A reader, who joined the Safal Niveshak tribe recently, sent an email to me a part of which I am reproducing below…
I am just getting started into the world of investment and just like you I am also a strong believer of the fact that wealth is created over period of time and you need to have patience and time on your side if you really want to create wealth in equities.
But I am struggling to get my fundamentals right so that I can do my own research as well as understand the research article penned by people like you. I hope I will be able to educate myself with your help. Any suggestions here are highly welcome.
This is a question that has been raised by several other tribesmen in the past – “I am new to investing and would like to become a sensible, long-term, value investor. But where do I start?”
If this question bothers you as well, here is my small attempt to dispel some of your doubts on where and how you can start your journey to become a smarter, independent investor.
Take this 2-Year course in smart, independent investing
I have penned down a 2-year course for startup investors, who really want to answer the question – “Where do I start?”
I am not offering this course via Safal Niveshak. Instead, you need take this course – call it a roadmap – on your own.
What you will read below is not cast in stone, and you are free to create your own roadmap to investing success. These are, in fact, just some guidelines that can help you in case you lose your way somewhere in your journey.
Treat is as a 2-year self-study course in investing that can benefit you tremendously for your lifetime. You are of course free to complete the course in more than two years, but then procrastination sometimes costs use heavy. This is especially true when it comes to investing.
By the way, before I move on to the course details and the steps you must take to see it through, here are some steps you must take prior to even investing your first rupee in the stock market.
- Spend less money than you earn. In simple words, save money.
- Pay off any high cost debt you have (like car loan, or personal loan).
- Create an emergency fund and buy mediclaim.
- Buy term insurance, especially if you have dependents.
- Prepare a simple asset allocation. Download my guide on asset allocation to know how you can do so.
- Start investing in the stock market by identifying 3-5 good equity mutual funds, and then start SIPs in them. Download my guide on identifying winning mutual funds. This step is basically to test the waters by getting your feet wet – getting the flavor of how stock markets perform by hand-holding some smart money managers.
Also, before sharing the course details with you, I am assuming certain things:
- You are willing to do the hard work to become an independent investor.
- You believe in the power of compounding and know the importance of dollar cost averaging.
- You are open to making mistakes as an investor and not repeating those mistakes.
- You are open to learn from the mistakes of fellow investors, as you appreciate that you won’t live long to make them all.
- You are willing to switch off all the noise that can distract you as an investor – block those business channels and forget the password to unblock them.
Now, since you are fine with these assumptions, let me share the details of the 2-year course (you can call it “Value Investing for Smart People 2.0”) that can help you become a smarter, independent investor.
Here’re the step-by-step details of this course that is spread over a 24-month period…
Months 1-2
Step 1: Sign up for my Value Investing Course. It’s free!
Step 2: Buy, borrow, rent (but please don’t steal!) these books for your primary stage of reading, and read them from start to end. Also, make your notes.
- The Intelligent Investor by Benjamin Graham
- One Up on Wall Street by Peter Lynch
- As a Man Thinketh by James Allen
- The Richest Man in Babylon by George Clason
Months 3-7
Step 3: Here’s your reading list (secondary stage) for the next five months:
- Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
- Margin of Safety by Seth Klarman
- Your Money and Your Brain by Jason Zweig
- Common Stocks and Uncommon Profits by Philip Fisher
- Warren Buffett Letters (these are available free of cost, here + read my reviews)
- Essays of Warren Buffett by Lawrence Cunningham
Step 4: Pick up the latest annual reports of a few companies you like, and read them from front to back. Watch this video to know what sections of an annual report you must read.
Months 8-12
Step 5: Here’s your reading list (higher secondary stage) for the next five months. These books will help you create a better mental framework towards investing:
- Aesop Fables (Morals like “appearances are deceptive’ and ‘look before you leap’ are so important in investing)
- Influence: The Psychology of Persuasion by Robert Cialdini
- Poor Charlie’s Almanack by Peter Kaufman
- The Black Swan by Nassim Nicholas Taleb
- Prof. Sanjay Bakshi’s Blog
Months 13-20
Step 6: You are nearing your graduation as a sensible and independent investment thinker. Congratulations!
