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Ten great investors

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4. Ken Fisher

Job description

Founder and CEO of Fisher Investments, a California-based investment advisory firm deploying a global, top-down, dynamic asset allocation strategy. Ken Fisher also serves as Co-Chief Investment Officer and is a member of the four-member Investment Policy Committee overseeing all strategic investments decisions across the firm. Fisher Investments manages billions of dollars for high net worth investors and institutional investors globally.

Investment style

Top-down, global, and dynamic. Fisher doesn't adhere to a static size or style, but positions portfolios based on client objectives and forward-looking expectations.

Profile

Ken Fisher is the youngest of Philip Fisher's three sons. After graduating from college in 1972, Ken initially worked for his father's investment firm. However, he left his father's firm and in 1979 founded Fisher Investments as a sole proprietorship, later incorporated and then reorganized into a limited liability company. Phil Fisher was a noted growth investor. Initially Ken Fisher embraced a value philosophy. His was one of the first firms to offer small-cap value investing, having helped define the category institutionally. Ken Fisher pioneered the Price to Sales Ratio, as documented in his 1984 book Super Stocks. This concept is now a core element of financial curriculum.

Ken Fisher started writing the "Portfolio Strategy" column in Forbes magazine in 1984, and in 2009 celebrated his 25th year as a Forbes columnist.

Through the decades, Ken Fisher evolved from a primarily small cap value investor to being style-agnostic and global by the early 1990s. He is a top-ranked market forecaster according to independent third party CXO Advisory Group. Ken Fisher is also on Investment Advisor magazine's prestigious IA-30-30 list of the industry's 30 most influential people over the last 30 years. He has been published or written about in many US, British, and German financial newspapers and magazines, and his academic research has been showcased and awarded in financial journals, including The Financial Analysts Journal and The Journal of Portfolio Management including a coveted Bernstein Fabozzi/Jacobs Levy award for outstanding research.

As of 2013, Ken Fisher has written ten books on investing and wealth accumulation, including best sellers The Only Three Questions that Count, The Ten Roads to Riches, How to Smell a Rat and Debunkery. His most recent new title, released in 2013, is The Little Book of Market Myths: How to Profit by Avoiding the Investing Mistakes Everyone Else Makes.

Long-term returns

Not known.

Method and guidelines

As detailed in his 2006 best seller The Only Three Questions That Count, investing is a science, not a craft. As such, investors need a framework for ongoing scientific discovery. Ken Fisher's query method is to ask three questions:

  1. What do I believe that's actually false?
  2. What can I fathom that others find unfathomable?
  3. How is my brain tripping me up?

The first question allows Ken Fisher to identify myths that most investors believe. He believes that if most investors believe X causes Y, but he can prove X doesn't cause Y, when he sees X happening, he can bet against Y and win more often than lose. For example, using this method Ken Fisher has proven that, contrary to the popular belief that rising oil prices drive stocks down, the prices of oil and stocks have no meaningful correlation.

The second question helps uncover profitable relationships most investors can't see. For example, if most investors believe X causes Y, but Ken Fisher discovers X doesn't cause Y, Ken Fisher seeks to prove if X perhaps causes Q or Z. Then, when he sees X happening, he can bet on Q or Z while everyone else is betting incorrectly on Y. For example, using this method Ken Fisher uncovered data showing that high US federal budget deficits have led to above average stock market returns.

The third question falls in the realm of behavioral finance, a field of study Ken Fisher has helped pioneer. Ken Fisher believes humans' brains are hard-wired to contend with basic problems of human survival, and humans don't deal well with counter-intuitive problems like investing. According to his research, human instinct often leads to poor decision-making in investing. For example, myopic loss aversion is a common cognitive error that Ken Fisher finds leads investors to move to avoid near-term losses at the expense of longer-term goals.

Key sayings

"Your biggest investing enemy is your brain."

"A good way to think about successful investing is it's two-thirds not making mistakes, one-third doing something right."

"I call the stock market The Great Humiliator. It wants to humiliate as many people as it can, for as long as it can, for as many dollars as it can."

Further information

Fisher Investments has entered a partnership with publisher John Wiley & Sons to do the first ever publishing imprint by a money manager - Fisher Investments Press. The imprint has published thirteen books authored by Fisher Investments staff including, Own the World by Aaron Anderson, 20/20 Money by Michael Hanson, and nine "On" series books: Fisher Investments on Energy, Fisher Investments on Materials, Fisher Investments on Consumer Staples, Fisher Investments on Industrials, Fisher Investments on Emerging Markets, Fisher Investments on Technology, Fisher Investments on Consumer Discretionary, Fisher Investments on Utilities, Fisher Investments on Telecom, Fisher Investments on Health Care. The final book in the series, Fisher Investments on Financials, was released in Fall 2012.

Fisher Investments produces a daily financial news and commentary website at MarketMinder.com.

Fisher Investments also has a wholly-owned subsidiary in the UK, Fisher Investments UK, and a joint venture affiliate in Germany, Grüner Fisher Investments GmbH.

Any investment program may be volatile and can involve the loss of principal. The books referenced above reflect the personal opinions and viewpoints of the authors and should not be regarded as a description of the advisory services provided by Fisher Investments. Nothing in these books constitutes investment advice or any recommendation with respect to a particular country, sector, industry, security or portfolio of securities. No assurance can be made regarding the profitability of any security mentioned or regarding the accuracy of any forecast made. Not all past forecasts were, nor future forecasts may be, as accurate as those presented. Past performance is no guarantee of future returns.

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