We do not normally review books in AimZine but felt that we should draw this recent publication to our readers? attention. We believe that anyone serious about managing their own stock market investments will want to read Guy Thomas?s ?Free Capital?.
The book is based on interviews of 12 highly successful private investors. Guy outlines their investing strategies, wisdom and lifestyles dedicating a chapter to each individual. Each of them has accumulated £1m or more - in most cases considerably more - mainly from stock market investment. Six are 'ISA millionaires' who have £1m or more in a tax-free ISA, a result which is arithmetically impossible without exceptional investment returns.
I found the book fascinating reading and Guy does an excellent job in analysing the various investing styles of the twelve investors. He also considers to what degree investing success is partly due to good luck but concludes that the exceptional returns achieved by these investors cannot only be due to good fortune.
It is enlightening to read about the very different investing styles of the twelve. Some invest most of their money in very few shares and hold them for years at a time; others make dozens of trades every day, and hold them for at most a few hours. Some are great networkers, who spend their day talking to managers at companies in which they invest; for others a share is just a symbol on a screen, and a price chart shows most of what they need to know to make their trading decisions.
Comments from the Author
Guy Thomas has been an independent investor since 1999. In his previous life as an employee, he was a research actuary with a firm of pension consultants, and then a university lecturer. He has published papers in academic journals covering insurance economics, actuarial mathematics, and taxation and investment. He is an honorary lecturer at the University of Kent.
All author royalties from the sale of Free Capital are being donated to the United Nations Stop Tuberculosis Partnership. So, it was clearly not money that motivated Guy to compile ?Free Capital?. I contacted Guy to ask for his reasons. Guy explained:
?As a full-time investor myself, I am always looking for ideas to improve my own results. Writing the book was a learning exercise: it gave me a license to spend many hours with first-class investors, asking impertinent questions which I would never otherwise have the chance to ask.?
?Furthermore, I have wanted to read a book like this for many years. I originally hoped somebody else would write it. Nobody did, so eventually I wrote it myself.?
?Finally, most of my writing is highly specialised and aimed at a small academic audience. This book is an experiment at less specialised writing, aiming at a broader audience.?
?The book has taken just under two years from the first interview to publication. I write only at weekends.?
The Investors
Most of the twelve successful investors are given disguised names. Guy explained this to me:
I promised the ten unidentified participants that I would protect their anonymity (this was very important in getting them to talk). I have heard quite a few guesses, but I neither confirm nor deny anything!
In general terms, around one-third of the interviewees are ex-City professionals; one-third are other degree-educated professionals; and one-third left school at or before age 18. Most gave up all employed work in their 30s or 40s to be full-time investors.
Lessons learned
So, what did Guy learn from compiling the book?
?The 12 investors have very different approaches. No approach emerges as clearly superior to all the others. In most cases there were clear links between the investor?s personality or career background and the successful investment approach he had developed. This impressed upon me that finding an approach which matches your personality and skills is probably more productive than looking for one true Holy Grail.?
Finally, I asked if there were any obvious common factors that separate the very successful investors from the crowd?
The final chapter identifies some characteristics which the investors in the book appear to share. The recurrence of these characteristics is intriguing and suggestive. But technically it?s hard to be sure that the identified characteristics separate these investors from the crowd, because I haven?t interviewed the crowd. (Pages 7 and 252 allude to this point.)
In conclusion, we would commend ?Free Capital? to anyone interested in stock market investing.