Here’s your reading list for the graduation stage, which will help you learn how to analyze and value businesses and identify the best among them:
- The Little Book that Builds Wealth by Pat Dorsey
- Financial Statement Analysis by Martin Fridson
- Financial Shenanigans by Howard Schilit
- Quality of Earnings by Thornton L. O’glove
- The Little Book of Valuation by Aswath Damodaran
- A Few Lessons for Investors and Managers by Peter Bevelin
Months 21-24
Step 7: Memorize this:
“I am an investor; I am not a speculator. As an investor, I will:
- Buy stock in simple, strong, sustainable businesses, and expect to be rewarded over time through stock price appreciation and dividends.
- Focus on the value of the businesses, and not stock prices. I will ignore daily stock price movements by not keeping an online portfolio tracker and switching off all business channels.
- Not try to time the market. I know that ‘time in’ the market, and not ‘timing’ the market, is important.
- Buy to hold. Not buy and forget, but buy-review-hold. My intention will be to buy a stock without any plans of divorcing it.
- Spread out my risks. I will prepare an asset-allocation plan for my equity investments, and review it from time to time.
- Stay strong, think long.
Step 8: Prepare your investment philosophy based on what you’ve learnt over the past 20 months. Yes, you do need a written investment philosophy that will help you remain disciplined.
Step 9: Print the Investment Owner’s Oath, fill it, and stick it in front of your work desk so that you look at it every day.
Step 10: Pray. Prayer can help you think clearly and make fewer mistakes. It reduces anxiety and stress – two of the biggest killers of investment returns. Reduced stress can help you make better investing decisions.
Finally, open a brokerage account (any big broker will do, till you don’t listen to his advice), pray again, and start investing in stocks.
Huh, this is hard work!
Welcome to reality! At Safal Niveshak, call it my sadism, but I want to see you do the hard work to make your money really work for you.
But, believe me, as you go through this course, you will realize that this is NOT extraordinary stuff. As Warren Buffett says that in investing, “…it is not necessary to do extraordinary things to get extraordinary results.”
Some of you might also wonder – “But this is just reading, reading, and reading. How much can one read?”
For you, here is what Charlie Munger has to say, “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren [Buffett] reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
So, if you want to become a simpler, smarter, and independent investor (well, you have no other choice if you want your investments to work for you), this is one course you would like to follow.
This will help you sharpen the saw before you actually hit the tree!
You have my best wishes!
This is the best course on value investing that anyone can take!
Yup, the harsh reality is that you can’t esape from the reading. And, one may have to read a bok like Intelligent investor or the Essays of Waren Buffett several times to grasp the meaning and essene. Also, a major part of learning omes from experiene. Even learning from mistakes happens after you commit a few errors!
I would also like to add a few titles to the list. May be one can read The Warren Buffett Way in the month 3-7, just before you read his annual letters, read this book. Also, in the month 8-12, Pat Dorsey’s other book ‘The Little Book that Builds Wealth’ is a good edition. Similarly, Poor Charlie’s Almanack can be taken up in the last month, once you read the great blog of Prof. Sanjay Bakshi.
And, I would also want to endorse the point that please, please beg, borrow or rent but DON’T STEAL!! The importance of this point can be understood after the end of your course.
Thanks Manish!
This is a well laid out roadmap and is almost like the index of a self help book on this subject.
Some would sulk at the hard work needed but you are bang on.
It seems a good time tested and tried path which should work well for most and frankly two years a pretty good, not rushed, timeline.
Thank you.
Thanks Sudhir!
Thanks Vishal.
Now, My first task is to take a print out of this post and pin it to my desk in office and in my study room at home. 🙂
Then start following the roadmap and stick to its timeline.
Regards,
Shantanu
All the best, Shantanu! 🙂
You should add Howard Marks, James Montier for the humour and sarcasm, Joel Greenblatt for the easily deceptive books.
could you please give names of some of their books that you recommend.
Most of Howard Marks thoughts are at Oaktree Capital website (google!) and search in Amazon. Montier’s books are fun (especially Value Investing) but is heavy going – but go http://www.gmo.com and get hold of his memo / mongraphs (in fact look at others as well and some of them can be very insightful). I would not recommend his books unless you are done with the rest! Go to Amazon for Greenblatt, you’ll be able to see his books. All are available in India on flipkart, landmark, etc. on their webstores. I would start with Marks memos and Grennblatt’s books
thanks
Thank SPV! Well, as they say, the learning must never stop. Thus I’ve excluded a lot of other invaluable reading stuff (including Security Analysis) out there, but that is for someone who has already learnt the basic art of investing sensibly and independently, and wants to keep on learning more.
