In his book “The Intelligent Investor”, Benjamin Graham posits that “successful investment is about managing risk, not avoiding it”. When it comes to investments, there are numerous investment instruments that have made billions of dollars for people, who may have embraced different investment philosophies, but all share the common skill of managing their risks and making the best of opportunities.
The secret of certain investors that transform them into veritable magnates of finance is not only their strong intuition; it is their knowledge and experience that enable them to make great profits, not only for themselves but also for those who place their trust in them, consistently and for long years.
If you are already engaged in the world of investing, or aim to become a better investor, looking into various investment styles and philosophies, getting to know the top investors from different time periods and learning about their wisdom and reading their books will surely broaden your horizon. Now, let’s take a look at the inspiring journeys of the world’s most successful investors.
Benjamin Graham
1894-1976
Widely known as the “father of value investing”, Benjamin Graham started his career on Wall Street after graduating from Columbia University. Graham lost most of his money in the Great Depression that began in 1929, but made a name for himself in subsequent years with his concepts of “security analysis” and “value investing” as well as his analysis skills. In his book “Security Analysis”, which was published in 1934 with a co-author, David Dodd, Graham drew a fundamental distinction between investment and speculation: “After a thorough analysis, it should be clear that an investment is going to protect the principal and provide an adequate return. Anything that does not meet these criteria is speculation.”
His second book “The Intelligent Investor” (1949), described by his student, Warren Buffet as “the best book about investing ever written” and still a highly popular read, focuses on the concept of “value investing”. A sound and thorough analysis identifies undervalued stocks, which will eventually reflect their true value in the market. According to Warren Buffet: “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline.”
John Templeton
1912-2008
Investor and fund manager John Templeton entered the mutual fund market in 1954 and created the Templeton Growth Fund, which grew 15% in average for 38 years. John Templeton laid the foundations of his fortune by buying stock trading at less than $1 on the New York Stock Exchange before the World War II, later making many times his money back when the economy picked up after the war.
A pioneer of emerging market investing, Templeton was named “arguably the greatest global stock picker of the century” by the Money Magazine in 1999.
A student of Benjamin Graham, Templeton focused on buying stocks he calculated were substantially undervalued, holding them until selling when their price rose to fair market value. He believed holding assets priced above fair market value in hopes they would further increase in price was speculation, not investing. However, Templeton did not buy stocks merely because they were undervalued but also took care investing in companies he determined were profitable, well-managed and with good long-term potential.
Thomas Rowe Price Jr.
1898-1983
Founder of T. Rowe Price, a publicly owned investment firm, established in 1937 and headquartered in Baltimore, Maryland, Thomas Rowe Price Jr. is regarded as a pioneer of growth investment. Price viewed financial markets as cyclical, and his successful investing career was based on discipline, process, consistency and fundamental research.
His investment philosophy was that investors had to put more focus on individual stock-picking for the long term. Price believed that investors could earn superior returns by investing in well-managed companies in fertile fields whose earnings and dividends could be expected to grow faster than inflation and the overall economy. Therefore, proprietary research to guide investment selection and diversification to reduce risk were the key principles of his firm.
Jesse Livermore
1877-1940
Considered a pioneer of day trading, Jesse Livermore was one of the richest people in the world at one time. However, at the time of his death, he had more debts than assets.
In a time when accurate financial statements were rarely published, getting current stock quotes required a large operation, and market manipulation was prevalent, Livermore used what is now known as technical analysis as the basis for his trades.
Some of Livermore's trades, such as taking short positions before the 1906 San Francisco earthquake and just before the Wall Street Crash of 1929, are legendary within investing circles. At his peak in 1929, Jesse Livermore was worth $100 million, which equates to around $1.5 billion today. One of the key characteristics that stood Livermore apart from other investors was that he traded on his own during his entire career, using his own funds, his own system, and not trading anyone else's capital, which makes his success even more astounding.
John (Jack) Bogle
1929-2019
Founder of the Vanguard Group, one of the world’s most successful mutual fund companies, John Bogle is named as one of the four investment giants of the 20th Century.
Bogle revolutionized the mutual fund world by creating index investing, which allows investors to buy mutual funds that track the broader market, to make investing easier and at a low cost for the average investor.
Bogle’s philosophy that average investors would find it difficult or impossible to beat the market over time led him to prioritize ways to reduce expenses associated with investing in mutual funds. Therefore, he focused on no-load funds featuring low turnover and simple investment strategies.
