Learning From Investment Greats
If David Rubenstein walked by on the sidewalk, you probably wouldn’t notice him. However, in the world of private equity, he is a rockstar.
Rubenstein is a lawyer by training who started his career in the Carter Administration. However, thirty-five years ago, he co-founded the Carlyle Group, a Washington DC based private equity firm now managing about $325 billion. This has made him a billionaire as well as a huge supporter of philanthropy. He was an original signer of The Giving Pledge in which he will give away at least 50% of his net worth during his lifetime or at death.
Throughout his career, Rubenstein has met highly successful investors from all walks of life and disciplines. He has taken these experiences and put them into a new book entitled How To Invest: Masters On The Craft.
The book will not disclose the latest “get rich quick” scheme. However, it successfully delves into the mindset of 23 highly successful investors from a variety of disciplines. In doing so, it is somewhat similar to The Millionaire Next Door or The Millionaire Mind.
In looking at these diverse investors, there are common lessons to benefit everyone.
The super-investors generally started from modest beginnings. Their families were often blue-collar workers; definitely not wealthy.
They are reasonably intelligent, good at math and are very hard working. They like to read, be in control and they are decision makers.
This is no singular way to invest. Whether investing in stocks, bonds, real estate, venture capital or private equity, capitalism offers the opportunity to succeed on many levels.
Being a long-term investor greatly increases the odds of success. Long-term is decades, not weeks or months.
Find something you are passionate about, but don’t count on “good luck.” Instead, you must prepare. Do lots of research and become an expert in a discipline. If you aren’t an expert, find one. Super investors surround themselves with people who are smarter than they are.
If you have done the research and have a high degree of knowledge, then be a high conviction investor. Make sizable bets. Taking hundreds of small positions won’t move the needle.
Successful investors are workaholics. None are punching an eight to five clock. They love what they do. Even though they are highly successful and don’t need to work, they remain driven and passionate.
Success in entrepreneurship takes a long time. If you look at any of the great modern entrepreneurs, it took years of pain before things really took off.
There will be naysayers who claim “it can’t be done” and you will make mistakes in the process. You cannot let these dissuade you.
Learn from your mistakes and continuously improve. In doing so, you must balance ego and humility. You must have confidence in your abilities, while simultaneously adjusting and growing as you analyze and modify things that didn’t work.
Control your emotions. Often, people chase investments simply because they have gone up and then run for the door after they drop. This is the opposite of how successful investors function. Super investors are contrarian thinkers. Although going against the consensus creates opportunity, it is often painful. This requires mental stability and the ability to think independently.
Rubenstein points out that not everyone has the time or interest to be a world-class investor. For the average person, Rubenstein says finding a solid reputable investment manager with a good track record is a must. The average person with no training cannot expect to achieve a high level of performance on their own just by winging it.
You are paying for a service. Know what the fees are. Make sure you can quantify the fees and get good value for your payment.
Is the fund manager putting his own money into the fund. Do they eat their own cooking? If not, then why would you trust them with your money?
Make sure transparency and disclosure is good as well as the managers track record. Are the people responsible for the track record still running the fund? If not, take a step back.
Markets will always go crazy relative to world events. Find a manager who has performed well through good and bad times.
Lastly, make sure you have reasonable expectations relative to rates of return.
Dave Sather is a Certified Financial Planner and the CEO of the Sather Financial Group, a fee-only strategic planning and investment management firm.
https://www.davidrubenstein.com/biography.html