I have a friend who manages my portfolio , and his results over the last 5 years have been quite unbelievable. He's beaten the market by such a huge margin that it's sometimes hard to believe that his returns are real, but my bank balance can vouch for the fact that they are !
I was asking him why his performance is so much better than other fund managers . He's a simple, straightforward value investor who worships Warren Buffett. He selects small cap stocks and holds onto them, but it's his ability to consistently pick winners which is quite amazing, so I was very interested in finding out what makes him tick !
The first thing he said is, "I benefited a lot by not having a mentor," - something which I thought was very counterintuitive ! He explained, "Because I didn't have a mentor, I was forced to learn for myself - and the best source of learning is from books ! I had to become a voracious reader, and read all the books on investing , written by multiple different authors , so that I could develop a style of my own."
He said that the problem with working with a hot shot fund manager when you're young and junior is that you are very impressionable , and you tend to adopt a lot of their bad habits, because you are so dazzled by them. You don't even realise that you are aping them, because you are so much in awe of them. It’s easy to get swayed by someone who's a glib talker and very charismatic even though his basic philosophy may not be sound.
Thus, you are far less likely to learn from someone who maybe a much better investor , simply because he is much more laid back and not as captivating. Because he didn't have someone who took him under his wing when he was young, he was forced to fend for himself. Therefore, he was forced to learn from books written by world class experts - which is why his fundamentals are so sound. He also emphasised the fact that the lessons books teach you are far more enduring because you're forced to engage intellectually when you are studying a book - you don't get just carried away by superficial impressions.
He says, "My mentors were all virtual , and the person I admire the most is Warren Buffett. Now lots of people say they follow Buffett's style, but they aren't able to walk their talk. I've read Warren Buffett multiple times , and the first time you read him, it's to try to understand his philosophy - how he invests; what companies he picks ; and why. However, the real lessons only come through when you read about Warren Buffet the second and the third time, because what you can really learn from him is his integrity , humility and simplicity ! What really stands out is the way he leads his personal life - he's a straightforward guy, who doesn't flaunt his wealth or his skills. I admire how he has consistently stuck to his knitting and remained honest to his basic philosophy. The most difficult part about following Buffett is not copying his investing style , but adopting his impeccably high levels of integrity and honesty."
He says - " What makes Buffett truly special in the financial service industry is his emphasis on integrity , and this is what I want to emulate! This is what makes him special - his refusal to compromise or take shortcuts. Buffett can teach you not just how to invest, but how to lead an honourable life. It's not just his personal integrity - it's also how much he values integrity in the management of the companies in whom he invests in ."
Interestingly, his favourite Warren Buffett quote is —" It takes a lifetime to build a reputation but only five minutes to destroy it."
What he has learned from Buffett is the importance of becoming a learning machine, which is why he is a voracious reader. In a way, it's a bit like the story of Eklavya and Dronacharya, and he has a burning desire to learn the best investing practices from the world's best . He doesn't have a MBA; he has not graduated from a brand-name university; and he doesn't have a rich uncle who's given him a helping hand - he has started from scratch and is completely self-made.
He's refreshingly transparent and honest , so that when he talks about the returns on his portfolio, he specifies the client's returns - net of taxes and fees - how much the client actually gets in his bank account at the end of the say. This is such a contrast from other fund managers who are happy to game the system in order to make a quick buck at the client's expense. While everyone in the financial services industry always talks about how they put their clients first, in reality it's very rare to come across someone who says what he does , and does what he says. Having someone who walks the talk is so refreshing - especially when his returns are so dramatic. It does seems like honesty does pay off in the long run , and he reinforces my faith in goodness.
For me, the most important lesson is that potentially, anyone anywhere could follow in his footsteps, because you can pick and choose your own virtual mentors by reading books !