To be in with a chance of beating the market , you first need to invest differently from everyone else . Not only are the fund managers in the following article among the most successful in the business , they are also among the most stubborn – in the best possible way . All are happy to underperform over short periods , taking comfort from the fact they will be proved right over the long term – as they have been time and again in the past . But how do you come to develop a method of investing that allows you to consistently beat some of the smartest people in the land with millions of pounds ’ worth of resources at their disposal – and just as importantly , how do you maintain confidence in your approach the first time the market turns against you ? In many cases , the answer is by copying someone who has done it all before ...
Fundsmith Equity manager Terry Smith says his investment strategy was born out of necessity : upon joining start-up Collins Stewart in the early 1990s , he realised it couldn ’ t afford to hire any top-ranked analysts of its own . As a result , he came up with the idea for a database system called Quest , which offered insight into whether companies created or destroyed value , and whether their shares were cheap or expensive . “ I have read Warren Buffett ’ s annual letter as chairman of Berkshire Hathaway since the early 1980s and admired his investment style ,” Smith explains . “ A few of the institutional investors we marketed Quest to in the US and the UK had an approach that was similar to Buffett ’ s , which confirmed to me it was a strategy that would deliver superior returns over the long term .” When Smith later became chief executive of Collins Stewart , it acquired Tullett Liberty , a business that had a pension fund in deficit . The trustees agreed to ditch the
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