You can contact the author (Teguh Hidayat) by email, The author live in Jakarta, Indonesia.

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Tips for Investors: Have a Mentor!

Some time ago I received the question as follows, 'Mr. Teguh, if I read from your writings, it seems that you take Warren Buffett as your only role model. Why Sir? Is it because he is the richest compared to any other investors? While in fact, there are many other investors who, although not as rich as WB, but they had better investment returns, such as Joel Greenblatt, Carl Icahn, Peter Lynch, and so on.’

Well, most people might idolize WB because he is the most senior and most successful investor, and he already generating a lot of writings either through his famous annual letters, or books about investments written by others (but based on Buffett’s investment method).

However, those are not the reasons why I only makes WB as a role model, but for the following reasons.

First, yes, it's true that notable investors in this world are not just Warren Buffett, but there are many others. And from the stand point of annual return, WB is also not the best.

But frankly, I’m actually just like any other common investor: Lazy to learn and lazy to read, where I prefer to spend my time for vacation and travelling rather than reading literature on stocks. So if I was going to read all the books by famous investors, I frankly do not have enough time. Because even for a full time investors, who do not have any other jobs, the regular works to analyze stocks and to build an investment plan are already time-consuming, which also need full concentration, and focus. And instead of learning from books, I prefer to learn from experience alone, by way of learning by doing.

That is why, and because to learn from WB (from his annual letter, etc.) is also take a really long journey (as long as WB is still not retired, we can still learn from him), I decided to focus on WB only. Of course, I’m not refrain myself from learning from other great investors, but I usually only read their books. For example the book by Guy Spier, a successful value investor who once had lunch with WB. But after reading the book (the contents are like novels, where Mr. Spier tells his experience and his ‘true story’ as an investor), I do not seek out more about Mr. Spier, because once again, it takes time.

Secondly, as mentioned above, most people like WB because he is one of the richest people in the world. However, even if I already knew about him in the 1980s, when he ‘only’ had a wealth of US$ 300 million, I will probably still make him as my role model. Because WB is not only a successful investor, he is also a good person, and a good human being. In many of his annual letters, WB not only shares his philosophies about investing, but also his philosophy in living the life as a human being in general. Buffett taught us a lot about humbleness, how to live a modest life, patience, and using our wealth for a good cause like philanthropy.

And if you have been in the capital market long enough, then you will realize that it is very difficult for anyone to be a good person in the stock market! Yup, because one of basic human nature is greedy, where people are more interested in buying skyrocketted stocks rather than making consistent profits through long-term investments. And not just small investors, big investors are also like to do lot of bad things like pump and dump the stocks, insider trading, doing corporate actions that harm the interest of public investors, and so on.

But Buffett is not like that. For more than six decades from the time he opened Buffett Partnership in 1956 (that's a very long period!), there is hardly any cases involving him or Berkshire (full list of Buffett 'scandals’ can be read here). While other famous investors/stock traders usually have legal cases or a bad story, or even becoming famous because of these acts. If Jordan Belfort had been imprisoned for pump and dumping stocks, Jesse Livermore reaped huge money from shorting the market instead of investment, then George Soros was famous for his 'Black Wednesday' event in 1992, where he made US$ 1 billion in profits from the crash of Pound Sterling, which led to huge losses for the Bank of England and many other institutional investor.

What did Mr. Soros is completely legal, so he never gets jailed for it. However, I do not know about you, but I myself would not be happy if I received a profit that comes from the loss of others. And WB teaches a lot about it, about how to make profits in the right ways, about how to fairly acquire a company and not by hostile takeover. In his many annual letters Buffett tells a lot about how the stock market in America, from decade to decade, is always fulfilled with greedy investors who justify any means to achieve maximum profit, and indeed they later became rich. But WB then shows how these rising stars just come and go, aka never last long in the stock market (or more tragic, ending with suicide like Mr. Livermore above).

Finally, third, WB is a always happy and relaxed in running his work in Berkshire, and that makes him a pleasant person. He is one of the few investors who are 1. Long-lived and youthful, 2. Always smile, 3. Always eager to attend university to give lectures/motivations, 4. Still taking the time to play bridge card, which is his hobby since the his youth, and 5. Prefers to stay home (which is a modest house for a billionaire) while watching a base ball game and eating pop corn instead of joining the bustle of the capital market. When WB had lunch with Guy Spier and his partners, they brought with him their family including two little girls. And Buffett even still take the time to buy gifts for the girls.

In fact, let alone if you are responsible for managing tens of billions of Dollars like WB, sometimes if we buy a stock for US$ 1,000 but later the stock dropped, we will immediately have a headache, is not it? So let alone be relaxed, we can not even sleep! But WB is not like that. Yup, Buffett not only teaches us how to make profit from stock, but he also teaches how to get the profit in a good and also casual way, so we can still enjoy life. And I myself has been sharing many articles about how to 'relax' in your investment activities in this blog, where we can get big profit but on the other hand we can still sleep soundly at night, one of them in this article.

Anyway, I always believe that every investor is unique, aka different from each other. So even though I take WB as my role model, but I still has some own investment style that is different from what Buffett does (although still based on the rules of value investing), because adjusted to the stock market conditions in Indonesia, the available opportunities, and to the amount of funds under management (which is clearly far smaller than WB’s). I also do not idolize WB or any other investor, so if there are people who criticize WB then it is fine, and I will not protest. However, since I also believe in the principle of ‘to be the best, you have to learn from the best’, then I suggest you to also have a role model, which you take them as a 'mentor' even though you never met them directly.

And for me, the mentor is Warren Buffett. Actually, since the last few years I has one more mentor, Li Ka-shing, and once again it is not because he was once the richest man in Asia, but because of reasons similar to Buffett. For example, in 1956, Mr. Li once refused an offer from an investor to buy his plastic factory at a price that would give him an extra profit of up to 30%, because he had previously verbally agreed (so there was not yet a written agreement) to sell the factory to someone else. Yup, Mr. Li always cling to his integrity, even if it means he will lose some money (but still, he made it as richest man in Hong Kong).

For the future, I may share more about Li Ka-shing's investment methods, which is also a value investor (please give me time to read it first). But for now I wish you Happy New Year 2018! Hopefully in this new year we can all be more successful, and can share more for others, amen!

Any inquiries, contact the author by email, (please introduce yourself in the email).

1 comment:

Kandi said...

Happy New Year Mr. Teguh.
Honestly, you're one of my role model :)