Life would be much simpler if there were a single book that could guide people through the world of investing, but unfortunately, no such book exists – or at least it isn’t one that Andrew Parry, head of investments at JOHCM, has come across yet.
While no magic one-size-fits-all book exists, investors can piece together information from a range of sources, with the manager outlining below the five he recommends.
Before moving on to the picks, he wanted to share some preliminary advice on what not to read – suggesting that investors should read “widely and voraciously”, but also selectively.
“As someone who has spent almost 40 years in the industry, my advice to those seeking guidance on what to read has remained constant: read widely and voraciously, but avoid books that tout the winning strategy of a guru,” he said.
“Instead, focus on books that help you understand the inefficiencies in pricing created by the ever-changing nature of markets. Reading widely can also help you identify the opportunities that arise from the collision of human nature with human endeavour.”
Below, he shared five titles that would put investors on the right track, including one that “stood the test of time” and should be re-examined in today’s inflationary, high-interest rates environment, one to better understand system shifts and the disruption that they can cause, and one that he takes a “guilty pleasure” in recommending.
First up is a book that the fans of value investing will appreciate. Benjamin Graham's The Intelligent Investor was first published in 1949 but has been made topical again by the hawkish measures of central banks around the world.
“When I began my career value investing was the dominant philosophy and this book had a profound influence on me,” said Parry.
“With the return of interest rates and inflation, I believe this book deserves to be revisited.”
Another that “has stood the test of time” is Peter Lynch's One Up on Wall Street. Lynch’s advice to observe trends in your daily life “might seem quaint in today's fast-paced world”, but is “invaluable” especially for stock pickers, who will find strategies in it to better identify emerging corporate winners, according to Parry.
For everyone who wants to learn about system shifts and the consequences they have for risk management as well as new structural trends – something that has increasingly fascinated Parry in recent years – Geoffrey West’s Scale and Matthew Syed’s Black Box Thinking are the perfect readings.
The former was recommended for its “excellent exposition on the universal laws that govern how systems operate and the non-linear properties that can create enormous returns or rapid value destruction”, while the latter highlights “the power of feedback loops that help us learn from our mistakes”.
Finally, Parry admits having “a guilty pleasure” in recommending Technical Analysis of Stock Trends by Edwards and Magee, first published in 1948.
“While it may not be popular in academic circles, it provides useful insights into early forms of pattern recognition,” he said.
In particular, Parry enjoys the charts in the early editions, which illustrate that “stock price volatility is not a recent phenomenon”.
However, JOHCM’s head of investments encouraged investors to expand their bookshelf not only beyond these five titles but also beyond finance writing.
“My experience has taught me that if you want to be a successful investor, you should not limit yourself to finance books. Literature is full of human insights that can give you an edge,” he concluded.