Bogle’s 1999 book detailing his investment philosophy, “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor” is still regarded as one of the best books on investment funds.
John Neff
1931-2019
John B. Neff began his career at Wellington Management Company. After three years at the company, he was appointed portfolio manager of the Windsor, Gemini, and Qualified Dividend funds, a position he maintained until his retirement in 1995. During Neff's management, Windsor became the highest yield and largest mutual fund in existence. It earned a return of 13.7% versus 10.6% for the S&P over the same period, which amounts to a gain of more than 53 times on an initial investment made in 1964.
Neff adopted a contrarian investing style that involves making investments based on factors other than market trends, projections based on past performance, and current industry indicators. His investing style was shaped by the low price-earnings ratio (P/E) methodology, and spent his entire career “arguing with the market”. Every stock Windsor owned was for sale and Neff continually and tactfully recycled funds into undervalued stocks. In his memoir published in 2001, “John Neff on Investing”, the acclaimed investor explained the success behind Windsor:
"Windsor was never fancy, fad-driven, or resigned to market performance. We followed one durable investment style whether the market was up, down, or indifferent. These were its principal elements:
- Low price-earnings ratio.
- Fundamental growth in excess of 7 percent.
- Yield protection (and enhancement, in most cases).
- Superior relationship of total return to P/E paid.
- Solid companies in growing fields.
- Strong fundamental case.
George Soros
1930-
Known for his mastery in translating larger scale economic trends into highly leveraged, killer plays in bonds and currencies, George Soros established the hedge fund company Soros Fund Management in 1973. His company eventually evolved into the well-known and respected Quantum Fund. Soros ran this aggressive and successful hedge fund for nearly two decades, achieving returns above 30% per year. A short-term speculator. Soros made massive, highly-leveraged bets on the direction of the financial markets.
George Soros is unique among highly successful investors in admitting that instinct plays a large role in his investment decisions. Nonetheless, he is famously well-informed about economic trends on a regional and global level and is known to use this knowledge to exploit market inefficiencies with large, highly leveraged bets.
Warren Buffett
1930-
Nicknamed the “Oracle of Omaha”, Warren Buffet is regarded as one of the most successful investors of all time. Buffett’s interest in business and investing, which started at a young age, turned into a passion and the center of his life when he became a student of Benjamin Graham at Columbia Business School. Following in on his mentor’s footsteps, Buffett embraced an investing style based on discipline, patience, and value. He founded Berkshire Hathaway, one of the most successful investment companies in the world, with an average return of 20 percent annually. Buffet Buffett is one of the richest people in the world with a net worth of over $100 billion.
Rather than focus supply and demand intricacies of the stock market, Buffett looks at companies as a whole, and he is known to consider factors such as company performance, company debt, and profit margins when making buying decisions
Carl Icahn
1936-
An activist investor that uses ownership positions in acquired companies to exert control to increase the value of his shares, Carl Icahn is one of the most successful investors of Wall Street.
Icahn is the founder and controlling shareholder of Icahn Enterprises, and with a net worth of $16.7 billion, he was the 26th richest person and the 5th richest hedge fund manager on the Forbes 400 in 2020.
The investor describes his philosophy as generally, with exceptions, buying stocks that no one else wants. He has been associated with a phenomenon known as the “Icahn Lift”, which is used to describe the increase in stock price caused by the anticipation that Carl Icahn would uncover shareholder value in companies he thinks are badly managed and acquires a significant stake in.
Peter Lynch
1936-
In the early 1980s, a young portfolio manager named Peter Lynch was taking the world by storm. He took over the Fidelity Magellan mutual fund in 1977, back when the assets of the fund were $20 million. By 1990, he had turned it into the largest mutual fund in the world, with a staggering annual return of 29%, a performance that earned him legendary status within finance circles.
Lynch enjoys sharing the secrets behind his success and his investment philosophy, which he has outlined in several books. He has three main principles:
- Only buy what you understand: According to Lynch, our greatest stock research tools are our eyes, ears and common sense. If something attracts you as a consumer, it should also pique your interest as an investment.
- Always do your homework: First-hand observations and anecdotal evidence are a great start, but all great ideas need to be followed up with smart research. Rigorous research was a cornerstone of Lynch’s success
- Invest for the long run: Lynch is known for keeping up his knowledge of the companies he owned, and for not selling as long as the story hadn't changed.
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