Yes, as you said, Howard Marks will be on that higher learning list through his memos, which can be found here, plus through his 2011 book – “The Most Important Thing: Uncommon Sense for the Thoughtful Investor”.
As for James Montier, his “Seven Immutable Laws of Investing” are a great read.
Greenblatt’s “The Little Book That Beats the Market” is another key resource.
Nice Roadmap Vishal…
Damn good, it would take some time for me but will definitely will take this up.
Its great. This is the best roadmap I have ever came across in the world of investing. I thing I was exactly looking for this. I will try to stick to the guidance. May require your help on the way. Please keep updating and adding more substance to this post. Thanks.
Even if a new investor is able to follow 20% of this amazingly useful road map, he would be adding a few lacs to his long term wealth. 🙂
Thank you so much. This is extremely helpful.
And thanks Manish for your advice..Makes a lot of sense.
Thank you all for the feedback to this post…and all the best to those who would really pursue this.
BTW, some readers have asked me why I have mentioned just these books while there are so many other great books that are not part of the list. The thing is that, and I have mentioned this in one of my comments above, the learning must never stop. Completing this 2-year course won’t mean that you must stop reading. In fact, this course is equivalent to just the “Go” trigger at the start of the marathon. You need to continue your reading throughout your investment life.
Here is a book list that I have on the website, which might be helpful for you in choosing further reading – https://www.safalniveshak.com/books/
All the best!
I like all the books in the list and there is no doubt reading them makes you a better investor.But this kind of academic approach to learning investing will always be counter productive.
Successful investing is all about discovering yourself and developing your own philosophy with the help of some good books.When you fix timelines the whole purpose is defeated as you might end up reading everything and still miss out understanding basic things in investing.Instead lay investors are better of learning at their own pace.
Thanks for sharing your view, Rakesh.
The thing is that my claim to fame lies in procrastination, and I see the world from the same pair of eyes. 🙂 That’s the reason I’ve put up a timeline. Of course, nowhere have I mentioned that this timeline is sacrosanct. It’s just a guideline for new investors who are searching for an answer to the question – “Where do I start?”
So everyone is free to follow the course in whatever way and at whatever speed he/she is comfortable with. Regards.
In my experience reading an investment book for the 3rd or 4th time proved to be 4 times more useful than reading it for the first time.So I always suggest people to select a few classics, say 4 or 5 books at a time , and keep re-reading them at least 4-5 times for at least 1-2 years.When this is competed you will automatically discover the next set of books you need to add to your reading list.
That’s a valuable suggestion. Thanks for the same!
I agree with Rakesh. I have experienced it personally.
Rakesh
Excellent one Vishal
Just one suggestion from my end to all the beginners. I think its very important to make notes while you are reading the books. I am not talking about merely highlighting in the book, one must copy those relevant paras verbatim or preferably in their own words. Also note down the ideas you agree and disagree with. After a while one easily compare how various investors present different views for the same ideas.
Great suggestion…
Thanks Anil! I have mentioned the “make notes” part in Step 2 above. But thanks for elaborating! Regards.
This is an awesome post! The reading part is harder for me than the emotional discipline needed! Will try and get hold of audio books.
thank you. so kind of you
Now i know where to send people when they ask how to start investing in stock market!
Hi Vishal,
Thanks for the insight you have to show us the roadmap when there is none. I urge you think in the term of non financial background and revise your course.
Thanks,
Manish Yadav
Hi Vishal,
I have recently started to look into value investing and it was your blog that gave my thoughts a direction. Thank you.
The question I have is, the list that you have provided is almost a year old. The reviews I have read for some of the books are extremely encouraging and those books are bound to stay on any list on value investing, or investing as a whole. In fact, I have started on the course this month itself, have ordered all the books for the first 2 months, and I feel very excited. What I want to ask is, would you recommend any changes in the list? Any additions or removals? or will it stay the same?
I am in no way suggesting anything, as I am in no position to suggest. I just want to know your thoughts on it.
Thanks and Regards,
Jimit.
