Do you know your investment style? Growth? Value? Perhaps a bit contrarian?
Understanding your investing style is crucial for long-term success. Like the clothes we buy, everyone is different, but knowing your style will guide your (often difficult) investing decisions, like whether to buy shares in Coca-Cola Amatil Ltd (ASX: CCL) or XERO FPO NZ (ASX: XRO).
Fortunately, just like fashion, investment style can be copied and who better to copy than the billionaires who pioneered the style? You will quickly find you relate to some more than others and this is often linked to how much risk you are comfortable taking and your long-term objectives.
Below are four of the greatest investors around today. Which one are you?
1. George Soros
Investing like George Soros is not for the feint hearted. Soros has built a net worth of US$24 billion according to Forbes and is most famous for 'breaking' the Bank of England with a massive bet against the British pound in 1992.
Investment Style: speculative, high risk, high reward
Soros' investment style is notoriously speculative. It is high-risk and high-reward, which makes it difficult for most investors to comfortably emulate. His philosophy of 'reflexivity' suggests that the participants in global markets drive boom/bust behaviours and he often makes huge bets on the future direction of economies, currencies and companies.
Companies to consider:
Although George Soros' investment style does not relate to a particular type of company, reports from Reuters last year suggest he was buying stakes in gold miners. In keeping with his style might mean considering ASX-listed gold miners Newcrest Mining Limited (ASX: NCM) or Northern Star Resources Ltd (ASX: NST).
2. Warren Buffett
Buffett is well known by most investors, drawn in by his simple philosophy of buying good businesses at attractive prices. His success has been well documented in books and online, and many investors find it easy to relate to his common sense philosophy.
Investment Style: value, low risk, long-term
Buffett is the poster-boy for 'buy and hold', long-term investing. The benefits of this style are numerous, including compounding returns over time and riding out short-term market volatility. Buffett also has a strong preference for buying companies with a sustainable competitive advantage which will continue to repay investors over time.
Companies to consider:
A fan of food, beverage and insurance companies, investors with Buffett's style should consider Coca-Cola Amatil Ltd (ASX: CCL) for its strong distribution network and global brand recognition, while Insurance Australia Group Ltd (ASX: IAG) offers positive growth prospects and strong cashflows.
3. Peter Thiel
U.S. tech entrepreneur Peter Thiel was one of the founders of Pay Pal and an early investor in Facebook. Through his investment fund Founders Fund, Thiel invests in companies which are on the cusp of technological change like cloud computing, aerospace and artificial intelligence.
Investment Style: start-ups, growth, tech
Thiel's style of investing is much higher risk than that of Buffett's, but also has high return potential from rocketing growth and break-out technology. Theil's fund aims to invest in new technologies which will drive global change and growth while earning outstanding returns for investors.
Companies to consider:
Thiel's tech-savvy investment style lends itself to growing internet-based companies, like those developing software as a service (SaaS) products. These companies are rapidly changing the way the world does business and include the likes of Ozforex Group Ltd (ASX: OFX) and Xero FPO NZ (ASX: XRO).
4. Peter Lynch
Ok, Peter Lynch is not a billionaire, but his spectacular performance managing Fidelity Management & Research's Magellan Fund made billions for others, elevating him to being one of the all-time investing greats.
Investment Style: value, company fundamentals
Lynch's sage advice to 'buy what you know' and patient, lower risk style of investing makes him another relatable character for most investors, similar to Buffett.
Lynch advocates a long-term, 'fundamental' style of investing based on company earnings and believes time spent trying to predict the economy is largely wasted.
Companies to consider:
One of Lynch's most famous quotes is "never invest in any idea you can't illustrate with a crayon", so among the companies to consider for Lynch investors are Woolworths Limited (ASX: WOW) and child education provider G8 Education Ltd (ASX: GEM).
