Invest like the Best: The Low-Risk Road to High Returns

By Chris Belchamber

Invest Like the Best. The Low-Risk Road to High Returns.

The best practices of the most successful investors—with winning track records that span decades—can be clearly defined, easily understood, and simply measured in real time.

But, very few people take the time to understand and follow them.

After nearly forty years as an analyst, trader, and investor, Chris Belchamber reveals the most common pitfalls, barriers, habits, and beliefs that can send investors in the wrong direction, with sometimes devastating consequences.

Learn how to recognize and avoid these issues in your own investing as you discover more than twenty best investor Insights" and find the real relationship between risk and return.

Transform your own results and experience as you learn from the greatest minds of investing history.

"The investor's chief problem, and his worst enemy, is likely to be himself. In the end, how your investments behave is much less important than how you behave."
—Benjamin Graham

• Language: English
• Publisher: BookBaby
• Release date: Feb 23, 2021
• ISBN: 9781544518749

Book preview

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Copyright © 2021 Chris Belchamber

All rights reserved.

ISBN: 978-1-5445-1874-9

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I can’t thank my support team enough for their endless help while writing this book. My sister Clare Martin, my son Daniel Belchamber, and my fiancée Mary Duffus.

I must also express my deep gratitude to everyone mentioned in this book for their great inspiration and education.

If I have seen further, it is by standing on the shoulders of Giants.

—Sir Isaac Newton, 1675

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Contents

Book Disclaimer

Introduction

Part I: Develop a Best Investors Mindset

1. Be Fully Aware of the Investment Challenge

2. Avoid Self-sabotage: Build an Investment Mindset Framework

3. Benefit from Systematic Investing

4. Avoid misdirection: What can happen if you just chase returns

Part II: Risk and Return, Dynamic Compounding, and Assessment

5. Best Investors are Crystal Clear about Priorities and Metrics

6. Master the Essential Math of Investing: Dynamic Compound Interest

7. Empower Yourself through Measurement

8. Know the Investment Myths and Heresies with Best Investor Analysis

Part III: Invest Like the Best

9. Money Management Matters

10. Investment Allocation

11. Active Investment Management

12. Decisive Comprehensive Procedure for Consistent Performance

Conclusion

About the Author

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Book Disclaimer

The opinions expressed in this commentary are those of the author. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual, and nothing contained herein should be construed as legal or tax advice. Before implementing any strategies, you need to seek proper financial, legal, and accounting counsel.

This book may contain forward-looking statements based on hypothetical assumptions, estimates, outlook, and other judgments made in light of information available at the time it was written and involve both known and unknown risks and uncertainties. Accordingly, plans, goals, and other statements may not be realized as described, and actual financial results and success/failure may differ materially from those presented herein.

Depending on your individual circumstances, the strategies presented may not be appropriate for your situation. Please consult a qualified advisor regarding your individual circumstances to learn more on strategies that may be appropriate for you. All examples are intended for illustrative purposes only, highlight a single possible outcome, and do not guarantee that similar results can be achieved.

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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

Does higher risk lead to higher return?

Do you need more than just a return to measure whether your investment process is aligned with the Best Investors?

What part has risk and luck played in your return, and what part will they likely play in the future?

Measurement

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

Decision-Making

How far from optimal is your own investment thinking and decision process?

In investing, do you need to take charge of your own best interest? Can that be made simple?

Other Strategic Elements

Do you see rules-based or systematic computer-driven investing as a useful addition?

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:

Part I: Develop a Best Investors Mindset

As the Best Investors show us, durable advantage comes from developing an optimal mindset.

Chapter 1: Be fully aware of the investment challenge

With a quick look at our discretionary biases, this chapter shows us how to be grounded in the importance of responsibility, understand the limitations of focusing solely on returns, embrace uncertainty, and realize how many cognitive biases can influence your decision-making process.

Chapter 2: Avoid self-sabotage: Build an investment mindset framework

Here, a Best Investor mindset framework is developed. It starts with the key question of whether our own thinking is consistently rational. Investors can benefit from understanding the perspective of different economic approaches and the difference between theory and practice. This leads on to how the hardwiring of the brain reveals a framework to improve decision-making.

Chapter 3: Benefit from systematic investing

Rational and strategic thinking can be strongly supported and further developed by systematic investing. Specifically, two systems reveal how this can extend and transform your capabilities.

Chapter 4: Avoid misdirection: What can happen if you just chase returns

The final stage in creating an optimal mindset is learning who and what to trust. Through lessons from the collapse of one of the world’s biggest hedge funds, LTCM, several filters emerge and reveal what needs to be done to protect your capital.

Part II: Risk