Individual investors are always on the outlook to take control of their money and investment advice from experts; guidance that’s often highly-charged and time-sensitive. Here are some of the investment secrets by business experts.
Like all experts, these money masters have different opinions on which investment vehicles they favour most. Some are short-term traders; some like to hold long-term. However, they have all won at the investment game.
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The owner of the NBA’s Dallas Mavericks, an American businessman, investor, author, television personality and Philanthropist, Mr Cuban made his fortune through the sale of start-ups MicroSolutions and Broadcast.com in the 1990s.
“The market could go up for years, and you could think you’re well off, and then, in a millisecond with high-frequency trading, a flash crash can take it all away. That’s why you want to have that money in the mattress, that savings, so you’re protected in case something goes wrong. I know it doesn’t earn much in the bank but you’ll sleep a lot better.”
The “money in the mattress” he’s referring to is a six-month emergency fund that he recommends anyone gather. Experts advise keeping three to nine month’s worth of living expenses in an easily accessible, untouched account in case of an emergency.
The CEO and Chairman of Berkshire Hathway, an American businessman, investor and Philanthropist, Mr Buffet is one of the most frequently invoked names in investing advice. He is one of the most successful investors of all times and the 2nd richest man in the world as per forbes.
“The goal of the nonprofessional should not be to pick winners but should rather be to own a cross section of businesses that in aggregate are bound to do well. A very low-cost S&P 500 index fund will achieve this goal. Indexing is the way to go. Invest in great American business without paying all the fees of a mutual fund manager and hang on to those companies and you will win over the long term. Put 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund. I believe the trust’s long-term results from this policy will be superior to those attained by most investors-whether pension funds, institutions or individuals-who employ high-fee managers.”
Paul Tudor Jones
Founder of Tudor Investment Corporation, Mr Jones is legendary for predicting Black Monday, the 1987 stock market crash that saw a 22% drop in a single day. At a time when the rest of the world was experiencing a meltdown, Paul and his clients captured a 60% monthly return and a nearly 200% return for the year.
“When you have a good position in something, you don’t need to look at it, it will take care of itself. Where you need to be focused is where you’re losing money, and that’s actually when people generally don’t want to look: “My account’s going down. I don’t even want to open it.” So I’ve created a process overtime whereby risk control is the number one single most important focus that I have, every day walking in. I want to know I’m not losing it. If you lose 50%, it takes 100% to get back to where you started-and that takes something you can never get back: time.”
Mary Callahan Erdoes
Ms Erdoes is the CEO of J.P. Morgan Asset Management Division, one the largest asset management groups in the world. Today Ms Erdoes oversees the management of $2.5 trillion invested by foundations, central banks, pension funds and some of the world’s wealthiest individuals.
“Invest for the long term and only take money out when you truly need it. Specific portfolio construction will be different for different people. For example, I have three daughters. They’re three different ages. They have three different skill sets that will change over time.
One might spend more money than another. One might be more frugal. One may want to work in an environment where she can earn a lot of money. Another may be more philanthropic in nature. One may get married, one may not; one may have children, one may not; so they’ll have different dependents. Every single permutation will vary over time, which is why even if I started all of them the first day they were born and set out an asset allocation, it would have to change.”
Chairman of Equity Group Investments, Mr Zell is an American businessman with investments in commercial real estate, energy, manufacturing, logistics/transportation, healthcare and communications and holds 49 years of expertise in business investments.
“Look for good companies with bad balance sheets and understand your downside.” Zell looks for down-on- their-luck companies that he can buy cheaply, and he is not afraid of debt. It’s the anti-Buffett approach: “Find poorly managed companies with shoddy balance sheets and you’ll have lots of upside if they turn around.” “The key to my success is that my focus is never on how good it’s going to get. My focus is on the percentage that it doesn’t work.”
John Maynard Keynes
A British Economist, although known for pioneering macroeconomic theory, Mr Keynes was also a great investor. Throughout the 1920s he was an avid speculator, gambling on currencies and commodities. Later he moved into stocks, eschewing the “animal spirits” of an irrational market for companies with good long-term prospects.
“Investing is an activity of forecasting the yield over the life of the asset; speculation is the activity of forecasting the psychology of the market.” Buy well-managed companies that pay a solid dividend, like those found in Vanguard’s Dividend Appreciation Index Fund.
Thomas Rowe Price Jr.
Founder of one of the oldest investment firm – T. Rowe Price, Mr Price hated selling stocks on commission, so when he launched his own firm in 1937 he charged a fee based on assets managed, a radical concept at the time that is now industry standard.
“Most big fortunes result from investing in a growing business and staying with it through thick and thin.” He sought out stocks with earnings and dividends rising faster than inflation and economic growth. “Some stocks are better than others despite the prevailing view that stocks fluctuate en masse with the economic cycle.”
Founder of Babson Statistical Organisation taught himself statistical analysis. He bought a typewriter, developed a market index based on Newton’s law of action and reaction (lower prices must follow higher prices and vice versa) and attracted 30,000 newsletter subscribers.
“More people should learn to tell their dollars where to go instead of asking them where they went.” “Buy PowerShares’ FTSE RAFI 1000 Index ETF or FTSE RAFI All World 3000. Both are broadly diversified in stocks that have a lower price-to-book value and high cash flow and pay a dividend.”
These strategies can help one to have a strong investment foundation, but merely having knowledge won’t help, execution will. Execution trumps knowledge every day of the week. Just make a little bit of progress each day or each week and before you know it, your path to financial freedom will be realised.