NEW YORK ( TheStreet) -- In this time of back-to-school and educational renewal, I want to draw upon my experiences as a student, an educator and an industry professional to provide you with some real-world insights to help enhance your financial education.Whether you're a current business or finance student, starting to think about pursuing a career along those lines or just seeking a few education pointers to help you become a more sophisticated investor, this installment of The Finance Professor has something for everyone.
Staying on Course
Required ReadingWhen it comes to business and finance, there are three categories of books which are necessary to a read: Textbooks, historical literature and fiction. The next few items on this checklist of essentials focus on tried-and-true, classic textbooks that have not only survived the years but continue to be updated by active professors and market professionals. 7. Economics by Paul Samuelson: Samuelson was the second recipient of the Nobel Memorial Prize in Economic Sciences. My father used this book, I used it, and I think that you should use it as well. Samuelson's Economics (now in its 18th edition) is by far the de facto standard textbook for introducing students to micro and macroeconomics, as it continues to be (as it has been for several generations) one of the most widely used textbooks on college campuses. 8. Principles of Financial Accounting by Jerry Weygandt, Donald Kieso and Paul Kimmel: Weygandt, Kieso and Kimmel know how to teach accounting. Their clear and concise approach takes the pain out of the process for those who are not interested in "the numbers." This and other textbooks by this team are widely used in accounting programs as well. 9. Investments by William Sharpe, Gordon Alexander and Jeffrey Bailey: This text focuses in on securities and securities markets, and it is another classic, which has been in print for decades and is a favorite among university professors. 10. Security Analysis by Benjamin Graham and David Dodd This is the bible of value investing. Warren Buffett lives by Graham and Dodd, and that should tell you volumes about this book. 11. Options as a Strategic Investment by Lawrence McMillan: By far, this is the best book on options. I use this in my MBA derivative course. McMillan's book explains everything you ever wanted to know about options in a way that doesn't require you to have a Ph.D. in mathematics. His practical approach to options comes with excellent charts and examples. I have a copy in all of my offices and homes. (I am still searching for the best textbook that encompasses futures, options and swaps.) 12. Stigum's Money Market by Marcia Stigum and Anthony Crescenzi: Written by the late Marcia Stigum, the latest edition was updated and edited by Anthony Crescenzi, a RealMoney.com contributor (see
Historical LiteratureThere are several works of historical literature that have opened up the inner workings of Wall Street to the general public. Gaining insider knowledge of how Wall Street really works will benefit both individual investors and students, especially those students who are looking for internships or post-graduation jobs. I believe the following titles are must-reads, and some are even required reading for my students. 13. Confession of a Street Addict by James Cramer: If you want to know what it's like to manage money, then read this book. Money managers take various forms: Mutual fund managers, pension and endowment managers, separate account managers (which is my business model) and hedge fund managers. Each of one of these types of money manger has to deal with the intense pressures of performance and beating investor expectations -- achieving certain objectives is critical, and you can learn a lot about how it's done. 14. When Genius Failed by Roger Lowenstein: This is the story behind the fall of Long Term Capital Management (LTCM). LTCM was a hedge fund that was far too overleveraged and was rescued by Wall Street firms and the Federal Reserve before it nearly took down the entire world's financial system. 15. Blood on the Street by Charles Gasparino: Find out what went wrong with Wall Street market research during the tech bubble (see
FictionThrough the power of entertaining stories, works of "financial fiction" can educate and inspire investors of all ages and experience levels. Here are a few of my favorites: 18. Reminiscences of a Stock Operator by Edwin Lefevre: This 1923 novel has been read and reread by most Wall Street traders. It tells the trials and tribulations of a "bucket shop" trader by the name of Jesse Livermore. Bucket shops were trading venues akin to modern-day off-track-betting establishments. Now illegal, bucket shops were once common until the establishment of Regulation T and the various securities laws which now govern the financial markets. There are many lessons to be learned from the trading exploits of Livermore. The central character talks about how he has made and lost fortunes, provides trading advice which is still relevant today and gives insight into risk management and the use of leverage. All of my students have to write a paper which answers this question:
It is often said the more things change, the more they remain the same. How is that so for the stock market?19. Atlas Shrugged by Ayn Rand: While I am not a devotee of Ayn Rand's philosophy of objectivism, this book is a very interesting look at how successful entrepreneurs, industrialists and the government interact. 20. Any book by Michael Ridpath: Ridpath is an author from the U.K. who uses investment banks and financial markets as the backdrop for murder mysteries. This is wonderful entertainment, which also provides excellent insight into the psychology and inner workings of the investment business.