by Martin Chapman

Created on: January 24, 2009   Last Updated: October 31, 2010

Knowledge is vital in gaining that competitive edge to become a successful investor. It is important to read everything on the history of stock market investment that you can get your hands on. The more you look back into history, the more parallels you will find with the current economic crisis. If only more economists had read about the past, then perhaps we could have avoided the current economic recession, which is the worst since the 1930s.

The following books are highly recommended to help understand the world of investment:

1. "The Intelligent Investor"/"Security Analysis", by Benjamin Graham

Benjamin Graham's book The Intelligent Investor is regarded by many as the best book on investing ever written. The book first appeared in 1949 and its main concept is that there is a half-price sale in the stock market every day. The trick for the investor is to know how to judge the difference between price and value. Graham outlines how to establish this value, but he is well aware that the value of the share in question may change, the estimate may be inaccurate, or that the market price movement may not be favorable, so Graham creates a "margin of safety" approach.

Graham and Dodd's book "Security Analysis", first published in 1934 is commonly referred to as The Investor's Bible. Security Analysis is a much larger book than The Intelligent Investor and goes into much further detail on fundamental analysis and the establishment of Intrinsic Value for securities.

2. "The Zulu Principle", by Jim Slater

The Zulu Principle advocates the use of a PE/Growth screening process, or PEG ratio, to identify securities which are undervalued in relation to their prospective growth rate. To an extent Slater is using Ben Graham's principles of value investing with a margin of safety. Slater points out that when a dynamic growth company is bought on a low P/E ratio, with a consequently low PEG factor, then those growth prospects are being bought by the investor at a discount. He is prepared to buy stocks at higher P/E ratios than Graham, but he claims to obtain his value by linking the P/E paid to the estimated growth rate and establishing a safety net with other criteria.

3. "Reminiscences of a Stock Market Operator", by Jesse Livermore

In his day Jesse Livermore was described by Time Magazine as the most fabulous living US stock trader. Many traders today know him from the book "Reminiscences of a Stock Market Operator", which is filled with advice

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