Free Capital: How 12 Private Investors Made Millions in the Stock Market
It is every private investor\’s dream to live off the fruit of his own investments, and this is the story of those private investors who are living that dream. The book profiles twelve individuals, each of whom has accumulated 1 million pounds or more, in most cases considerably more, mainly from stock market investment. Six are ISA millionaires who have 1 million pounds or more in a tax free ISA, a result which is arithmetically impossible without exceptional investment returns. It should be said that this is emphatically not a book for those wishing to learn how to invest. Rather, it is a chance to glean insight into the thought processes and the mindset of investors who have made it big off their own bat.
The book devotes a chapter to each investor, taking time to examine each individual\’s background, investment style, successes and failures and daily routine. The first thing the reader will notice is that all follow their own unique investment strategy, which can be completely at odds with that of the next person in the book. Yet the key factor seems to be that each has honed his own strategy to perfection and, perhaps most importantly, stuck to it. Whilst some will no doubt take objection to the fact that all twelve individuals are men, the group is otherwise a relatively eclectic mix. A third of those profiled are ex-City professionals; one third are other degree-educated professionals; and another third left school before the age of eighteen.
Thomas divides his dazzling dozen into two categories: \”surveyors\” (of which there are eight) and \”geographers\” (which make up the remaining four). The surveyors are the archetypal \’bottom-up\’ investors who approach each individual company in isolation, attempting to ascertain a picture of true value regardless of the wider market hubbub. Conversely, geographers attempt to discern secular market trends before delving deeper into an individual sector to identify the companies they believe to be most exposed to those trends. Setting aside this broad generalisation however, there are often very few similarities between each investor\’s individual approach. For example, some will go to great lengths to weed out the tiniest of details about their investee companies, while at the other extreme one will only go as far as looking at a chart before taking the plunge. Some spend hours every day posting on bulletin boards, whilst others prefer to get straight onto the directors to gain insight into a company. The bottom line is there is an investment style to suit everyone and one of the keys to successful investing is ascertaining exactly what it is.
Although individual approaches may diverge, subject matter certainly does not. All but one of the investors focuses exclusively on small caps, which seems to say a lot about where private investors need to be if they want to be really successful in the long-term. The other main similarity is that all of them, despite having achieved complete freedom of action, work very hard. Crucially however, this is not because they are compelled to by the daily grind; on the contrary they simply love the thrill of the chase. As we all know, it is a lot easier to excel at something when we enjoy doing it.
The best thing investors will take away from this book is a sense of personal inspiration in light of what can be achieved with determination, careful planning and the odd spot of luck. As an added bonus, the writer is donating all royalties to charity – specifically the United Nations Stop Tuberculosis Partnership.
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