How These Stock Market Wizards Made Their Fortune...

The greatest investors in the world have one thing in common - they all have generated massive returns on their investments.

Over their entire investment career, they have managed to beat the market with exceptional returns.

Their ability to consistently outperform the market has won the trust of all.

How did they do it?

They generated great returns with the help of two important attributes - time and consistency.

Let's know more about these investors and their strategies that helped them to turn their small savings into massive fortunes...

#1. Warren Buffett

Warren Buffett is arguably the best investor of all time.

With an estimated net worth of over US$ 100 bn, no investor to date has been able to generate and grow their investments to put them in the top 10 richest people in the world.

He is also one of the greatest philanthropists in the world and has pledged 99% of his wealth to charity.

Buffett started his investment career under the wings of his guide and mentor Benjamin Graham. At an early age, Buffett began reading books related to finance and stock markets.

In 1965, Buffett purchased a textile maker Berkshire Hathaway and turned it into a holding company to invest and grown his wealth.

Through Berkshire Hathaway, Buffett made exceptional returns in companies such as Apple, Coca-Cola, Bank of America, Wells Fargo etc.

Since then, Berkshire Hathaway has produced, on average, annual returns of 20% with an asset size of over US$ 800 bn.

Buffett believed in the principle of value investing thought by his mentor Ben Graham. Buffett looks for well-established companies which are undervalued and buys them to hold for the long term.

He also believes in the idea of 'Competitive Advantage'.

This simply means, investing in companies that have a moat i.e. an advantage over their competitors in a particular area of business or the business as a whole.

This is even applicable in today's market where companies like Coca-Cola and Apple have a huge advantage over their competitors.

This helps them create a monopoly in the industry and thus continue to create value for their shareholders.

#2. Peter Lynch

Peter Lynch is one of the most successful asset managers of all time.

He is known for managing the Fidelity Magellan Fund, a mutual fund division of Fidelity Investments. His estimated net worth is just a little over the US$450 m.

Between the years 1977 to 1990, Lynch grew the investment of merely US$20 m to over US$14 bn.

Between this period, the Fidelity Magellan Fund outperformed the S&P 500 for almost 11 out of the 13 years.

The fund managed by Lynch grew at a compounded annual growth rate (CAGR) of over 29.2%.

He simply believes in the very principle of long-term investing with the idea of buying companies that an investor has thorough knowledge about.

This knowledge gives him the confidence to be invested for a long period even if the market were to crash.

The ideology of Lynch is a little different form that of Buffett.

He believes in investing in high quality businesses with enormous opportunities for growth having a strong presence in the market and a unique selling proposition (USP).

Some of his notable investments were in companies such as Ford, Volvo, General Electric, Dunkin' Donuts, and Lowe's.

Unlike Buffett, Lynch never tried to accurately value companies. He believed in investing in a well-diversified portfolio of great companies with high growth prospects.

According to him this is the key to 'beating the street'.

Lynch has also authored and co-authored books on investing and business such as One Up On Wall Street, Beating the Street, and Learn To Earn.

#3. Bill Ackman

Another great investor and hedge fund manager is Bill Ackman. He is the founder of one of the biggest hedge funds, Pershing Square Capital Management.

He has an estimated net worth of around US$ 3 bn. A follower of Buffett, Bill Ackman has learnt various investment strategies and skills from him.

Unlike Buffett or Lynch, Bill has a very different investment strategy and approach. As he is an activist investor.

Activist investors are those who not only invest but also manage their investments and partake company activities.

Ackman buys large stakes in public companies he believes have immense potential for upside.

Along with his team, he tries to figure out ways to improve the operations of the company and the quality of the business. Once that's done, he will then sell the company after it has achieved its target price.

Some of Ackman's notable investment have been in companies such as, Canadian Pacific Railway, Target Corporation, Valeant Pharmaceuticals, and Chipotle Mexican Grill.

In 2020, the value of Pershing Square's holdings increased by 70.2% compared to the previous year's record of 58.1%. It has an asset size of over US$ 13 bn.

Ackman has a record of producing massive returns for investors. He does so by implementing the activist investment approach.

To Conclude...

There are many more in this list, such as John C Bogle, Carl Icahn, George Soros, and John Templeton, among others.

Each one of them are unique in their own way. They have played a vital role in the investing world. There is much we can learn from them.

Also, the methods and strategies of these stock market gurus have been successful to a certain extent.

But not every investor can copy and implement these strategies. Especially when it comes to Indian stock markets.

In fact it's always recommended that an investor must learn from these stock market gurus but not copy them.

Instead, create a suitable strategy that works for you.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...