Most books on successful investors are either by big traders or investors who run large money management accounts or focus on their successes. Peter Lynch ran one of the largest funds when he retired from Fidelity. Warren Buffett has grown super rich by investing the float from an insurance company he owns. The multiple volumes on wizards (Market Wizards, Stock Market Wizards and Hedge Fund Wizards) of Jack Schwager are mostly about traders and investors running books of hundreds of millions of dollars. While aspiring investors can undoubtedly learn from these stories, they cannot really connect their personal struggles with them.
All of us want to know about small private investors who multiplied their own funds using their wits. This is precisely the book for the likes of us. Except one or two investors profiled in the book, who had a bit of connection and small pot of money, all were average middle-class people with limited means. At least seven, of the 12, struggled with their jobs and career and had the guts, determination and passion to opt out of their career.
This is where this book helps. Guy Thomas has profiled 12 private investors from England in his book Free Capital, which is available from Amazon at a throwaway price. All of them have accumulated £1 million or more—in most cases much more—mainly from stock market investments. Six of them have accumulated £1 million or more “in a tax-free Investment Savings Account (ISA), which is arithmetically impossible without exceptional investment returns,” writes Thomas. Each chapter is about one investor and narrates their backgrounds, what got them interested in the stock market, at what point they decided that they don’t need to work anymore, a bit about their personal lives, their major hits and misses and how they spend their days now.
There is little in common among the 12. All of them come from different backgrounds. Two have higher degrees in computers; one, called Sushil, is a trained economist; two have business school degrees and John Lee is a chartered accountant. Many others have left school with few qualifications and are entirely self-taught. Only two of them revealed their identities. Two others have serious health issues. Taylor suffers from chronic fatigue syndrome, also known as myalgic encephalomyelitis (ME), which makes him housebound for long periods. He had to leave school at 16. Sushil has undergone 15 orthopaedic surgeries in 25 years.
The most accomplished among them is John Lee, who is a politician, a former Conservative Party member of parliament who was even a minister in departments of defence, employment and tourism. For 15 years between 1997 and 2012, he wrote the“My Portfolio” column for Financial Times. One of them is an activist investor. Some like to interact with the management and attend annual general meetings. Others stay away and just go by the numbers. Just one of the 12 is a trader and a day-trader at that! Most of them are stock-pickers. The only common thing I could find among them is that they have made money mostly by buying high-quality small-cap stocks and holding them for years.
Why the title Free Capital? It is free financial surplus over and above the living expenses that is the raw material for these investors. It also describes the freedom which investors enjoy from the drudgery of conventional careers. This is the most important take-away from the book that should be conveyed to non-investors. Most of the investors profiled got to a million pounds in less than 20 years of investing. That even 10 years of thoughtful and systematic investing can change your life radically is one of the best-kept secrets of the world.
As Thomas so eloquently puts it: “Personal investing requires no deference, self-promotion, management skills or tact; it requires only a few good decisions. It is a field where outsiders can excel: an individualistic game loosely defined by rules which are sufficiently static to make experience valuable, but also sufficiently fluid to keep the game interesting.” I have not come across anyone saying any of this as a life advice, especially to the youth who are rebellious by nature and who have time on their side to create amazing wealth, all with their acumen. If you wanted proof and inspiration that this works and could convert school dropouts, chronic patients and rank outsiders into fabulously wealthy people, read this book. Highly recommended.