That’s what my friend told me after I asked about his personal investments. I knew exactly what happened.
We sat at the corner of the lobby at the Ritz Carlton Singapore. It was lunch time and I just came out of a major equities investment conference.
As I put down my cup of black coffee, I was hearing about his recent experience:
“Willie, I’ve made nothing but I’m still giving these fees to my bloody banker…”
You see, I met my friend several years ago. He was a very successful venture capitalist and we regularly exchanged notes on investing. We caught up years later after a conference we were at.
He said: “I go to China often to meet tech companies, have to hire people, and manage each deal personally.”
My friend carries out transactions that’s worth millions of dollars. He knows the drill – due diligence, running his analyst team, working with legal, regulators and so on. Over the years, he has developed a sharp business acumen that allows him to make quick, critical decisions. That has led him to be a solid dealmaker in the world of start-ups.
Yet, the funny thing is, my friend prefers to let another “professional” manage his money. The funnier part is these “professionals” might not even have the same business acumen as him.
The results? “All lousy”.
I’ve come to believe investing is personal. But more importantly, the working experience and knowledge you have – in terms of focus, making quick decisions and having a disciplined work approach — whether in your business or in your career can be your greatest edge in the market.
In October 1975, Warren Buffett played “coach” to then Chairman and CEO, Katherine Graham of The Washington Post. He wrote a memo about the growing problems in pension plans that might impact her business. And Buffett suggested how she and her company could deal with it.
This was what he wrote to her: “Stock market prices may bounce wildly and irrationally but, if decisions regarding internal rates of return of the business are reasonably correct — and a small portion of the business is bought at a fraction of its private-owner value — a good return for the fund should be assured over the time span against which pension fund results should be measured.
It might be asked what the difference is between this approach and simply picking stocks a la Morgan, Scudder, Stevens, etc. It is, in large part, a matter of attitude, whereby the results of the business become the standard against which measurements are made rather than quarterly stock prices. It embodies a long time span for judgment confirmation, just as does an investment by a corporation in a major new division, plant or product. It treats stock ownership as business ownership with the corresponding adjustment in mental set. And it demands an excess of value over price paid, not merely a favorable short-term earnings or stock market outlook. General stock market considerations simply don’t enter into the purchase decision.
Finally, it rests on a belief, which both seems logical and which has been borne out historically in securities markets, that intrinsic business value is the eventual prime determinant of stock prices. In the words of my former boss: ‘In the short run the market is a voting machine, but in the long run it is a weighing machine.’
By the way, you can read the Warren Buffett’s full memo here.
Warren Buffett’s words to Katherine Graham were gold. He tells her simply to treat each individual stock as if you were to buy the entire business operation. More importantly, to ignore whatever noises that’s out in the stock market.
I agree with Buffett. That this would be the most profitable and safest way to invest.
Over the years being in banking and writing my financial blog, I realized few people would invest in the stock market in the same way they would put in their fullest effort in their own industry.
Instead, what they would rather take the “easy way” to let someone else take their money and invest on their behalf.
Put it this way, if you’re running a business, have been in a corporate career or have some form of business experience, I’m very confident you’ve a far better investment judgement — in making good decisions — than most money managers. Because no one looks after your money better than yourself.
What you need is the right mindset and a set of investing tools.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
Credit: investing.com
Today, China’s bear market is well into its fifth year — shares are still in the bargain bin, international investors have lost interest in the market, and nowhere to be found.
