Investing and Finance by Bill Ackman - Review

On the weekend I watched Bill Ackman on Youtube give a 45 minute talk called

'Everything You Need to Know About Investing and Finance in Under An Hour' 

If You're So Smart, Why Aren't You Rich?

I found it fantastic. I have heard of Bill Ackman before but only as a news maker and popular hedge fund manager.

All I really knew about the guy was that he used to be an investor in CP Rail and up until a few weeks ago was $500 million short Herbalife stock, through which he had a very public ongoing dispute with Carl Icahn. He always looked arrogant and a bit of a smartass to me. He is Harvard educated and very passionate about investing.

Forgetting all that hedge manager stuff for now, the guy gave a very simple and more importantly great lesson on how to invest and how to better understand the process behind investing. I thoroughly enjoyed his lesson and would urge anyone struggling to understand basic business and company fundamentals to look it up on Youtube.

For those without access or who just want the highlights and my review, this is the short form version and what he covers and has to say;

On The Keys to Successful Investing

• Invest in public companies
• know how the company makes it's money
• make sure you pay a reasonable price
• try to pick companies that will be around forever
• look at companies with little or no debt
• look for high barriers to entry
• invest where there the company is immune to outside market forces
• invest in companies with low reinvestment costs
• avoid a business with controlling shareholders

In this section he focuses on buying cheap, low debt, hard to replicate, wide moat businesses that will be around forever. Think Coca-Cola, McDonald's, Royal Bank, Bell Telephone, CN Railway. Nobody creates or starts a new railroad these days (hard barrier to entry) and nobody is going to come up with a Coke recipe. These are the types of companies you want to invest in when the price is right. 

On When to Invest

• when you have money you don't require for at least 5-10 years
• only when you have a zero credit card balance
• when you have paid off your student loans
• after you have accumulated and can set aside 6-12 months of emergency funds

He briefly covers timing of your investing life to saving money, being debt free and after setting aside an emergency fund.

On How to Withstand Market Volatility

• become secure financially
• ensure what happens in the market day to day does not scare you into selling
• do your own due diligence on companies
• make sure you pay a reasonable price

You will be more likely to stay invested in the companies you bought if you are secure and don't need the money you invested. Make sure you bought in cheaply and know intimately what the company does and how it makes money.

On How Mutual Funds Work

Pros;

• even with a small investment you can achieve portfolio diversity
• your money is managed by a professional investor

Cons;

• thousands of funds to choose from make it difficult to decide
• you have to spend a lot of time researching what manager has a good fund

On What Is A Good Money Manager

• someone who can very simply explain their investment strategy
• well respected within the industry
• picks investment from a value approach
• has been around at least 5 years
• consistency of style and philosophy
• has invested their own money in the fund

If you are going to let someone else handle your finances then checking off these boxes will help you find the right person and can be helpful while you interview someone.

On Investing in Your Future

You are going to make money while you work. How you invest that money will affect the quality of your future and that of your kids and family. It will decide what kind of house you will be able to buy and even the type of retirement you will have.

"Investing is going to be important to you whether you like it or not"

My Takeaway

The video is 5 years old and has over 2.5 million views. Bill explains business and finance in very simple terms and in under an hour. I wish I would have seen this video years ago to help me better understand and just how important it is to check out a company's financial statements.

It isn't everything you need to know about finance and investing BUT the basics are covered.

Well done Bill!

Related Post: Index Funds and The Quest for Simple

Recommended Reading: When Bill was 22 years old he read The Intelligent Investor by Benjamin Graham. He credits the book for getting him started on the road to investing it it has transformed his life in a positive way. It is a great place to start your journey too.