Alice Schroeder, Warren Buffett's biographer, once said that he works harder at investing than anyone she has ever known.
Similarly, ultra-successful fund manager Peter Lynch retired in his forties, not because he hated the job, but because it took so much out of him to maintain his success. Readers of his books will recall tales of family holidays peppered with company visits, for example!
A different path
They worked punishingly hard to create the outstanding returns achieved, but the workload required it: Warren Buffett is in charge of a large conglomerate in Berkshire Hathaway (NYSE: BRK-A - news) as well as his various investment portfolios, and Peter Lynch once declared that he held in excess of 400 shares in his Fidelity Magellan Fund.
Luckily, most private investors have smaller funds to manage and, therefore, the choice of doing things differently by devoting less time to investing. That's a choice worth taking to preserve a healthy work/life balance, and what's more, it could actually improve your returns. It's one area where taking a different path to the investment greats makes sense.
Less is more
I think that in the world of investing, as in other areas of life, less is more. Compressed periods spent researching and managing a share portfolio can result in more focussed effort of a higher quality, compared to endless periods spent glued to the computer screen, where return for effort can diminish in proportion to the length of the session.
Mercifully, our two mentioned gurus advise us not to follow their actions but to do things differently. Peter Lynch once said, "There don't have to be more than five companies in a portfolio at any one time," and Warren Buffett said, "If you really know the businesses you have bought, six wonderful ones is what you need to make you rich. Your seventh investment will dilute your returns." Both super-investors reckon a concentrated portfolio may produce better returns and the great secondary pay off to such a strategy is that it can potentially consume less time.
Small is beautiful
Most of us are not investing billions as private investors so we don't need a vast portfolio of shares just to achieve enough capacity for our funds. So, just a few shares on the watch list, and a few in the portfolio, can make for a much reduced workload managing and researching investments.
Working long hours on investment might produce more ideas, but the best investment opportunities are often the most obvious -- if you have to work too hard to identify them, it could mean that the ideas are lower quality.
As an example, I decided to sell my holdings in Tesco (LSE: TSCO.L - news) and Aviva (LSE: AV.L - news) to buy more BP shares when the share price fell to about 300p in the wake of the Gulf of Mexico oil blow-out disaster in 2010. To me, the shares were face-slappingly cheap, as I believed the company could survive the crisis because of its cash flow and the potentially drawn out timing of costs.
So far, that investment is working out well, but there is also a big secondary advantage in time saving, because the position now constitutes more than 30% of my investment funds.
Compare that to holding, say, six 5% positions: that's six news flow streams to monitor, six lots of buy and sell decisions to make, six investments to research replacements for when the investments mature and are sold, and potentially five times longer at the computer.
Last thought
Despite this articles catchy title and the undesirability of following Buffett's extreme work ethic, he often dishes out great advice; for example he once said, "Diversification may preserve wealth, but concentration builds wealth."
Although I think that it's important to work hard keeping abreast of the holdings that we do have, that's a powerful endorsement for the 'less is more' school of investment. To me, it suggests the potential for more free time and greater investment reward -- the perfect blend of success!
Similarly, ultra-successful fund manager Peter Lynch retired in his forties, not because he hated the job, but because it took so much out of him to maintain his success. Readers of his books will recall tales of family holidays peppered with company visits, for example!
A different path
They worked punishingly hard to create the outstanding returns achieved, but the workload required it: Warren Buffett is in charge of a large conglomerate in Berkshire Hathaway (NYSE: BRK-A - news) as well as his various investment portfolios, and Peter Lynch once declared that he held in excess of 400 shares in his Fidelity Magellan Fund.
Luckily, most private investors have smaller funds to manage and, therefore, the choice of doing things differently by devoting less time to investing. That's a choice worth taking to preserve a healthy work/life balance, and what's more, it could actually improve your returns. It's one area where taking a different path to the investment greats makes sense.
Less is more
I think that in the world of investing, as in other areas of life, less is more. Compressed periods spent researching and managing a share portfolio can result in more focussed effort of a higher quality, compared to endless periods spent glued to the computer screen, where return for effort can diminish in proportion to the length of the session.
Mercifully, our two mentioned gurus advise us not to follow their actions but to do things differently. Peter Lynch once said, "There don't have to be more than five companies in a portfolio at any one time," and Warren Buffett said, "If you really know the businesses you have bought, six wonderful ones is what you need to make you rich. Your seventh investment will dilute your returns." Both super-investors reckon a concentrated portfolio may produce better returns and the great secondary pay off to such a strategy is that it can potentially consume less time.
Small is beautiful
Most of us are not investing billions as private investors so we don't need a vast portfolio of shares just to achieve enough capacity for our funds. So, just a few shares on the watch list, and a few in the portfolio, can make for a much reduced workload managing and researching investments.
Working long hours on investment might produce more ideas, but the best investment opportunities are often the most obvious -- if you have to work too hard to identify them, it could mean that the ideas are lower quality.
As an example, I decided to sell my holdings in Tesco (LSE: TSCO.L - news) and Aviva (LSE: AV.L - news) to buy more BP shares when the share price fell to about 300p in the wake of the Gulf of Mexico oil blow-out disaster in 2010. To me, the shares were face-slappingly cheap, as I believed the company could survive the crisis because of its cash flow and the potentially drawn out timing of costs.
So far, that investment is working out well, but there is also a big secondary advantage in time saving, because the position now constitutes more than 30% of my investment funds.
Compare that to holding, say, six 5% positions: that's six news flow streams to monitor, six lots of buy and sell decisions to make, six investments to research replacements for when the investments mature and are sold, and potentially five times longer at the computer.
Last thought
Despite this articles catchy title and the undesirability of following Buffett's extreme work ethic, he often dishes out great advice; for example he once said, "Diversification may preserve wealth, but concentration builds wealth."
Although I think that it's important to work hard keeping abreast of the holdings that we do have, that's a powerful endorsement for the 'less is more' school of investment. To me, it suggests the potential for more free time and greater investment reward -- the perfect blend of success!
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