Your Money: Learn lessons from the master money makers

Only a handful of professionals outperform the markets consistently over time. But, as Jonathan Davis explains, they make investors a fortune

Who would not want to be a professional investment manager? On the face of it, there are few better jobs to be had. After football players and pop stars, there are few industries in which the top performers are so handsomely rewarded. The bull market of the past 15 years has made the profession one of the most highly sought after in the City. Salaries for those who can demonstrate that they are one of the handful of truly exceptional talents can easily run into the high six figures, with matching bonuses on top.

Investment is one of the most highly competitive businesses on earth and to produce exceptional returns year in, year out is at least as great a challenge as winning an Olympic medal. A handful of professionals do, however, have what the Nobel economics laureate Paul Samuelson calls the elusive extra "performance quotient".

Having spent a year on an in-depth study of eight of the most successful professional investors in Britain, with the idea of trying to establish what have been the major factors behind their success, I can report that the qualities you need to succeed in this demanding business are not the ones which the ordinary investor might at first imagine. The eight I looked at include some of the best-known names in the business.

All these investors have the same objective: to produce returns that exceed those of the market as a whole. But their way of setting about doing so could not be more different. All of them are versed in the art of balance-sheet analysis. All have their own distinctive valuation techniques, which they are happy to describe in detail."

Some, such as Anthony Bolton and Jim Slater, are out-and-out stockpickers. They look for exceptional performing shares, rather than taking overall views on the direction of markets.

Bolton is big on detailed company research. His two funds, which cover the UK and Europe, specialise in finding out-of-favour companies that other investors are shunning for one reason or another; something formerly owned by Robert Maxwell, or nuclear power companies which nobody understands, are the sort of things he loves. Such shares are often irrationally undervalued and make large gains when they return to favour.

Slater has his own screening system for finding growth shares that are not yet fully valued by the market, based initially on the ratio between their earnings and the rating those earnings are accorded in the market. He likes to back broad investment themes (such as the spread of sports retailing and the Millennium bug) and also keeps a very close eye on directors' share dealings. His "Zulu Principle" holds that you do best by sticking to a few companies you can really become an expert on rather than trying to work out how entire industries or the economy as a whole is moving.

Other investors prefer to take a broader view. Mark Mobius, a 60-year- old fitness freak, spends 80 per cent of his time flying around the globe in a private jet looking for bargains in more than 30 different emerging markets. Ian Rushbrook, who runs Personal Assets in Edinburgh, uses his own sophisticated computer models to help him try and decide if the markets are over-valued or not.

Nils Taube, Sir Jacob Rothschild's stock market adviser, specialises in spotting broad international trends that can be expected to head towards the UK and Europe. He was one of the first, 30 years ago, to spot the huge potential growth in supermarkets: now he is busy making money from betting on the continued consolidation of Europe's financial and banking system.

So no two methods for success are the same. As Anthony Bolton told me: "If you are going to out-perform the market, by definition you have to do something which is different from what everyone else is doing."

It all sounds very easy, at least until you try to do it. Going against conventional opinion is something most of us find difficult to do. That is why many successful investors are essentially loners.

The paradox is that there is much less mystique about investment than is often realised. Some of the adages you need to succeed - for example, to run your profits and cut your losses - are almost as old as the hills. Yet few of us actually follow the advice. Buying the most popular shares in the markets, for example those with the highest price-earnings ratios, have been repeatedly shown to be a sure-fire route to long-term underperformance. Yet most investors, many professionals included, persist in doing just that.

In principle, there is no reason, most of the experts insist, why private investors cannot do just as well as the average professional investor. Although their information sources are not so good, they have the advantages of having smaller funds to manage. They can afford to take a genuinely long-term view, a luxury that is in practice denied to most professional investment managers. In Anthony Bolton's words, there is actually very little original thought in investment. It is putting the wisdom of the ages into practice that is so difficult. Putting your money with the genuine superstars, provided you can spot them early enough, is just as good a strategy for long-term success in the stock market as any.

`Money Makers', by The Independent's Jonathan Davis, a study of Britain's most successful professional investors, and what ordinary investors can learn from them, is published by Orion Business Books at pounds 20. To order a copy at the specially discounted price of pounds 15 (including P&P) call 01903 736736 and quote the reference number MMJD.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Pricing Analyst

    £30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

    £21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

    Ashdown Group: Head of Client Services - City of London, Old Street

    £45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

    Why Mohammed Emwazi chose Isis

    His friends were betrayed and killed by al-Shabaab
    'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

    Open letter to David Cameron

    Building the walls of fortress Europe has had deadly results
    Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

    You don't say!

    Tory candidates' election tweets not as 'spontaneous' as they appear
    Mubi: Netflix for people who want to stop just watching trash

    So what is Mubi?

    Netflix for people who want to stop just watching trash all the time
    The impossible job: how to follow Kevin Spacey?

    The hardest job in theatre?

    How to follow Kevin Spacey
    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders