Investing is not a precise science. Rather, it is an art. And it takes years to build up enough experience to be able to claim you have mastered the art (although it is arguable that it is never possible to master investing). How much time is required to learn the art? It depends on how much you immerse yourself in the subject. But one of history’s most coveted value investors, Walter Schloss, believes it takes at least 10 years, in the beginning, after which you can start to build out your experience.
As mentioned above, Schloss is one of history’s most coveted value investors. He worked with Benjamin Graham during the early part of his career and followed Graham’s deep-value strategy for the whole of his life, producing staggering returns for his investors at the same time. Schloss averaged a 15.3% compound return over the course of four and a half decades, versus 10% for the S&P 500 over the same period. Even Warren Buffett (Trades, Portfolio) tipped his hat to this great value investor, writing in 1994:
“The other day I received Walter’s 1993 tabulatiom… Accompanying these performance figures is a financial statement that should inspire Ben Graham productions to film Citizen Schloss.”
“I think Walter’s operational style should be a lesson for us all (one Charlie has already mastered)…Walter continues to outperform managers who work in temples filled with paintings, staff and computers. And he accomplishes this feat by rummaging among cigar butts on the floor of capitalism. It’s quite a 38 year record, a tribute to Ben as a teacher, Walter as a student, and to the advantages of a free puff.”
Schloss clearly knew what he was doing, and there is plenty to learn from his writings, lectures and videos published over the years. One of Schloss’ most informative comments concerns the amount of experience required to be able to invest with any degree of confidence. In an interview with the Outstanding Investor Digest, given in 1989 with his son Edwin, Scholss made it clear that a decade should be the minimum investing timeframe for investors to get acquainted with the market:
“OID: As I mentioned to you in a prior conversation, Templeton’s worst 10 years investment-wise were his first 10 years. And you told me that the same was true for you.
Walter Schloss: Yes, that’s right. I think the first 10 years you get kind of acquainted with what you’re doing.”
Ten years might seem daunting at first, but as Schloss goes on to explain, this period is required to become acquainted with investing, the market and become humble about money, something many notice investors struggle with:
“…people have to be very humble about money if they want to keep it. They have to work at it. It doesn’t just happen. And different children have to be treated differently. Some people are even afraid of money. My mother, for example, would have been one of the worst investors and my father was a terrible investor. And it’s because they lived through fear – through the Depression. As a result, they allowed fear to make their judgments…”
And if you have not been invested through a severe market downturn, it is difficult to imagine how you would react in such an environment and invest accordingly:
“…In the last 15 years [1974 to 1989], it’s been a remarkable stock market. But people forget what things were like during the 1930s. I think Graham – because he lived through that period – remembered it, was scared it would happen again and did everything he could to avoid it. But in the process of avoiding it, he missed a lot of opportunities…One of the problems of a lot of the people who went through the Depression – Ben Graham, Jerry Newman and others – is that they keep on thinking that things will always be like that…People who did missed this tremendous market. Some people can do it. Most people can’t and I don’t think they should try.”
This is extremely valuable advice considering the length of the current bull market that has been in place for nearly a decade now.
Start a free 7-day trial of Premium Membership to GuruFocus.
