Free Capital: How 12 Private Investors Made Millions in the Stock Market is a book by Guy Thomas. It was written a few years ago now, but Amazon touted it to me over the weekend and, sitting at home on lockdown, I clicked and bought.
Fortunately, it was a good decision. The book is eminently light and readable and even, dare I say it, mildly inspiring.
The format is simple. Twelve successful investors who have given up their day jobs to invest full time tell their stories. The author categorises them roughly according to investment style–namely:
- Geographers
Top-down, macro investors - Surveyors
Bottom-up, deep-dive company analysis - Activists
Buy and moan - Eclectics
Open-minded opportunism
While the investment styles are different, the personality similarities (in most cases) are quite striking:
Middle-aged blokes
Most of the investors seemed to hit their straps in their 40s and, yes, they are all blokes.
Pennywise
Although there was mention of one yacht, there was much more talk of non-descript suburban semis and frugal living. The mindset that might cause you to balk at buying a brand new car might also encourage you to chisel another 1/8 off your bid price.
Independence day
The goal for a lot of the investors was to be successful enough that they could carry on doing what they loved on their own time, rather than selling their days to an employer. These were not people who used to leap out of bed in the morning punching the air with relish at the thought of another day in the office. Investing is not viewed as work, in fact one even refers to calling it work as a ‘travesty’! Reading their thoughts on this one after the other brought Buffett’s ‘I tap dance to work’ line to my mind.
Not ‘people persons’
Most of the investors are clearly introverts entirely comfortable working essentially alone and away from the distractions of others.
Mistakes
… they all made them, especially early on. Some took years to find their own style and methodology.
Leverage
This is avoided by one and all and in financial instruments where it is inherent (CFDs and spread betting), it is always handled with the utmost of care. In the same way that I think people like this are born with an innate understanding of compounding, they are also born with an equivalent understanding of the ‘Game Over’ risk that only leverage can bring.
Although most of the subjects in the book remain anonymous, Lord (John) Lee, the first ISA millionaire and a great spokesman for small shareholders, is interviewed. Lord Lee is familiar to most British investors from his long-running FT column. His style is also one of the more accessible: buy shares in dividend-paying and–preferably–family-owned companies.
The book will not teach you how to invest in any particular style, but it does offer some lessons about the psychological side of investing and it is always worth having the ingredients for success in any enterprise reiterated: focus, energy and mental resilience.
Free Capital is an enjoyable and worthwhile lockdown read.