The 12 days of a well-read Christmas

My eight-year-old son recently received an early Christmas gift; a piggy bank in his favourite footy club's colours (brown and gold). Unfortunately, he was more concerned with learning how to get the money out than how to fill it up, much to his thrifty father's chagrin. 

So it's something close to therapy for me to be able to bring you what our team deems to be our 12 best ever Investor's College articles. If you're in search of holiday reading that will actually pay off rather than simply distract, our six judges and their selections of their two favourite articles fits the bill.

A few brief comments on what made their selections stand out accompany each link and, to sweeten your reading pleasure, we're going to compile all these articles in a special downloadable pdf, due to be published to the site very soon. Feel free to pass a copy of it on to anyone focused on the wrong end of the moneybox. [My son is going to be very disappointed when he sees what his father has left for him under the tree this year.]

Steven Johnson, CIO, Intelligent Investor Value Fund

'You don't need to make extraordinary returns to end up extremely wealthy', says the chief investment officer of the Intelligent Investor Value Fund, 'you just need to let the maths of compounding work its magic.' That explains Steve's first selection, The magic of compound interest.

Compounding has played a large part in Warren Buffett's incredible investing record, so it's no surprise that Steve's second selection, The secrets of chapters 8 and 20, is related to Buffett's teacher and the father of value investing, Benjamin Graham. The two most important chapters in Graham's seminal work (and our namesake), The Intelligent Investor, are essential reading for any investor, but 'for those that have a copy of the book, it's worth rereading these chapters once a year or so. For those that don't, this Investor's College will take you a tenth of the time and give you most of the important points.'

I spent nine years as an accountant before joining The Intelligent Investor, which might explain my first selection, Weighing up ROA, ROE and ROCE. 'Most investors would rather hear the story of a stock rather than bury themselves in the details. But this short series was a good example of how, often through laziness, we form lousy conclusions by leaning too heavily on a few key metrics. The accounts are normally presented in the most positive light, so it pays to know your ROE ABCs'.

The commodity that most of us are short of these days is time. And given the number of stocks listed in Australia it can be a nightmare whittling down the list to the most prospective opportunities. Finding short cuts, clearing high hurdles provides an easy way of culling most of the deadwood, which helps avoid stress and leads to better investment decisions.

Investing is as much about avoiding losers as it is about picking winners. Most investors, particularly newer ones, will naturally focus on how to pick winners. But the easiest and best way to improve overall investment results is to focus on reducing investing mistakes. So my first article suggestion, which leans on the work of investing legend Phil Fisher, is Bad stocks and boom times from 2005.

In a relatively concise example, this article shows why long-term investors should be focused almost exclusively on the very best companies in an industry or niche. It also shows why timing is much more crucial for investors interested in cyclical or marginal companies (not generally our game).

As you can see from some of the other suggestions on this list, the art part of investing is terribly important. Investors need to know about the hard-wired shortcomings in their own psychology, or else it will lead them astray. But it's also crucial that investors learn about the nuts and bolts of the investing craft.

The Top 5 financial ratios series that began in 2010 is a fine starting point. So far in this series we've looked at the most important numbers to crunch for listed property trusts, manufacturers, retailers, banks and insurers. They're all worth reading, but we've only got room to republish one here, so I'll go with Top 5 financial ratios: Retailers of 11 Jun 10, because it's a sector where good financial acumen makes a massive difference in the goal of sorting winners from losers.

Receiving dividends is one of the great pleasures of owning shares (and, statistics show, the chief driver of long-term returns). Yet the dates around dividends can be confusing, particularly to those newer to the investing game. Dazzled by dividend dates? Provides a ready-reckoner which cuts to the chase of what you need to know about this crucial topic.

As an Australian, it's easy to feel re-assured about the safety of our banks. Everyone tells us how strong they are, from politicians to the chief executives themselves (and even those sometimes-reliable credit ratings agencies). But the truth is that our banks have a weakness and it's crucial that investors in the sector appreciate what it is and the risks it entails. Our big banks' Achilles' heel exposes the issue.

One of the first financial ratios any new investor must grapple with is the price-to-earnings ratio (or PER). The problem is that a little bit of knowledge can be a dangerous thing. It's important to know what type of PER you're dealing with, and how to calculate its various components. The article Getting to grips with PERs explains all.

Once you've got to grips with PERs, you'll most likely participate in a capital raising at some point. Share offers can be confusing but there are two main types – rights issues and share purchase plans. The article Your guide to retail share offers will help you work out whether to participate, and even whether you might be entitled to a 'free lunch'.

In 2010 we introduced a Value Investing Video Series. For me, the pick of the bunch was Gareth's two-part series on Golden Rules for losing money. For those who want to put a face to the name and enjoy this informative, easily understood presentation on classic investing mistakes, it's well worth watching.

The reviews we've published on investing psychology are also really valuable, and especially pertinent for a few of our current recommendations. So at risk of suffering from recency bias, I'm selecting Aristocrat, A case study in investing psychology. As much as we can understand a stock, it is usually our emotions that determine whether we're able to take advantage of our analytical handiwork. Nathan's review offers pointers on how to avoid the psychological traps rapidly rising and falling stock prices present.

Finally, if you've found yourself spending an idle hour surfing through the more than 200 Investor's College articles in our archive, please let us know your favourites.