Words from the wise

The Best Investment Advice I Ever Received Price: Rs 520 Pages: 216 By: Liz Claman Published By: Business Plus Target audience: Novice investors Quick read tip: Run through the content list for people who interest you and jump to their advice Language: Easy Style: Illustrative

There are two roads to successfully nurturing your very own money plant: adopting the tried-and-tested strategies of wildly successful investors or hashing out a formula of your own, learning from your mistakes. No prizes for guessing which route is easier and faster, beyond offering a great chance of minting money. The only trouble is getting the world’s most successful moneymakers to share their magic formulas. It’s not like you can invite Warren Buffett to tea and pick his brains, right?

But with this book, Liz Claman—you may have seen her on TV anchoring business news, first for CNBC and now for Fox Business—gets over 65 of America’s richest and most famous investors to share their knowledge with you. The star-studded line-up includes Jim Cramer, Donald J Trump, Suze Orman, Steve Forbes, Bill Gross and Wilbur Ross, in addition to head honchos of leading companies and authors. They may be mostly talking about stocks, but real estate, the bond market and gold as an investment vehicle are not ignored.

What’s more, she condenses this wealth of advice into fundamental points and presents it in short chapters liberally peppered with anecdotes. So you can just as easily start reading the book on page 77 as on page 175. And pick up some trivia along with tips.

For example, did you know Buffett agreed with Woody Allen’s theory on bisexuality, namely that it doubled one’s chances for a date on Saturday night? “Over the years, we’ve been Woody-like in our thinking, attempting to increase our marketable investments in wonderful businesses [through the stock market], while simultaneously trying to buy similar businesses in their entirety [through negotiations],” wrote Buffett in a letter to his shareholders.

For that matter, did you know that Bill Gates once held his own Olympic Games? This particular titbit emerges when Frank Holmes, CEO and chief investment officer of US Global Investors Inc, makes his point about how all great money managers are intellectually competitive, the competitive spirit being the key difference between them and the dime-a-dozen chartered financial analysts.

Angelo Mozilo’s Bucket Theory for Investments The co-founder and CEO of Countrywide Financial Corporation recommends breaking up your investments into three specific, well-defined buckets: • The first bucket, your largest one, is for money that will be absolutely safe no matter what happens.This should be money parked in bonds, deposits and the like • This one, devoted to equities of world-class companies for the long term, should garner about 30-40% of your holdings and be periodically reviewed • Parked in junk bonds and high-risk stocks, this is money you should be prepared to lose. If you hit pay dirt, the rewards are huge. But limit this to 5% of your holdings

Now for the tips. These range from the seemingly obvious like “if it sounds too good to be true, it isn’t true” to warnings like “pressing your bets in the market by buying on margin is not a wise move”. There are also a host of rarely heard ideas like “shorting a stock isn’t a bad idea as a rule; it can be a good move if you can get shares of a highly leveraged company that is heading for bankruptcy.” We all hear often enough about the advantages of thinking long-term when it comes to investing in the stock market, but one of the nuggets in this book talks about how important it is to view the long term as a consistently infinite series of short terms. Which means, don’t just park your money and forget about it, relying solely on the growth of the economy, because you cannot be successful in the long run without being successful most of the time in the short run.

Another great piece of advice comes from Charles Munger, who is Buffett’s partner. He believes you have to work and think in a matrix. “Look at how ants share information and relate this to how markets share information. Look at how bees colonise and compare it to how markets colonise. A diamond that has the most glitter has 56 angles, so you have to look at something from many different perspectives.”

Then there are the seven common principles linking value leaders studied by Peter S Cohan, which are also key points to look into before investing in a company because firms with high value quotients tend to do better in the market. And Angelo Mozilo’s advice about breaking up investments into three specific buckets (see box).

Unless you are a novice in the investment arena, you are very likely asking: so what’s new here? Besides, reading advice such as develop a thorough understanding of your individual risk appetite and long-term goals or keep your emotions out of the equation or that the magic of compounding only works if you start young, starts to get boring when every third guru repeats it. But since sometimes it’s not so much the lesson as the teacher, you are going to find it hard to put down the book...till you’ve read every single advice.

The biggest takeaway from this book? There is no one formula guaranteeing instant millions. So don’t look at this as a book of secrets or a magic wand. Neither is it a primer, or a do it - yourself guide to investing. But together, the individual nuggets of wisdom it contains will offer you some valuable perspectives in investing.

Also read our review of the book 'Lessons from the Greatest Stock Traders'
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