Up close and personal with Prof Glen Arnold

  • Business
  • Saturday, 07 Apr 2012

Collect some investment tips from a man who believes that true happiness comes from taking on responsibilites and feeling a sense of accomplishment.

Professor Glen Arnold of the Salford University of UK will be town next week. In case his name does ring a bell, it's because he is the author of a best-selling book: The Great Investors: Lessons on Investing from Master Traders. This is one of eight books Arnold has written on the topic of investing and trading. He's now working on his ninth book.

Since writing his first book in 2001, Arnold has steadily gained credibility and acknowledgement for his ability to capture the philosophies of some of the greatest investors and combining their ideas with modern strategic analysis and finance theories to develop a coherent investment approach.

Some of Arnold's books include Corporate Financial Management, The handbook of Corporate Finance and The Financial Times Guide to Investing, all published by Financial Times.

Of the people he is inspired by the most, Arnold says investment gurus Warren Buffett and Charles Munger were most influential.

“Their intellectual leadership comes from the principles they have developed and the knowledge they have accumulated. These are not just about investing, but about human relationships and our duty to each other. Sir John Templeton, who became a billionaire by investing other people's money, had a great sense of morality and of serving others,” says Arnold.

Interest in investing

Surprisingly, Arnold's passion for investing started from seeing a photograph of a young boy in an Ethiopian refugee camp in 1984.

“In it was of a boy around 15, looking very thin. He may not have eaten for several weeks and it was a surprise he could stand at all. But he was upright and trying to run to where food was being handed out. The significant thing for me was that he was carrying, in his outstretched arms, his younger brother who was even thinner than him. That is real dedication.”

“I decided to act in the business world, making money that can be used by people on the front line helping others, particularly in educational projects,” says Arnold.

Arnold grew up above a shop owned by his parents in the sleepy English market town of Ross-on-Wye. He developed a keen interest in business when at aged 17 while on a gap year visit to Australia and Malaysia. The main ambition then was to be an entrepreneur, so he studied Accounting and Management at Cardiff University in the UK.

“I bunked off regularly to run a market stall business selling crockery and glassware. Later, this business grew into four shops with the help of my wife, Lesley. We were bad retailers! Undercapitalised, bad at attention to detail and lacked economies of scale. We very nearly went bankrupt,” Arnold recalls.

Returning to his academic life (Arnold had picked up a PhD in Economics along the way) he started teaching corporate finance and investment.

In 2001, he resigned from the university where he taught to dedicate a year to studying in detail the investment philosophies of great investors.

“I had no income and no prospect of a return to a safe university post, or any job. However, I was determined to find my own investment philosophy drawing on the ideas of great investors, modern strategic analysis and finance theory. The result was a book called Valuegrowth Investing (now The Financial Times Guide to Value Investing),” says Arnold.

Other books followed, and equity investment and property development proved lucrative. Currently, Arnold also teaches investment ideas during twenty one-day seminars at Schroders Investment Managers in the UK each year.

Arnold feels that the main reason why most people fail in the market was because they speculate rather than invest.

“They do not know how to invest. This requires a focus on business analysis, not treating shares as counters in a game of Monopoly or Roulette.

They do not insist on a large margin of safety. They feel they have to invest regularly rather than wait for the perfect pitch to come along,” says Arnold.

Arnold feels that if you do not understand it, do not buy it.

“You must view shares as part ownership of a business, not as gambling counters in a game of chance. Be a business analyst trying to understand what makes it tick, rather than an equity analyst. The thoughtful, dedicated private investor can out-perform the professional,” believes Arnold.

Arnold adds that the market was there to serve you not to guide you.

“The market, in its manic depressive fashion, often sets prices that are far from the true value of the business. Be independent, evaluate firms and exploit market prices rather than be led by them,” he advises.

Another nugget of advise is to not pay high fees.

