Book Review: Richer, Wiser, Happier
One common thread among great investors who get featured in books is the fact that almost every one of them got rich by managing other people’s money for a fee that allowed their own capital to expand over time.
William Green in his recent book has written about the process of some well known fund managers and a couple of not so well known fund managers. What appealed to me was that this work did not come out after one year of extensive reaching out to fund managers but something the Author has done over 20 years and more and it shows in the depth he is able to go into.
The commonality I could find among all of them,
Most fund managers, featured here or otherwise, are generally rich enough to not worry about where their next meal is coming from. They continue to manage funds though not because the next million dollars they earn will change how they live (though it doesn’t harm to have a few million dollars more) but because they like the challenge that the market throws at them. This quote from another book, The Money Game puts that into perspective
Almost everyone, other than John Templeton advise that while they have achieved greatness through active investing, an ordinary investor is better off with just an Index fund. Given that these guys are the cream of the fund managers society, this showcases their belief of how tough it is for a small investor to be able to generate returns that are greater than what could be achieved much easily by way of a low cost Index fund.
Keeping costs low is another piece of advice and one that goes well along with Index funds. Yet, costs are the most ignored aspect by a lot of investors. Mutual Funds are seen as Expensive while Advisors are seen as cheap while it’s actually the other way for most small investors.
Interesting Trivia: Joel Greenblatt started Gotham Capital in 1989. After 5 years in running, the fund returned half the investor’s money, at 10 it gave back in full, preferring to manage their own fortunes. With a 50% CAGR during the first 10 years of operation, the performance fee would have added up to a capital the partners would have felt sufficient to trade / invest on their own without having to be answerable to anyone else.
Likewise is the emphasis on Risk Control. As McLennana says,
The future is “intrinsically uncertain” that investors should focus heavily on avoiding permanent losses and building “a portfolio that can endure various state of the world ”
Of course, it’s not that they all believe in similar things. Mohnish Pabrai follows and believes in the art of holding a concentrated position in line with his guru Charlie Munger. McLennana on the other hand believes that concentration enhances risks and would rather be well diversified. His fund has a portfolio of around 140 stocks.
The chapter “High Performance Habits” could have been a book in itself. While there is the tendency to boost things and the small thing about only winners being profiled, it still showcases what it takes to win in the competitive world of investment management.
If you are looking to learn something new, you may be disappointed but the book is an attempt at reemphasizing what many a time we know in our hearts but one that we tend to ignore when the sentiments of the crowd start to crowd out our thoughts. The book is dense at times, but well worth the time spent.
Overall I would rate the book 4 out of 5. A worthy read for both new and experienced investors.
Amazon Link: Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life
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