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.

Life and Style
“What is it like being a girl?” was the question on the lips of one inquisitive Reddit user this week
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
peopleMario Balotelli poses with 'shotgun' in controversial Instagram pic
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business


    £50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Programme Support, Coms, Bristol, £300-350p/d

    £300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

    (Junior) IT Systems Administrator / Infrastructure Analyst

    £28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

    Finance Officer

    Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice