There is no shortage of proposed insight when it comes to investment success. Some people think it comes from knowing people. Others think it comes from hard work. Although those things are true, in and of themselves, they don’t constitute a formula for investing. You need more. Let’s take a closer look at what you should seek to reach your investment goals.
Larry Sarbit is CEO and CIO of Winnipeg-based Sarbit Advisory Services and is the sub-advisor on three funds for IA Clarington. In an article he has written for the Financial Post, Sarbit provides some insight into what constitutes a formula for investment success, and he does so by plucking some established wisdom from one of the most famous investors of all time, Warren Buffett.
Investing is like fishing
Well, actually, Sarbit’s first insight comes directly from Charlie Munger, vice chairman of the conglomerate headed by Warren Buffett, Berkshire Hathaway. Recently, Munger said that the first rule of fishing is to go where the fish are and that the second rule of fishing is to follow rule number one.
According to Sarbit, Munger used the example of China to make his point. Specifically, Munger spoke of a successful Chinese investor, Li Lu, who did very well by investing in China, which, metaphorically speaking, is where all the fishes are, from an investment standpoint. In other words, you need to find investments in places that haven’t been depleted of fish.
The circle of competence
Which brings us to another bit of Warren Buffet Wisdom that Sarbit points to, which is to stay within one’s own circle of competence, and Sarbit again used China as an example. He says he would never venture alone in China as an investor because he doesn’t know the language, the culture, or the type of governance to expect. Instead, Sarbit prefers to stay in places he’s familiar with, or partner with people abroad who actually know the domestic landscape.
In other words, Buffett, Munger and Sarbit are all preaching what we’ve been preaching here, too, which is to invest in places where other people aren’t, and to do so with either your own personal knowledge, or that of people you can partner with for long-term investment success.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.