Research pays off big for part-time investors
Book Review: ‘The Warren Buffetts Next Door’
Necessity is the mother of invention, the saying goes. And so it is that eczema, 18-wheelers and aging played a strange hand in inventing the stunning and untold investment success stories of a number of anonymous Americans. Untold, that is, until now. Forbes Media Vice President Matt Schifrin tells these stories, and their morals, in his new book, “The Warren Buffetts Next Door: The World’s Greatest Investors You’ve Never Heard of and What You can Learn from Them.”
The morals of these men’s (yes, all men’s) stories come in a couple of varieties. First and most overtly, this book is packed with the investment strategies and tools that have been used by these everyday Americans — people who have made millions of dollars trading, some before and after their 9-to-5 jobs as civil engineers and computer lab managers.
(In fact, there seem to be a disproportionately large number of engineers of different sorts featured in the book. Wonder what that’s about — maybe their math, problem-solving and logic powers translate well to solving stock market riddles. Muy interesante.)
Schifrin found his subjects on a couple of investor communities online where he could verify their track records going as far back as 2000, in some cases.
Second, and perhaps most importantly, every one of these “Warren Buffetts Next Door” stories has its own flavor of wildly inspirational upshot, on top of the substantive investing takeaways. These are people you’ve never heard of, and will probably never hear of again, most of whom taught themselves an investment strategy that has bested the S&P 500 many, many times over.
And this self-tutelage was no glamorous gap-year escapade with Daddy’s golf cronies. These folks have invested hundreds of hours and boatloads of sheer will to learn about the markets online in their home office, or hunkered down at the public library or — as one of Schifrin’s subjects did — by tracking his tardy dentist down, finding the doctor day trading in his office, and begging to be taught.
Many of Schifrin’s subjects overcame big losses in the tech bubble implosion early last decade, which should provide some inspiration to those trying to recover from the real estate crash of this decade. Not only that, most of Schifrin’s subjects also tackled some serious personal trials as part and parcel of their path to carving out their bizarrely successful investment track records.
One is a former Canadian stockbroker who lost his job — and his broker’s license — and delved into clinical depression after feeling personal responsibility for his clients’ losses in the dot-com crash. Another was tied up by all fours as a child to stop him from scratching his eczematous skin, then spent the next 40 years or so trying to run away from those memories before developing himself into a successful investor.
Throughout the book, I found myself skipping straight to each chapter’s “Who is …” bit, in which Schifrin tells the short bio of the investor, obstacles and all, with a focus on how the individual became interested and involved in investing. After the media’s recession-era focus on horror stories and hearing the same old stories of a chosen few financial luminaries, I found this element of the book utterly and completely refreshing and entertaining, in a visceral, human way — and I think readers will, too.
That is not, however, to give short shrift to Schifrin’s systematic treatment of the substance for which we should know these “Warren Buffetts Next Door”: their investment strategies.
These strategies are compelling for a number of reasons. They are as different as the individuals, their personalities and their life stories — the strategies range from deep value investing and long-term holding of a small number of carefully selected stocks (a la Buffett himself) to investing in gold and other mining stocks, to flat-out deeply researching all sorts of investments (Chinese gold included) online for four-plus hours a day, and investing in the fruits of the research.
Schifrin’s treatment of these strategies is just as compelling as the strategies themselves — and deeply usable. He describes not only the investors’ general approach and their returns, but he covers the resources they use and how they use them (I mean, he gives the names of the specific websites, message boards, newsletters and even computer equipment these investors are using; where they hold their brokerage accounts; and even how much time they spend doing specific types of research).
And Schifrin also provides extremely detailed case studies of individual investment decisions made by each investor, as well as a set of their “Rules of Investing.”
You get the sense that Schifrin is not treating the investors as academic subjects and investment savants at which to marvel. Rather, he is treating them as exemplars: sources of inspiration that many a reader simply can’t afford not to at least try modeling themselves after.
I also came away from the book less with the sense that Schifrin was encouraging reckless day trading, and more that he was encouraging deeply researched, seriously informed, self-directed investment strategizing. He’s bubbled up to the surface of the investment and retirement planning conversation the fact that “parking what’s left of your nest egg in an index fund, or handing it over to an expert, may not be the best solution.”
And he has, with this book, proven that Warren Buffett is not actually an anomaly, but that many self-educated investors are out there beating the pros, and the market, many times over.
Schifrin shows over and over that the particular investment strategy you choose is less important than what he calls “clear thinking,” good math and time. And the whole while, he underscores that country club contacts and a fancy degree or training program in stock picking is entirely irrelevant, in this age of very well-developed, “amateur” investor communities online.
You may not, like these investors, be running from childhood post-traumatic stress disorder relating to eczema treatments, nor may you have a truck driver’s boredom — or your retirement age chasing you down, forcing you to figure out a way to live off something other than cat food.
But you can be like the individuals featured in this book by making an aggressive commitment to the proactive research and action it takes to be a smart investor, self-directed or otherwise, and in making the fullest possible use of your time, your smarts and your computer.
Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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