Dear Jimit, thanks for asking! Like the legends’s lessons, even the list doesn’t require a change, at least not as of now. Also, as you read these books, you will find names of several other books recommended by the authors.
Hope this helps. All the best for your learning! 🙂
Regards,
Vishal
Vishal, Great ideas are simple and your outline here in this post is just that. I visit this post when I am loosing patience and energy to keep moving on the path you have laid out. Thank You
Great to know that Hari! All the best in your journey! Regards.
thank you for the course outline , but honestly no patience at age of 66 ! but sure learn a lot from this blog and suggested blog.
A Great initiative Vishal, the best of internet till date that i i can credit is this blog. Thanks a ton, i havent started yet but i am now a baby in doing so , all the best to me. Will let you know the results soon ( Two Years from now thanks)
Vamsi
Thanks Vamsi…and all the best! 🙂
Hi Vishal,
Thank you for your ideas and direction. When I first saw the link to your two year course I thought that this is where you would begin a sales pitch!
Glad I was proved wrong.
I think the critical thing (other than learning all you can) is to learn to invest and hold. All these online trackers are exciting to watch but invite you to keep buying and selling. Last year I was shocked to find that I paid out more than 10,000 Rs in brokerage alone. Fortunately I made more than that but I am sure that in my earlier attempts my brokerage would have been more than my profits! I now realize that no matter what the market thinks, the value of my share in a business cannot go up or down every minute.
I am trying to get my son (who has just joined his first job) to start investing. Pointing him to your site is good first step. Any ideas that can help?
Thank you for your efforts.
Sanjay
Thanks for writing in, Sanjay!
Your son may start with taking up my free 20-lesson course in value investing, for which he can sign up here.
For graduate level (Masters) course I will suggest:
1. Accounting for Value and Financial statement analysis and security valuation – Both by Stephen Penman (Hopefully this will cure you of harmful impact of Damodaran’s book)
2. Security Analysis by Ben Graham (You need to grapple with this if you want to become a master)
3. Against the Gods – Remarkable story of Risk By Bernstein (All about probability and risk)
4. Thinking Fast and Slow by Kahelman
5. You can be stock market genius
6. Creative cash flow reporting By Mulford
7. Perhaps most important book- Fountain Head by Ayn Rand. This is for reality check. If you are not like Howard Roark then think twice before reading any of these books and becoming investor in the stock market. You need to have same qualities like him.
I appreciate your hard work. Thank you so much for this beautiful work. Hope i will get some benefit out of these.
Margin of Safety is unavailable, pretty much everywhere! Can you lend a copy please? (I live in Mumbai)
I have a soft copy Kunal. You can find it on Google.
Found a link. Thanks!
Hi Vishal,
I am 22 years old fresher working in MNC. I really appreciate the simplicity of this particular blog. This blog is a guide to person like me who are new in this field. Can you tell me a book which simplify the complex terms in stocks or investing? I am from engineering background…
Sir, Don’t know if you have already published the book.
Your content is far better than other finance blogs….I want to see the your name as author and book in this list….
Thanks for your kind words of appreciation and suggestion Rachit! Have not thought about a book thus far. 🙂
Hi Vishal,
I have taken the endowment plan(new jeevan anand) in LIC for next 35 years and I am 26, for which I pay 31000 annual premium and paid for 1 year . Later I came to know that term insurance is better than New jeevan anand. I am thinking to discontinue the policy and move to term insurance @ loss of 32K. Could you please suggest the best way to proceed ?
Thanks
Vish
Hello Vishal,
Thanks A lot for pointing out a self study course for newbies like us.
Do you read the hard book or the Kindle versions?
The kindle versions would be very cheap. But somehow i dont get the book like feel in it.
Regards,
Pradeep
I have one question.
Why is the Financial Statement Analysis book being covered in the later 13-20 months? Why not after 6 months?
Thank you sir for sharing the detailed way to learn about stock markets. Though it is time-consuming I believe that this process truly helps the individual investors to attain financial freedom.
Thank you once again
hello sir i am from a non financial background (software), do i need to add any other books to this list for better understanding.
Not necessarily on the back end of financial statement analysis books there is a section jusy for techincal terminologies go to that whenever u find a word u dont understand
Dear sir ,
Is there any update on this Thread sir, I want to start my investing journey using the above approach.
Thank you
Sai