Is it instructive and gainful to copy the investment decisions of great investors? The short answer is: yes!
We can learn a great deal from the strategies and decisions of famous investors.
Sir John Templeton, for example, still has much to teach us. Sadly he passed away a few years ago. He was a pioneer in his day of international investing and brought home the advantages this has in terms of reducing volatility and increasing returns. And never before has it been more important to have a properly structured and internationally diversified share portfolio.
If you search throughout the world you will find more bargains and better bargains – also, you gain the safety of diversification.
“It takes patience, discipline and courage to follow the ‘contrarian’ route to investment success, to buy when others are despondently selling, to sell when others are avidly buying. However, based on the half century of experience, I can attest to the rewards of the end of the journey,” Templeton said.
He correctly maintained that achieving a good investment record took a lot of hard work – far more work than most people think.
Investors should never permanently adopt any type of asset or selection method. They must remain flexible, open – minded and sceptical. Long – term results are achieved only by changing the types of securities you favour and your method of selection.
Warren Buffet, the famous American investor, is more insular in his investment approach. All things being equal, Buffet prefers to concentrate his investments in the American market – he says that most of his investors pay their bills in dollars. Contrary to Templeton’s approach, Buffet believes that diversification is an excuse for ignorance. Buffet’s approach is to put all your eggs in one basket and watch that basket carefully.
Buffet is perhaps most famous for his articulation of a concept of franchise investing. By this he means buying shares in companies that have some form of monopoly. A favourite example of this is Coco-Cola, which has the strongest franchise in the world. If you gave me “$100 billion and said take away the soft drink leadership of Coco-Cola I would give it back to you and say it can’t be done. A takeover of Coco-Cola would be like Pearl Harbour.”
Next month I will continue with this theme and outline some practical steps for following great investors.
*If you are not happy with your portfolio performance or would like a second opinion, please do not hesitate to contact Fenestra for a confidential consultation.
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