“Fund managers can take away the bulk of the investment gain. Fees of 1.5% sound low, but it can remove one-third of your gain. A fund manager charging 1.5% per annum better pack some real dynamite,” he says.

And of course, Arnold advocates reading the philosophies of the great investors and learning from their hard-earned experience of what worked.

Arnold says that the basic characteristics needed for an investor to beat the market were independence of mind, capacity for hard work, ability to make judgements without complete information and the ability to resist the temptation to speculate.

Patience, perseverance and willingness to admit and learn from mistakes were also extremely important.

“The market is a voting machine not a weighing machine. Exploit the market's pricing and do not be led by it,” says Arnold.

He adds: “The non-investors around you will, from time to time, make large returns particularly in bull markets. These speculators will shout about their performances. Do not be tempted to follow them in the path to apparent easy riches,” he cautions.

Investing in happiness

Arnold still works 55 to 60 hours per week.

“At 50, I feel that I'm only just getting going, only just starting to build on sound foundations! There is so much fun to be had with more and more discovery in terms of intellect, encounters with business people, and business models and concepts. I'm really looking forward to the next 40 years. I have said people have a tendency to be over-optimistic!” he says.

Arnold adds that Sir John Templeton observed in his youth that the successful people in his small community worked only a little bit harder than those who were average.

“The extra ounce of work effort seemed to have an exponential payoff. I've always tried to put in an extra ounce,” he says.

Arnold adds that it was fun to achieve. Psychologists have examined the happiness of people who were relaxed, without work or worries, for example those who were watching TV, playing sports for leisure or being on a permanent holiday compared with those who were active and regularly felt a sense of accomplishment from carrying out their duties.

“It turns out that those leading a life of little responsibility are less happy than those who worked to achieve something. So, the sense accomplishment trumps the lack of hard work,” explains Arnold.

Investing in family

The people most important to Arnold are his wife, his sons, Lawrence and Charles and, his parents Chris and Brenda.

Arnold feels family and other relationships must come first. He has always taught his boys that financial success was merely the icing on the cake.

“By all means go for it, but not at the price of losing friends and family, love and life. Many millionaires are very unhappy. They forgot that money is not an end in itself. When they finally got there, they found it quite an empty existence,” he says.

Having been married since the age of 26, Arnold says that he and his wife Lesley still spent as much time together.

“Lesley is a dedicated teacher and we tend to travel abroad when she has school holidays, hence we are in Malaysia during the Easter break. We work together on many exciting projects. For example Lesley has taken the lead on the purchase of a house and gained planning permission for two more. We are always moving forward and we do these things together. Also, she has full control of my finances so I have to make her interested in me still after all these years, otherwise I would be penniless!” he exclaims.

Arnold says that he has told his boys they would get very little money from him, which he says was important for them to know.

“They have been given life skills and it is up to them to make the most of things. They must find their own way, make their own mistakes. This is for their own sense of satisfaction and accomplishment as it is right, morally.”

“Warren Buffett says on his death that his children would receive enough to do anything but not enough to do nothing. I'm not even that generous. They can't quite do anything from their current base, but they can do a lot, and do it off their own bat,” says Arnold.

Arnold's definition of happiness is a sense of love and being loved combined with a sense of purpose and fulfilment.

BORN: Aug 21, 1961 in London

PERSONAL: Married to Lesley. Two university-going sons

HIGHEST QUALIFICATION: PhD in Economics from Loughborough University of Technology

CAREER: Entrepreneur with retail business while studying PhD, investor, businessman, best-selling author and part-time professor at the University of Salford

NOTEWORTHY: Author of 8 books on investing

FAVOURITE FOOD: A good old English roast dinner

FAVOURITE PLACE: The English countryside in spring and summer

HOBBY: Hill walking

VALUES: As a Christian it is my privilege and duty to use the talents that I have to serve others to the best of my ability. It is a moral duty for those who rise through luck, dedication and hard work to positions of money, influence or power to dedicate themselves to help those who have been less fortunate, motivated or inspired.

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