Tag Archives: Advice

A Reader’s Question on Advice for a New Investor

Insantity Defense

A Reader’s Question:

Dear John: I have a friend who wants to know what to do with his money. I know Charlie Munger suggests investing in cheap index funds for a “no-nothing” investor. But aren’t there problems with indexes? What do you think?

Well, especially now when most bonds (especially government bonds) seem high risk for no-or-low return, the first question would be what should that person allocate towards equities.

I am working on my answer, but thought YOU have advice for this reader.

The links here:

all provide a case for equity investing.  However, when you hear that historically the stock market has returned 8.6% or 9% for the past 200 years, it is a little like saying the average height of the person in this room is five foot five inches tall. The room has a pro basketball player standing tall at 7.5 feet and a dwarf in the corner at 3.5 feet–the average is 5.5 feet.  People are still seared by this experience in 2007-2009.

I will post my response tomorrow.


A Reader Lands Hedge Fund Job

A Reader Sought Advice


Thanks to all the advice offered by other readers, this person landed a job at a multi-billion dollar fund.  I received this letter:

I am more than happy to share my experience – it obviously may not be very useful as each person has a different background/personality but I hope the general rules that I have learned the hard way will prove useful to some.

With that said, here is a summary of my key recruiting pointers:

1.     Email + Call + Meet professionals in the industry – one of my coworkers speaks barely passable English, works under the often-shunned H1B1 visa, and as the appearance of sluggish slacker.  First impression would tell you that he would be the last person in the labor force to land an analyst role at a top investment management firm.  At least that’s what I assumed.  Then one day I was discussing the gloomy job market in finance with him and he mentioned in passing that he had emailed about 100 professionals before finding someone in his Alumni network willing to talk to him.  He has a master’s in financial engineering from UCLA and guess what his teammates are doing? Looking for jobs.  He commented, “of course you can’t find a job if you just submit your resume, come on, who’s going to look at 500 resumes?”  I took a similar approach after having failed miserably with mass-emailing resumes and catchy cover letters.  It’s an approach that worked for me and my coworker and we aren’t the brightest or the most experienced so perhaps it will work even better for others who are brighter/more qualified.

2.     Research the firm + the role – while it’s obvious that you should research the firm that you are interviewing for, it’s less apparent that you must research the role.  Often times the role description will be a bunch of mumble jumble so I have found it helpful to learn about the position from someone in the department before the interview if possible.  This is hard to do in most cases so the next best alternative is to write down what interviewers tell you and rapidly build up your knowledge during the interview.  I have found that especially when interviewing with more senior people, they are much more interested in your knowledge about the role than your skills and intelligence.

3.     Leverage recruiters – I tailored my linked-in profile to the investment management/hedge fund industry.  My hunch is that recruiters heavily leverage LinkedIn to find candidates and big companies often use recruiters to screen candidates.  Therefore, recruiters can be your best friends in getting a job if you are open to them, respect them, and seek their advice.  My recruiter gave me a list of common questions that the firm was known to ask and it sure is a lot easier going into a test knowing most of the questions.  Also, it’s helpful to have someone who already has a relationship with the firm and knows all the do’s and don’ts to follow-up on your behalf.

4.     Be aware and mindful of interview taboos – I went into one important interview (for me at least) with a cup of coffee and found out later that it was a big taboo because it makes you look like a tool.  If you are like me, this kind of stuff is not obvious so make sure to google interview don’ts before you go in.

5.     Be open-minded – I went into interviews originally with the mindset that I just want to do investment research, I don’t want to build pretty power points or do grunt work.  This prevented me from passing up many good opportunities.  Then one day I realized that I was too damn closed-minded and decided to not jump to conclusions and try to get every interview I can.  If it worked, then great, and if not, then I got free practice.

6.    Be realistic – in the end, I’ve learned that unless you have certain experiences/credentials/connections, some jobs are simply not for you.  For example, hedge fund managers will not talk to you if you don’t have sell-side experience.  It boggles my mind why 100+ hours, adderall-charged work weeks spent making Powerpoints prettier and building simple spreadsheets translates to business acumen or investing prowess but reality says otherwise and reality must be respected.  As an aside, I feel that many of the seemingly meaningless hurdles designed into the corporate ladder is because the managers had to go through the same hurdles so unless you’re a genius, why should you be granted a shortcut?  The answer seems to be either play their game or do it on your own, which I think is vastly more preferable if you have the gumption.

I hope this is helpful.  Keep in mind that what I have described above is what I found to be useful in landing a corporate job and I suppose does not apply to someone who wants to start his/her own fund.  If I had to boil what I have learned down to one sentence, it would be: respect reality and act accordingly. 

Please feel free to share the above/parts of the above with your readers in any way that you see fit.  I only wish to remain anonymous.

p.s. I found this blog on Charlie Munger, check it out! http://mungerisms.blogspot.com/

A Reader Seeks Advice

I must create a system, or be enslaved by another man’s–William Blake

This reader confronts a quandary that many of you might have faced. Thoughts or suggestions? Advice?  I will post my thoughts later.

A Reader Writes about transitioning to value investing

I have traded equities, futures, and options successfully from a carve-out from a fund. I have spent my entire 11 year career in two buyside proprietary shops. Fortunately or unfortunately, I never had any finance exposure in school or career wise (in the traditional sell-side sense). I graduated magna cum laude from XXX with major in psychology. I have always wanted to become a value investor and run my own fund one day. I currently run my own book now but it is 180 degrees from what value investing is as I’m sure you know being a former trader.

The struggle for me is that I don’t have the fundamental basics down yet for value. I am currently teaching myself basic accounting (I actually had to go back and do a refresher in algebra as well). I’m not an analyst although I use and trade off analysts for work and find the transition difficult in analyzing financial statements, companies, etc. because of my lack of experience. I came into trading without a mentor and had to self teach myself, and find myself in the same position again for value investing.

I have read a lot of the value investing grails like Graham and Dodd, Buffett, Greenblatt, Greenwald, Montier, Klarman, etc., However, putting things together without the basics has been overwhelming and tough for me. I understand the very simple concept of buying with a margin of safety but actually putting that into practice is not an easy task without some guidance.

I am having a tough time learning valuation. When I took Greenwald’s executive course on Value Investing last summer, I understood the big concepts but when we got down to the numbers, such as figuring out WACC, going through items line by line, a lot of things were over my head. I know these are things I gain from experience and learning the basics but it’s been tough trying to figure out what to learn on my own. Another problem is I don’t have a network of people to tap into that are value people. Everyone in my world is fast money whether they are fundamental or not.

I had the fortunate opportunity to sit down and speak to one of the value managers at A Value Investing Firm recently who is also a professor in the Columbia Value Investing Program. I had seriously considered going back to school, but she and I agreed that since I just turned 36 and that there is no guarantee that I will be selected into the Value investing program, that self-instruction may still be the best course for me. I have had a successful run as a trader but I would love to make the transition to Value just as you have. I would love any suggestions you have for me or perhaps we could even get together for a drink. I would be very curious and interested how you made the transition.