these insights into actionable trade ideas. One to add to your shelf.

Volatile Markets Made Easy: Trading Stocks and Options for Increased Profits
Knowing how to effectively trade volatile markets is an important part of any trader’s education. This is especially true in today’s tumultuous environment. And whether just venturing beyond plain vanilla stock trading or an experienced options trader; this book by can improve your trading.

As the title strongly implies the focus is on strategies that can take advantage of volatility. This book is written especially for retail investors/traders and one area where it shines is its clear language and precise explanations of concepts. He also makes frequent use of detailed trade examples to illustrate these concepts. The author takes a simple approach that uses flag chart patterns in trending stocks and explains exactly how to develop a trading plan based on them.

Chapter Topics Include:
An introduction to options – This can be skipped by experienced options traders but should be carefully studied by the novice.
The authors favorite technical chart patterns – It is by no means a guide to chart patterns in general and focuses on just a few of the “best” which are explained thoroughly.
The Greeks explained – And how to use them properly
All the author’s favorite options strategies – And how you can use them in your trading

The author also discusses in detail a strategy involving ratio-backspreads which have the potential to manage risk better. It was a strategy I had never come across before and it is one of the strong points in this book.

For those interested in the math surrounding options trading and its strategies he goes through some of the mathematical algorithms behind it all. Believe it or not it is actually quite helpful to at least have a general understanding of what is happening “behind the scenes,” so to speak. But it isn’t necessary by any stretch.
A great book for traders to have in their 2012 arsenal.

Common Stocks and Uncommon Profits and Other Writings

Of a different flavor than previously listed texts Common Stocks and Uncommon Profits and Other Writings is just one of those classics that must be on the list for its sheer utility. Not many trading books can stand the test of time but Philip Fisher’s masterpiece, first published in 1958, has done just that and more.

This updated version still contains all the relevant material of the original, while also including perspectives from the author’s son, Ken Fisher. A man who has made his own way in the trading world quite well. Philip Fisher was a genius at his work and both traders and investors alike are cheating themselves if they don’t study his great work. This one should be on any market participant’s bookshelf, front and center.

Index Funds: The 12-Step Recovery Program for Active Investors

Index Funds can be great investment vehicles. And they are great for traders too, not just your “buy and hold” investors looking for a low expense way to diversify. As suggested by the title, however, this book is in fact dedicated to a passive, “buy and hold” approach to investing. Nonetheless it is simply a great book all-around.

The author, Mark Hebner, reveals the potential risks and problems of active investing which will be helpful in your assessments even if you do actively trade. And help you avoid “overtrading” if active trading isn’t your goal. Hebner’s book lays out the risks of stock picking, mutual fund manager picking, market timing, and other activities which can negatively impact your profitability. Hebner offers a “scientific,” fundamental based approach to long term investing that many may find unfamiliar. You can only benefit from an incorporation of Hebner’s best ideas into your own analysis and for those looking to reduce risk exposure, this is a must have.

Stalking the Black Swan: Research and Decision Making in a World of Extreme Volatility
Kenneth A. Posner spent close to two decades as a Wall Street analyst, tracking the so-called “specialty finance” sector, which included controversial companies such as Countrywide, Fannie Mae, Freddie Mac, CIT, and MasterCard many of which were caught in the subprime mortgage and capital markets crisis of 2007. While extreme volatility is nothing new in finance, the recent downturn caught many off guard, indicating that the traditional approach to decision making had let them down. Introducing a new framework for handling and evaluating extreme risk, Posner draws on years of experience to show how decision makers can best cope with the “Black Swans” of our time.
And Posner has seen it first hand and knows from his own experience what being caught out by a “black swan” event in the financial sphere is like. Unpleasant to say the least. But can they be prepared for or otherwise made at least less unpleasant?

In this great book for our times Posner traces out various sources of what most of us perceive as “surprise events” and illustrates a practical approach for attempting to mitigate some of the “unpleasant” effects they may cause. This is an absolutely must have book for 2012 and the uncertain environment we find ourselves. Both for trading and in other areas of our life where a little “insurance” against black swans may be appropriate.

The author also asks and attempts to answer some outstanding questions in this book such as:
How do highly intelligent bankers and investors get surprised and brought down by financial crises created by their own interactions?
Why can’t formulaic rules and regulations prevent such crises?
How can sophisticated models be so far off?
How can one cope with the ‘the unpredictability of collective action’?

His exploration of, and answers to, these profound questions comes off as being at the very least honest and thoughtful. But they are also thorough and instructive. Posner, as a top-notch analyst, is someone whose investing philosophy has influenced a lot of people, including myself, over the years. And this book is another great resource coming from him.

One of the most fascinating aspects of the book is the trip through memory lane with Posner to revisit the calls he made on some of the most controversial financial firms smack in the middle of one of the most volatile environments in modern financial history.

While not specifically about investing or trading Posner’s book is one that should be on every trader and investors bookshelf for the years ahead. This great book truly provides a rounded education in decision making during periods of elevated uncertainty and volatility while giving the reader a pleasant story to read.

Extraordinary Popular Delusions & the Madness of Crowds
We must offer up one more book that cannot be strictly considered and “investing” or “trading” book. It is well worth the departure. Extraordinary Popular Delusions & the Madness of Crowds is quite possibly the single most relevant and timely book of the bunch for our times. This despite the fact that its first publication was in, wait for it…1841.

Why do otherwise intelligent individuals form seething masses of idiocy when they engage in collective action? Why do financially sensible people jump lemming-like into hare-brained speculative frenzies–only to jump broker-like out of windows when their fantasies dissolve?
These are just some of the questions Charles Mackay asks, and answers in this old but brilliant masterpiece. Truly an education on the “boom – bust” phenomenon this book and its subject apply just well to the NASDAQ and Housing bubbles of today as to the events he details in the book. If you haven’t already heard of, or read this book you need to put it near the top of your list now. Go ahead, we’ll wait.

Well, that’s it! Now you’re armed with knowledge of 10 of the greatest investment books for 2012, and beyond. Read them, study them, get out there and profit!

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