Six Books You Need to Make Money

July 17, 2007 — -- Knowing how to invest is a life skill that can pay off big. If you're just getting into the game though, learning how to play the markets to your advantage can be complicated.

The books below tell you what you need to know to make money, without a lot of financial terminology. They're not your typical textbooks — they're as fun as they are informative, and must reads for anyone interested in business and investing.

"A Random Walk Down Wall Street"

For novice investors, "A Random Walk Down Wall Street" provides a great foundation for getting started — whether you plan to manage your own investments or want to work in collaboration with a broker or financial adviser.

By using the bursting of the dot-com bubble as an example of how not to invest, Burton Malkiel offers advice on how to evaluate a wide range of investments from stocks and bonds to real estate and collectibles. He also provides a "life cycle" guide to investing, which helps you to better understand how your asset allocation should change at different ages and with different investment goals.

"Buffet: The Making of an American Capitalist"

Warren Buffett — also known as the "Oracle of Omaha" — is one of the greatest investors of our time, and this book not only provides insight into his investment philosophy, but it also gives you the inside scoop on who he is as a person, from his early career, to his unique marriage, to how he has chosen to raise his children.

As you will see, despite his astronomical net worth — he's the third richest person in the world, according to Forbes magazine — he lives a very modest life, but has made a major impact on the world of investing. Buffett is a value investor, which means he buys companies that are currently undervalued by the market.

But Buffett isn't just looking for cheap companies. Rather, he is looking for niche players with "economic moats" — his term for sustainable competitive advantages — around their business.

Buffett is a great practitioner of the idea of investing in what you understand and can easily explain, and his investment in a company like Coca-Cola is a great example of this. This book is a page turner and more of a "beach" read than you might think.

"One Up on Wall Street"

Author Peter Lynch — another superstar investor — employs an investment approach similar to Buffett. His philosophy is based on the idea that people can reap significant rewards by investing in companies with easy-to-understand products that are encountered in everyday life. In "One Up on Wall Street," Lynch provides his perspective on how he built a tremendous track record as the portfolio manager of Fidelity's multibillion-dollar Magellan Fund.

To give you a sense of the magnitude of Lynch's accomplishments: When he started managing Magellan in 1977, the fund had about $18 million in assets. By the time he left, in 1990, the fund was up to approximately $14 billion in assets with a portfolio of more than 1,000 stocks.

In addition to telling his own story, Lynch also provides some basics for how to evaluate companies, and includes advice on which numbers on a company's financial statements really matter.

Similar to "A Random Walk Down Wall Street," this book is an excellent read for those looking to become more skilled investors by learning the basics from one of investing's greats. Click here to read an excerpt.

"Good to Great: Why Some Companies Make the Leap … and Others Don't"

This book reads like an investor's road map for me. Jim Collins does an incredible job of identifying and explaining the elements that take a company from — as the title implies — good to great. Most importantly, he talks about two things: leadership quality and focus.

A great company is one where its leaders are disciplined, passionate about what they do and doing what they do best. When investing, I look for companies with management teams that fit this definition. It is important to not get caught up in what management says, but what they are doing, and if their actions are consistent with their words.

"Moneyball"

"Moneyball" is so much more than a book about our nation's pastime. Michael Lewis masterfully writes about Billy Beane, general manager of the Oakland A's, and how he uses deep, thoughtful, qualitative research to put together a winning team. What is so amazing about Beane is he was able to consistently put together a playoff team, despite having a budget that's smaller than almost every team in baseball.

Beane does not fill his team with the big, perennial — and expensive — superstars, but, rather, looks for players who are consistent. Beane is all about value — one of the key ingredients to successful investing. However, he makes the important distinction between something being cheap and valuable. I love this book and recommend it to everyone.

"Succeeding Against the Odds"

John Johnson is a pioneer. This is the story of how he took a $500 loan and turned it into one of the most successful publishing and cosmetics companies in the world. He founded Ebony, the first national black publication, and had the courage and vision to do what others did not. Not only is Johnson's story inspirational, but it is also a must-read, how-to book on creating and sustaining a good business.