Introduction

“Gaining both Wisdom and Wealth in life are worthy goals. Wealth often does not lead to wisdom. Wisdom more often leads to wealth. Wisdom is permanent; Wealth is temporal. So which one is your primary aim?”1

—Peter Brandt

In this book, I will guide you through the wisdom needed to generate and preserve wealth. By the end, you will have seen the path of the most successful investors. The wisdom is hidden in plain sight, but as Henry David Thoreau said, “It’s not what you look at that matters, it’s what you see.” What you don’t see is costing you the wealth you want. The Best Investors have already shown the way.

Whether your investment journey has just begun or you have decades of experience, it is all too easy to fall into believing commonly quoted and overly simplistic assumptions about investing. However, the crucial complexity of markets lies beyond unsubstantiated myths and mantras. The wisdom and experience of the great investment practitioners—our Best Investors—addresses market reality, exposes confused thinking, and reveals a clearer and surprisingly simple structure that can be easily understood and adopted.

In life and investing, I have found that the best way to evolve starts with finding out who is best at what they do, understand it, and then incorporate it into your own process.

Investing is all about numbers, so it isn’t hard to identify the few who qualify to be called “Best Investors.” This group includes Ray Dalio, Seth Klarman, Stan Druckenmiller, Jim Simons, and others whose insights inform my own investment process and this book. The secrets, though, lie beyond just the numbers they have achieved over decades. For deep insight into how they achieved durable success, you also need to look at their journeys, discoveries, and choices—and what they all have in common.

Doing so will focus your investment process and remove the mystery from the big investing questions that come up all the time, which this book will address. So, here are some questions I will ask again at the end of the journey to Invest Like the Best. At the end of this book, I believe that most investors will consider them in a new light.

The Big Investment Questions

Risk and Return

1. Does higher risk lead to higher return?
2. Do you need more than just a return to measure whether your investment process is aligned with the Best Investors?
3. What part has risk and luck played in your return, and what part will they likely play in the future?

Measurement

1. What are the best-practice measurements of your investment process and progress?

Decision-Making

1. How far from optimal is your own investment thinking and decision process?
2. In investing, do you need to take charge of your own best interest? Can that be made simple?

Other Strategic Elements

1. Do you see rules-based or systematic computer-driven investing as a useful addition?
2. Is passive investing aligned with the Best Investors?

The goal of this book is not to criticize other professionals. Still, you need to know that many financial advisors, famous investors, and so-called experts are not aligned with the Best Investors on the answers to these essential questions. At the end of this journey, though, you will be. You’ll gain the clear metrics and understanding that sets apart the few Best Investors from everyone else.

That’s why I wrote this book: to empower you. Whether you choose to manage your own assets or work with an investment manager, I want to give you the tools to enable you to stay on the path to prosperity. I particularly want to keep you out of trouble, so you don’t learn your investment lessons the hard way and waste crucial time. To succeed, you need more than hope, unsubstantiated beliefs, and insufficient due diligence. You need to know what works and why.

In my nearly forty years as an analyst, trader, and investor, I have written a book published by Credit Suisse First Boston, been promoted to Managing Director on the proprietary trading desk of JPMorgan in London, and talked to many institutional as well as retail investors. I have worked through many common pitfalls, habits, and beliefs that can misdirect or block unwary investors. This book will give you a productive framework to avoid them all.

The book is laid out in three parts, each with four chapters, and each chapter ends in a summary. (If you want just a quick take, you can start with that summary.) The chapters themselves are filled with quotes and direct advice from the Best Investors; I’ve also distilled the main takeaways in Part I and Part II as “Best Investors Insights” so that you can easily review them. All twenty-four insights are listed in an appendix at the end of the book. In the chapters, I’ve included charts, visuals, and graphics to better explain my points, as well as additional resources you can look at to deepen your knowledge.

The intention is to make the journey to “invest like the best” as accessible as possible.

Here’s a roadmap of what’s to come: