I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.
-- Charlie Munger
If you're a stock investor, there's a good chance that you'd like to be a better stock investor, and an effective way to become one is to learn from the masters. Here are a magnificent seven investors to know about and to learn from.
Image source: The Motley Fool.
1. Warren Buffett
Warren Buffett is arguably the most well-known investor, for good reason. Since taking over the reins of Berkshire Hathaway in 1965, he has built it into a juggernaut recently worth more than $880 billion -- and has increased its value at an average annual growth rate of 19.8%, versus 10.2% for the S&P 500 over the same period of nearly 60 years.
A key lesson you can learn from Buffett is the importance of sticking to what you know, what he calls a "circle of competence." Your results can suffer when you invest in companies and industries you don't understand all that well.
2. Charlie Munger
Charlie Munger was Buffett's business partner for many decades, and Buffett credits him with being the "architect" of Berkshire Hathaway. When managing money on his own from 1962 to 1975, Munger's growth rate was also 19.8%. Charlie Munger was quite a wit, uttering many unforgettable lines. He also taught Buffett the value of buying into great businesses at good prices, instead of merely good businesses at great prices.
3. Seth Klarman
Seth Klarman is a well-known investor to relatively few. His Baupost fund has reportedly averaged annual returns of about 20% since 1983. One investing concept key to his approach is margin of safety; he actually wrote a book with that title, and though it's now out of print, it's for sale here and there for $2,000 or more. It's smart to seek a margin of safety in your investments, which means aiming to buy them for less than they seem to be worth. (Having a margin of safety is a hallmark of value investing.)
4. Hetty Green
Harriet "Hetty" Green, who was born in 1834 and died more than 100 years ago in 1916, was at one point known as the richest woman in America. Many descriptions of her have been less than generous, referring to her as "ruthless," "formidable," and "the witch of Wall Street." She was born into a wealthy family and learned about money management from her granddad. She inherited between $5 million and $7 million, and via investments and frugal living, reportedly grew that into around $100 million. She steered clear of speculative investments and advocated buying low and selling high, noting: "There was no great secret in fortune making. All you have to do is buy cheap and sell dear, act with thrift and shrewdness and then be persistent."
5. John Neff
John Neff isn't the most well-known investor, but he had an admirable record. He more than doubled the returns of the S&P 500 when he helmed Vanguard's Windsor Fund for the 31 years between 1964 and 1995. He was another value investor, aiming to buy stocks when they're undervalued. He favored stocks with low price-to-earnings (P/E) ratios and dividend payers, as well.
6. Joel Greenblatt
Joel Greenblatt is known for, among other things, writing the best-selling The Little Book That Still Beats the Market, in which he offers his "magic formula," which is a "long-term investment strategy designed to help investors buy a group of above-average companies but only when they are available at below-average prices." When Greenblatt managed the Gotham Capital hedge fund, it grew at a remarkable average annual rate of 40% over more than 20 years.
7. Jack Bogle
Finally on this list, there's John "Jack" Bogle, referred to by many as the father of index funds. (He also founded Vanguard, known for low-fee mutual funds and exchange-traded funds.) We all owe a debt of gratitude to Bogle, as having many low-fee index funds available to us today means we don't have to expend much time or energy becoming great stock pickers. Long-term investing in index funds can be all you need to build a comfortable retirement. Don't believe me? Consider this: Over the past 15 years, fully 92% of all large-cap stock funds underperformed the S&P 500. So had you invested in a good low-fee S&P 500 index fund, you'd have lapped lots of highly paid money managers on Wall Street. Thanks, Mr. Bogle!
These are just seven of the many terrific investors from whom we can all learn, and the more you learn, the better your portfolio may perform.
