market can seem daunting, but one short cut is to learn from the masters.
Many had a good way with words too, cutting through the jargon so common
among today’s professionals to bring home the essentials of the subject in a way
that anyone could understand.
Here we look at five of history’s greatest investors — and how their wisdom
might help you get more from your money today.
John Maynard Keynes:
You probably think of John Maynard Keynes as one of the 20th century’s most
influential economists. But he was also a brilliant investor. His Cambridge
college, King’s, appointed him bursar in 1924. Between then and his death in
1946, the fund he managed for King’s grew from pounds 30,000 to pounds 380,000,
a remarkable feat given the stock market turbulence of those decades.
The path was far from smooth, however, with the fund tumbling in the 1929
Wall Street Crash.
But this painful experience provided valuable knowledge, shaping a new
investing style for Keynes. He went from trying to work out what the market
would do to focusing on a small number of individual companies — a style adopted
by Benjamin Graham and Warren Buffett (see below).
In a 1934 letter, Keynes said: “As time goes on, I get more convinced that
the right method in investment is to put fairly large sums into enterprises
which one knows something about and in the management of which one thoroughly
So what did he buy?
In the Thirties, he dramatically increased his holdings of mining shares and
stocks that had fallen but seemed well placed to recover. Union Corporation, the
South African miner, was a core holding, as were Austin Motors and Hector
Whaling. He also challenged convention merely in his devotion to shares. At the
time, most institutions were wedded to bonds.
Best quote: “The dealers on Wall Street could make huge
fortunes if only they had no inside information.”
Investment returns: 12% a year.
Few investors are household names but Warren Buffett, otherwise known as “the
Sage of Omaha”, is the exception. Buffett runs Berkshire Hathaway, an American
firm that owns insurance companies among other investments.
His approach to investing in shares could be summarized as “buy and hold” —
but he chooses them carefully in the first place. Berkshire’s biggest holdings,
which include American Express and Coca—Cola, are long—established businesses
with loyal customers.
Buffett looks for companies that not only generate profits consistently but
are able to reinvest them in the business. Not all companies do this; even if
they make profits, they may squander them by using the money to expand into less
Buffett is not bothered by falls in the stock market — in fact he actively
welcomes them if he can buy more of the same shares more cheaply.
He says: “Overall, Berkshire and its long—term shareholders benefit from a
sinking stock market, much as a regular purchaser of food benefits from
declining food prices. So when the market plummets — as it will from time to
time — neither panic nor mourn. It’s good news for Berkshire.”
Best quote: “Only buy something that you’d be perfectly
happy to hold if the market shut down for 10 years.”
Investment returns: 19.7% a year (Berkshire Hathaway shares, 1965—2012).
Sir John Templeton:
John Templeton, who was born in Tennessee but later became a British citizen,
started his Wall Street career in 1937. When war broke out, he used borrowed
money to buy 100 shares each in 104 companies whose share price was $1 or less.
Only four turned out to be worthless, and he made large profits on the others,
holding them for an average of four years.
This story encapsulates his approach. First, he believed in buying at a time
of extreme pessimism, when most people would instinctively avoid the stock
market. He also sought out undervalued companies, but sold the shares when their
prices had recovered, exemplifying his principle that investors should “expect
and react to change — there are no stocks that you can buy and forget”.
Templeton took a global approach to shares, saying: “If you search worldwide,
you will find more — and possibly better — bargains than in any single
He was the first Western investor to appreciate the potential of Japan’s
post—war economic miracle, but also moved his clients’ money out before the
Tokyo market peaked in the late Eighties — moving it to America in time to catch
a bull market there.
Templeton’s fund management business still exists as part of Franklin
Templeton, and his principles are used “on a day—to—day basis” in the running of
the Templeton Growth fund, says its lead manager, Dylan Ball.
Best quote: “The only way to avoid mistakes is not to invest — which is the
biggest mistake of all.”
Investment returns: 15.1% a year (US version of the Templeton Growth fund, 1954-1986)
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