Investment strategies of the rich

There are three kinds of people in the world: the haves, the have-nots, and the have-not-paid-for-what-they-haves. I agree with the writer George Bernard Shaw: “Lack of money is the root of all evil.” What kind of person do we want to be? And how do we grow wealth?

Thanks to the organizers of the Philippine Investment Conference, which was held from July 1 to 2 at SM Megamall’s Megatrade Hall, for inviting me to be the guest speaker on the topic of “Investment secrets of billionaires,” asking me to share what information and insights I’ve gleaned from interviews with numerous business tycoons. Here are some ideas:

1. Invest in value, not so much the price. Instead of focusing on just the price of real estate, a stock, a business, a mutual fund or another investment option, let us train our minds to discern or “see” what our eyes normally can’t, which is the intrinsic or real value (or lack of it).

For example, a guy was offered real estate located along the secondary road of a city and on the lot was a mismanaged, unprofitable and very old business. While the seller and most people saw only a second-class commercial lot with a decrepit business, this businessman saw intrinsic values he saw a commercial site with the potential to flourish and a mismanaged but good business that could be resuscitated. He bought the property.

Philip Fisher said, “The stock market is filled with individuals who know the price of everything, but the value of nothing.” Charlie Munger said, “All intelligent investing is value investing — acquiring more than you are paying for. You must value the business in order to value the stock.” According to Seth Klarman, “Value investing is at its core the marriage of a contrarian streak and a calculator.” Klarman also said, “While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.”

2. Focus on time and not timing. Do not seek get-rich-quick ventures or rackets as shortcuts to wealth, but steadily grow wealth by saving and investing wisely.

Many investors think that timing the movements of stock or realty markets is key to becoming wealthy or to get rich quickly, but many of the rich actually focus on and harness time and compound returns as the more important key to growing wealth.  Many of Asia’s rich take a boring, long-term, buy-and-hold approach to investing, which largely ignores temptations to speculate or make kneejerk reactions to market volatilities.

3. Never stop studying; be eternally curious. Information is power not only in diplomacy, war, negotiations, trading, professions, politics or business, but even more so in investing. John Gokongwei Jr. of JG Summut Holdings, Lucio C. Tan of Philippine Airlines, Mercedes Tan Gotianun of Filinvest Group and other very astute investors read a lot: they study nonstop, research, and keep asking questions.

Invest in yourself through education, books, newspapers, and magazines. I heard that in the past, before the era of the Internet, Gokongwei used to collect and study the annual reports of various companies here and abroad.

4. Use other people’s money. My former accounting professor at Ateneo de Manila University, banker and accounting whiz Maurice Lim, once remarked in our class that some of the smartest businessmen grew very rich “using other people’s money.” If we are overly conservative and just steadily plough in our monthly salaries or business profits into investments, that is organic growth of wealth and it is not a bad thing. However, my professor’s advice of “using other people’s money” is, I think, what seperates the very rich from the rest of us.

Make no mistake: using other people’s money is not a fool’s license to get other people’s money for wasteful or irrational spending, which is a formula for disaster; rather it is an astute strategy used by the smartest and richest people to grow their wealth faster — leveraging wisely and prudently by using money from investors and banks, hiring competent people to work for them — all these help the rich grow wealth.

5. Write down your plans and goals. Congrats to Philippine STAR columnist Carmen Pedrosa for being one of the earliest true Rody Duterte supporters to see the rise of this phenomenon as the answer to the people’s anger at government apathy and shortcomings. She is also the newly appointed director of PAGCOR. Whenever we would meet for a chat, she noticed that I would always get one of two notebooks from my pants’ back pockets to jot down notes and she told me the late Greek shipping tycoon Aristitle Onassis used to take lots of notes, too.

I read years ago about people who write down goals — they tend to excel more and achieve more in the future than those who don’t. Thomas Corley wrote in his book, Rich Habits: The Daily Success Habits of Wealthy Individuals, that 67 percent of the rich people he surveyed wrote down their goals, while 81 percent kept a to-do list.

6. Invest in people. There’s a Chinese proverb that I like very much. It advises: “If you want one year of prosperity, grow grain. If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people.”

Many of Asia’s wealthiest tycoons I’ve encountered have taken the time and effort to invest in good, trustworthy people, whether family members or professionals who can support them, business associates whom they can deal with well, creditors, suppliers, customers, etc.

7. Don’t be emotional in investing. Movie queen Susan Roces, who is celebrating her 75th birthday this year, once told me that the late President Ferdinand E. Marcos advised her and her husband, the late movie king Fernando Poe Jr., to never decide when emotional, whether sad, happy or fearful. I believe this holds true for the wisest investors.

Do not be emotional when investing, whether in stock markets, real estate or business ventures. Don’t panic like other investors about the daily or weekly fluctuations of the stock markets but take a long-term outlook. George Soros said, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” Jim Rogers said, “Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.”

In fact, some of the wealthiest investors, like the legendary Rothschilds of Europe or Soros reportedly invested when there was “blood in the streets” or lots of red ink in crashing markets. Warren Buffett said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” He also said, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Benjamin Graham advised: “Buy not on optimism, but on arithmetic.”

8. The most important investment is yourself. Invest in your intellect,  personality development, and physical health. Invest in your skills, creativity and talents. Invest in relationships, family, friends, spirituality, your career, your business and developing good habits. Invest in yourself, because you are ultimately your greatest moneymaking machine!

* * *

Thanks for your feedback! Email willsoonflourish@gmail.com or follow WilsonLeeFlores on Instagram, Twitter, Facebook and http://willsoonflourish.blogspot.com/.