What You Can Learn from the Greatest Investor You’ve Never Heard Of

Ask for names of investing greats and you should hear the likes of Warren Buffett, Benjamin Graham and Peter Lynch being given. But, mention Shelby Cullom Davis and the likely response you’ll get is “Shelby who?’’

Meet Shelby Cullom Davis – the best investor you’ve never heard of. He turned US$50,000 in 1947 into US$900 million by the time he passed away in 1994. Davis achieved a compounded annual return of 23% for 47 years, results that would make anyone an investing superstar. Shelby’s exploits are chronicled in John Rothchild’s The Davis Dynasty. Here at The Motley Fool Singapore, we believe that there can be great lessons that anyone can learn from some of the best investors out there. This week, we’ll take a look at Shelby Davis’s first lesson for us.

Lesson 1 – It’s never too late to start if you have the right framework

Warren Buffett was a whiz kid who started his own investment partnership at the ripe old age of 26 in 1956 but not everyone starts young like Buffett. For those of you who think you’re too old to start investing because you need to draw upon your savings as you approach retirement, take heed from Davis – he only started his investing career at 39 without prior experience and went on to build an immense fortune.

Davis started investing with a great investing process. He was an admirer of Benjamin Graham, the revered mentor of Warren Buffett, and subscribed to a similar ‘value investing’ orientation by looking at shares of growing and profitable companies that were trading at a low Price – Earnings ratio. Davis also recognised the importance of temperament as he ignored market volatility and did not give in to excessive fear, nor euphoria. He preferred taking the long-term approach and stayed invested in companies for years through bull and bear markets – a truly Foolish approach that we at The Motley Fool Singapore would give a thumbs up to. Davis’s experience showed that it is a person’s temperament and investing process that truly matters in investing, not their age.

With a sound investing process and a focus on the fundamentals, a person can start investing at any age. Retirees or people near retirement who are looking for income can invest in companies with a solid history of sustainable dividends and strong financial stability, which can reduce risks when investing. Companies like real-estate fund management firm ARA Asset Management (SGX: D1R) and glove manufacturer Riverstone Holdings Limited (SGX: AP4) provide decent dividend yields of 2.7% and 4.8% respectively with sound fundamentals.

If investing in individual companies might be too much of a roller coaster ride, there’s still the option of investing in the overall shares market through an ETF. The SPDR Straits Times Index ETF (SGX: ES3) tracks the returns of the Straits Times Index (SGX: ^STI) and has returned a total of 88.8% (excluding dividends) since its inception on Apr 2002. The SPDR STI ETF also pays out a dividend every year which can be used for income and currently stands at 2.42%.

Most people approaching retirement or who are already retirees will likely have savings they intend to draw upon in their golden years. If a portion of money is used for investing with the right temperament and mind-set, it can provide an additional income stream through dividends and a better tomorrow with capital appreciation. While the share market will always experience steep drops, investors with a sound process, regardless of age, should stand a great chance of coming out ahead.

If this article has piqued your interest in Davis, stay tuned for the next part of this series next week as we look at how he trounced the market and what we can learn from it. In the meantime, if you would like to learn how to GROW your wealth in the years ahead, click here now for your FREE subscription to Take Stock Singapore. Take Stock Singapore is The Motley Fool’s free investing newsletter written by David Kuo. It tells you exactly what’s happening in today’s markets and shows how you can GROW your wealth in the years ahead.

The Motley Fool’s purpose is to help the world invest, better. The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.