“The secret to success in any field is to find what successful people do, think about and act on, and do the same.”
- Anthony Robbins
I recently read a book called The World’s 99 Greatest Investors by Magnus Angenfelt, a former hedge fund manager, sell side analyst and financial journalist. What’s interesting about this book is that the author claimed to have spent a lot of time to find out who are the best investors in the world, a task that he thought was easy but actually turned out to be quite difficult.
The author used a very simple rule in terms of screening - more than 25 years of verified track record. He had to contact a lot of people and do a lot of manual screening in order to get the list finalized. It was a remarkable effort. There are some familiar names such as Warren Buffett (Trades, Portfolio), George Soros (Trades, Portfolio), Charlie Munger (Trades, Portfolio) and Prem Watsa (Trades, Portfolio). But many names will likely not ring a bell at all.
The styles vary quite a bit from value investing to speculating, from macro-oriented to quantitative-based investing. On average these investors have beaten the market by 12 percent per year for 25 years and they manage on average 10 billion dollars, obviously quite an achievement.
Although the investment style differs, the author has managed to find the 12 insights common to virtually all of these 99 greatest investors. I’d like to share these insights with the readers as I find some of them intriguing and inspirational. I've highlighted 3 insights that I think are crucial to investing but less frequetnly mentioned on this forum.
1. Know you own investment rhythm - I think this is extremely important yet very often ignored. As Guy Spier put it: “My job is to be Guy Spier. I’m not going to do a very good job of being Bill Ackman (Trades, Portfolio) or being Warren Buffett (Trades, Portfolio) but I’m going to do a damned good job of being Guy Spier, better than anybody on the planet. Everybody’s path is unique and I think it’s really, really important that we find our own path.”
2. Know your strength and weaknesses.
3. Consider the risks, not the potential.
4. Be prepared to change your strategy if the market changes - This is another very important insight that is not widely acknowledged in my opinion. If we look at the investment career of Warren Buffett (Trades, Portfolio), Sir John Templeton, and Peter Cundill. One of the things that stands out is how much their strategy has changed over the years. Buffett went from cigar butts to great businesses, from domestic only to international, and from non-tech to selectively tech. Market evolves and so should our strategy.
5. Don’t invest on the basis of tips.
6. Dont’ let your emotions cloud your judgment.
7. Don’t invest in something you don’t understand.
8. Be disciplined and work hard.
9. Only do businesses with reputable companies and guard your reputation.
10. Don’t underestimate the efficiency of the market, but don’t overestimate its perfection - this is a very interesting insight. As value investors, we believe the market is inefficient. But sometimes we do underestimate the efficiency of the market. Hence the value traps and mistakes.
11. It’s not wrong to make mistakes, but it is wrong to fail to learn from them.
12. Patience is a virtue, in investing as in all else.
Warren Buffett (Trades, Portfolio) famously suggested to the students that they should list the qualities of the person they admire and work very hard at acquiring those qualities themselves. I think this list of 12 insights is great way to start.