IN THE last chapter of his book, The Effective Investor, Franco Busetti asks local fund managers for the best advice they can give an investor. Here is a sample of their responses:
Buy shares on the most attractive valuation multiples, that is the highest dividend yields, lowest price:earnings ratios and price-to- book multiples. Don't bother with macroeconomic forecasts.
Remember, there are no new paradigms. Beware of advice accompanied by the words "this time it's different". All investments revert to the mean in the long term. John Biccard, Investec Value Fund manager, Investec Asset Management.
Successful investing requires accepting four basic tenets. First, investing is simple. If investors stick with quality and generous yields ... they are more than likely to succeed. However, simplicity should never be confused with being easy. Secondly, be realistic.
Beating indices or fellow investors by huge margins is not possible for most of us. Be content with doing slightly better than most. Thirdly, do not follow the herd. Most investors lack the perspective and emotional detachment to invest well.
Finally, the common advice of investing for the long term is sound. Almost all unpredictability occurs over the short term. In the long run, risk is substantially reduced. Charles Booth, former chief investment officer, RMB Asset Management .
Never let emotions rule your investment decisions. Always believe in mean-reversion and buy when no one else wants to. Be patient ... be humble, there are many clever people trying to win this game. Be diversified, it's the only free lunch you'll ever get! Simon Hudson-Peacock, head of Specialist Equity, Cadiz African Harvest Asset Management .
Firstly, what's the definition of a stock that's down 90%? It's one that was down 80% . and then halved! Remember this to avoid thinking a stock is cheap. It was more likely just unreasonably priced before. Secondly, keep a long-term focus. Many investors are short term in their outlook.
Various interest groups (including the media) have a vested interest in short-term activity. These groups also tend either to have preferential access to information or to play a major role in its distribution. As a result their influence tends to drive the behaviour of investors. By taking a long-term view that focuses on sustainable real changes to trends, one can avoid this noise, reduce costs and stay above the madding crowd. Matthew Kreeve, head of quants and portfolio manager, Frater Asset Management.
A stock is cheap when the investor understands why it is cheap. Just as you know a person is fat when they walk into a room without knowing their exact weight, you will know a stock is cheap. The corollary to this is that a stock is not cheap based on other people's forecasts. All these provide is comfort, and it is in the sphere of extreme discomfort that the stock picker's best work is done. Piet Viljoen, RE-CM .
MICHEL PIREU: firstname.lastname@example.org