Investment is a term that begins with great excitement and sounds promising but it may not turn out to be so interesting and dependable if it is not planned properly. It is highly essential to manage your resources with utmost diligence and sheer common sense not just at any one point of time but always. Further, not to forget diversification is the key.
The importance of diversification
“Don’t put all your eggs in one basket.” Here ‘eggs’ do not mean the real eggs but your assets and money. It means you should spread your money among various investments so as to reduce your investment risk over a period of time i.e., opt for diversification.
Well, diversification is nothing but the risk averse behaviour depicted by the investing parties. The stocks and bonds purchased by the investors are distributed in a proportionate manner with a wider range of options or investment destinations at their disposal.
A look at well-diversified portfolios
If you launch your search for the top investor portfolios in the world, there are chances that you may find many well-known names successfully churning the wheel of fortune in their favour with billions of dollars safely finding a place in their bank accounts. The investor portfolio of such investors is very well-diversified to cater to the market fluctuations quite well with robust resilience.
Here are the top 5 global investors that are sure to surprise you with their fund management talent that has touché the physical reality in full bloom!
1. John Templeton
In words of American-born British investor John Templeton, “Diversification should be the corner stone of your investment program. If you have your wealth in one company, unexpected troubles may cause a serious loss; but if you own the stocks of 12 companies in different industries, the one which turns out badly will probably be offset by some other which turns out better than expected.”
This clearly shows that John Templeton was completely in favour of diversification and his name is often held synonymous with globally diversified mutual funds. By creating the Templeton Growth Fund, Ltd in 1954, he made an entry in the mutual fund market. The Money magazine identified him as ‘Arguably the greatest global stock picker of the century.’ John Templeton had a very flexible approach to investing.
Learning – Own the stocks of 12 companies in different industries!
2. Jack Bogle
One may often think as to what is the secret behind Jack Bogle’s success? Well, a clearly-thought out investment plan involving a series of diversified investing chain landing up money in different projects for a considerably long period of time is certainly the reason for this grand success. Pioneering the low-cost index investing for millions of people and founder of Vanguard Group in 1974, Jack Bogle created the first index fund- The Vanguard 500.
He was always in the favour of well-diversified portfolio made up of index fund that are held over a very long period of time. His one of the main tip for investors is that they should have a careful allocation of funds among stocks, bonds and cash reserves and diversified selection of middle-of-the-road, high-grade securities. He further iterates that there should be a careful balancing of risk, return and cost. An investment plan that uses low-cost and diversified investments can help you sail through successfully.
Learning – A careful balancing of risk, return and cost!
3. Ray Dalio
Counted as world’s most successful hedge-fund manager and one of the best investors, Ray Dalio is the founder of Bridgewater Associates (one of world’s largest hedge funds) which has around $160 billion in assets. Dalio began investing as early as at the age of 12 and bought the shares of Northwest Airlines. Since then, he has not looked back.
He has a unique strategy for diversification. He advises the investors to diversify across different asset classes, diversify within asset classes, diversify across markets and countries and diversify across time. He himself took numerous uncorrelated bets in markets all over the world. He divided the market into two categories i.e., growth and inflation and then further separated them into two sections depending on whether they were rising or falling. Later, he ensured that a portfolio is built that is able to counter any of the four scenarios.
Learning – Take numerous uncorrelated bets in markets all over the world!
4. Prince Alwaleed
Saudi-Arabia based influential investor and founder and CEO of Kingdom Holding Company, PrinceAlwaleed’s has a very well-diversified portfolio worth more than $20billion and investments across a wide range of industries i.e., banking, retail, entertainment, petrochemical and transportation. He has always favoured high-growth and high-risk tech companies as he believes that higher the risk, the greater the return.
Learning – Invest across a wide range of industries!
5. Benjamin Graham
British- born American investor and ‘Father of Value Investing’ Benjamin Graham said, “Diversification is an established tenet of conservative investment. By accepting it so universally, investors are really demonstrating their acceptance of the margin-of-safety principle, to which diversification is the companion.”
He further stated, “There is a close logical connection between the concept of a safety margin and the principle of diversification. One is correlative with the other. Even with a margin in the investor’s favor, an individual security may work out badly. For the margin guarantees only that he has a better chance for profit than for loss-not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses.” Thus, he clearly showed that diversification is the key to increase the success of overall investment. He always invested in companies that had minimum or no debts, good profit margins and substantial cash flow.
Learning – Look for companies that have minimum or no debts, good profit margins and substantial cash flow.
Well! Was it a fruitful reading journey so far? Did you find these investment stories of world’s top investors relevant enough?
So, what is the message that these well-established promising investors put across for a universal audience to read, discern and decipher in just the apt spirit? Let us help you out with this. These investors exhibiting the most profitable construction and employment of a diversified investment portfolio clearly communicate that you may wisely choose to adopt a bolder and a bit innovative (experimental) approach to route your funds for continuous sustainable multiplication.
We hope it was tantalising enough for you to start thinking about investment on a broader note from now onwards keeping in mind the huge scope of success that it presents if managed well!
Read further Pioneering stories of investment, each of these investors stories are different but their strategies can be adopted by you and used to help invest and yield profits.