Investor: Former Lehman's boss, on his deathbed, gives five steps to investing securely
IMAGINE you were going to die in the next couple of months. What would you do?
Gordon Murray, a former bigwig at Lehman Brothers and Credit Suisse First Boston, was in just that position earlier this year and decided to write a slim volume called 'The Investment Answer' to explain his investment philosophy in a handful of simple steps.
Murray, who now only has three months to live because of a brain tumour, is not just a 25-year veteran some of the world's best known financial services companies, he has testified in front of Congress about the present crisis and is a fierce critic of the way big investment houses do business.
Murray's slim book is only available to Irish readers who can download it from Amazon to their Kindels but it can be easily summarised for every investor and repays thought. It offers, at the very least, a system that is both coherent and relatively straight forward.
Murray's basic message is a simple anti-Wall Street investment philosophy; money management is a mug's game and you should instead invest in index-linked funds and make sure that you rebalance your funds reasonably often.
Murray has five basic pieces of investment advice.
The first is to find an adviser who earns no fees from any investment company and only earns fees from you; something that is still relatively rare in Ireland.
His second piece of advice is to divide your money among stocks and bonds, big and small, and value and growth.
The third piece of advice is to subdivide between foreign and domestic shares. This advice is the least relevant to Irish investors who have learned the hard way that sticking to your domestic market is madness.
Fourth, decide whether you want to invest in actively or passively managed mutual funds. The book does not come down on one side of the argument or the other but rather it lays out the pros and cons of each strategy.
Fifth and most controversial or counter intuitive; rebalance your fund by selling your winners and buying more of the losers.
As the market goes into a tailspin, there is something curiously old-fashioned and reassuring about reading an analysis like this. Of course there are reasons to believe that we are facing a crisis that could wipe away the euro but the expression "this time it's different" is probably equally misguided for recessions as it is for booms.
Of course a real boom or bust requires such a belief to drive up prices, or drive them down, but the reality is almost certainly somewhere in between.
In the present climate it is somehow heartening to read a good old-fashioned plea for the merits of investment combined with a radical criticism of many aspects of the markets.
None of 'The Investment Answer' is particularly revolutionary, and it comes with a deep layer of typical American schmaltz, but it is not everyday that one gets investment advice from a dying man -- especially somebody who knows the investment world well.