One of the upsides of being married to an Independent Financial Adviser (IFA) is that I generally get superb advice on my finances and thankfully, for the most part, I usually listen which does not actually go with all aspects of what is an excellent marriage - I am told.
As a for instance, and I blogged on this previously in January of this year, my wife had advised me to release a number of our ISA schemes when the market was at 5,400 and sell a holding on a property we had. While we made a small loss on the property, we made excellent winnings on the ISAs and we now have a 'war chest' of cash which we have been investing back in ISAs and other vehicles as we have seen the market rise since January (albeit tentatively).
My wife, as an industry insider, uses as her 'guru' a chap called Anthony Bolton, who since 1979 has headed the Fidelity Special Situations Fund and now overseas all Fidelity investments. Since he took over there, the fund has enjoyed average annual returns of over 20% while the market grew at 14%. Not much, I hear you say? Well, for every pound invested in his fund, you got a third more back than just investing in the market.
It comes as no surprise that my funds have been with Fidelity since I met my wife over 15 years ago - woohoo!
The Bolton Effect
This week, Anthony Bolton's new book 'Investing Against The Tide' was featured in the Sunday Times and listed there are 10 lessons that Mr. Bolton has learned over his career - they are a terrific read and a must for any armchair investor. He even makes the technical stuff sound vaguely understandable although looking at Enterprise Value was pretty hairy.
The one really salient thing that slapped me in the face which has always been a running sore between my wife and I, is that most of us are a sucker for 'hot tips'. Whenever I have taken such a 'tip' I have fallen badly and my wife has always 'strongly advised' me against investing in individual shares unless I have done a detailed analysis myself. If not, leave it to the experts.
Of course, my kind of expert is usually in the column of the financial sections of newspapers, on the forums of Hemscott or on the pages of 'Motley Fool' - and in the front bar of a pub. The fact that the pub tipster seems to be no better dressed than I, does not drive a better car and still works is a bit of a giveaway but that does not seem to bother me. Instantly, the beery sage is 'Gordon Gecko' and in control of some of the best financial information available.
Rather like my attempts to pick a horse at the Grand National, I am a sucker for reading snippets of information and then putting my £5 each way on a horse whose name may have some vague significance. This year it was on 'Comply or Die' and I won £25 which makes a dent in the years of wasted money. Interestingly, my wife won less but I am sure her comment would be that Anthony Bolton does not bet on horses.
Sure Fire Winners
Bolton has a snippet that is priceless. A colleague of his, Peter Lynch, finds it strange that say Doctors would invest in oil exploration companies based on tips by friends, newspapers or even brokers rather than biotechs where they may have some reasonable knowledge.
I heard a loud gong in my head as the comment resonated with me.
Oh, the times I have followed someone else's tip in a completely different business to my own experience and lost my shirt are just too many to mention. Even when it has been in my own industry, I was bad enough.
However, I did have some success back in the 90's investing in web 1.0 and I bought and sold DoubleClick many times before the bottom fell out of the market. Back then, I was closer to the new wave of the internet and how online advertising was going to be a massively lucrative market. Their shares kept going up and down in cycles and I actually got them pretty much called and made a few quid for once. But as Basil Fawlty gave back all his winnings on Dragon Fly, I too gave a chunk back by selling when I got nervous and some while later DoubleClick were 'Googled' and I would have had a handsome return.
But even my successful picks were more by chance than good judgement. Here's a really stupid thing - I have been asked to invest in a number of small start ups in the last few years and become and Non-Executive Director. When such a juicy opportunity is given to me, I go into hyper-research mode and look in detail at the managers, interview them, look at their plans, look at the market, kick their assumptions around, do 'what ifs' on their thinking, look at where they have spent money so far, their personal histories and track records and then I ask my wife.
In the main, I have been able to call everyone correctly and as yet, I have only invested once. In all other instances, the companies stumbled and fell some while afterwards - one quite spectacularly after an amazing start. You see, when it becomes personal, you use all your business logic, experience, understanding of people and your skills to make sure you are doing the right thing. When it's a tip, for some reason I go the opposite way and on the say so of just one individual I can blow cash almost without thinking.
Investing The Bolton Way
What Anthony Bolton has proved is that you can have short term success by getting lucky, using a few trading programs even to augment your judgement, but over a long period of time, nothing pays dividends like rigorous application of diligence and trusted methodology.
Certainly, the 10 lessons were a salutary reminder of why I have not made any money out of my personal 'bets' while those invested through my wife have outperformed the market thanks to people like him. There are many Fund Managers who have caught real colds, even the much vaunted Nicola Horlick, who got very angry that regulators did stop Bernard Madoff as she invested in him. But it only goes to show, you may think you are clever, but nothing beats due diligence and cutting through company spin.
The top tips were for me were - cut through company spin, watch the managers and scour the accounts. The dumbest thing is, whenever I have asked to be an individual investor I do it to the nth degree. Give me a 'front bar tip' and I'm like a salivating dog who has been given a piece of meat under the table.
'Never mind, Rodney, this time next year we'll be millionaires.'
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