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Free Capital, 2nd edition: How 12 private investors made millions in the stock market

Book Description

Wouldn't life be better if you were free of the daily grind - the conventional job and boss - and instead succeeded or failed purely on the merits of your own investment choices? Free Capital is a window into this world. Based on a series of interviews, it outlines the investing strategies, wisdom and lifestyles of 12 highly successful private investors. Each of them has accumulated £1m or more - in most cases considerably more - mainly from stock market investment. Six are 'ISA millionaires' who have £1m or more in a tax-free ISA, a result which is arithmetically impossible without exceptional investment returns. Some have several academic degrees or strong City backgrounds; others left school with few qualifications and are entirely self-taught as investors. Some invest most of their money in very few shares and hold them for years at a time; others make dozens of trades every day, and hold them for at most a few hours. Some are inveterate networkers, who spend their day talking to managers at companies in which they invest; for others a share is just a symbol on a screen, and a price chart shows most of what they need to know to make their trading decisions. Free capital - money surplus to immediate living expenses - is the raw material with which these investors work. It can also be thought of as their psychological habitat, free from the petty tribulations of office politics. Lastly, free capital describes the footloose nature of their assets, which can be quickly redirected towards any type of investment anywhere in the world, without the constraints which institutional investors often face. Although it presents many advanced insights and valuable investment hints, this is not an overly technical book. It offers practical ideas and inspiration, with revealing detail and minimal jargon, making it an indispensable read for novice and experienced investors alike.

Table of Contents

  1. Cover
  2. Publishing Details
  3. About the Author
  4. A Note on Names and Details
  5. Preface
    1. What this book covers
    2. Who this book is for
    3. How to use this book
    4. Free capital?
  6. Introduction
    1. Geographers, surveyors, activists and eclectics
    2. Performance records and ISA millionaires
    3. No drama
    4. The role of luck
  7. Part 1: Geographers
    1. Chapter 1. Luke: The Big Picture
      1. Geography
      2. Into banking: a lucky break
      3. Leaving banking
      4. The big picture: the neglected oil sector
      5. Leverage, shorts and squeezes
      6. A typical day
      7. 30,000 posts
      8. Conclusion
    2. Chapter 2. Nigel: Catching the swings
      1. Psychology and banking
      2. Capitalism on a credit card
      3. Shipping cycles
      4. Commodity boutique
      5. A ten bagger and time out
      6. Junior miners
      7. Portfolio management: “when it doubles, sell half”
      8. Exploiting cross-market intelligence
      9. Bulletin boards
      10. Conclusion
  8. Part 2: Surveyors
    1. Chapter 3. Bill: Just the facts
      1. A difficult child
      2. Privatisations: political profits
      3. The tech boom: knowledge doesn’t always help
      4. Leaving the day job
      5. Spread betting, shorting and over-confidence
      6. Knowing what to overlook
      7. Working methods
      8. Bulletin boards and tail-coating
      9. Conclusion
    2. Chapter 4. John Lee: Defensive value and dividends
      1. Doctor’s son
      2. Politics
      3. Defensive value and dividends
      4. Meetings: enjoying the process
      5. Portfolio management and ISAs
      6. A sense of history
      7. A published performance record
      8. Stockbrokers and advisors
      9. Director and trustee
      10. Half a century of investment delight
    3. Chapter 5. Sushil: The apostate economist
      1. Getting started
      2. The tech bubble: “synchronised stupidity”
      3. Leaving the day job
      4. Investment strategy: knowability
      5. Few advisors, little mathematics
      6. Tax, spread betting and leverage
      7. A typical day
      8. Company meetings
      9. Successes and mistakes
      10. Academia
      11. Giving it away
    4. Chapter 6. Taylor: The autodidact
      1. Teenage tearaway
      2. Getting serious
      3. Unleveraged plunging
      4. Erinaceous: a lucky escape
      5. Sitting tight vs. changing your mind
      6. Macro trading as a bear market defence
      7. Conclusion: the 20-hole punch card
    5. Chapter 7. Vernon: Buying the glitch
      1. Teenage programmer
      2. A small legacy
      3. Tech stocks boom
      4. Buying the glitch
      5. Buying the glitch: QXL Ricardo
      6. Research method for glitch stocks
      7. Structuring investment decisions: core, secondary and hygiene factors
      8. Core, secondary and hygiene factors for two investment decisions
      9. Portfolio management and leverage
      10. Mental skills for investing
      11. Conclusion
  9. Part 3: Activists
    1. Chapter 8. Eric: The networker
      1. Teenage gaming for profit
      2. Property management
      3. Starting in shares
      4. Ten-bagging Ben Bailey
      5. Portfolio management and spread betting
      6. A typical day
      7. Tactics for annual general meetings
      8. Keeping a low profile
      9. Conclusion
    2. Chapter 9. Owen: Efficiency and opportunism
      1. Growing up young
      2. Schoolboy stag
      3. Into the City: prop trader
      4. Moonshot: Horace Small
      5. Split capital trusts
      6. Portfolio management and leverage
      7. Activism in action
      8. Father and athlete
      9. Conclusion
    3. Chapter 10. Peter Gyllenhammar: The corporate engineer
      1. “Noble without land”
      2. Return to Go
      3. “A Swedish Goldman Sachs”
      4. Return to Go – again!
      5. Attractions of UK micro-caps
      6. Corporate engineering in bombed-out shares
      7. Britannia Group
      8. YJ Lovell
      9. Full bids
      10. Not taking advice
      11. Successes and mistakes
      12. Policy issues for the UK
      13. Working days and sailing days
      14. Conclusion
  10. Part 4: Eclectics
    1. Chapter 11. Khalid: The day trader
      1. The rag trade
      2. Ratners
      3. Trading the account
      4. Starting in CFDs
      5. Broker upgrades and downgrades
      6. Favourite technical indicators
      7. A typical day
      8. Day trading in difficult markets: 2007 onwards
      9. Conclusion
    2. Chapter 12. Vince: The tax exile
      1. Tuberculosis
      2. A job is a means to a mortgage
      3. Small-cap investor
      4. Geographer and surveyor
      5. Portfolio management and debt
      6. Options: covered straddles
      7. A day in the life of a tax exile
      8. Conclusion
  11. Conclusion
    1. Characteristics of the free capitalists
      1. No single blueprint
    2. Life choices and chances
      1. Future time perspective
      2. Few dependants
      3. Ambivalence about careers
      4. No overnight success
      5. Ill health as a career constraint
      6. Technology as a facilitator
    3. Attitudes
      1. Money is about freedom, not consumption
      2. Low appetite for leverage
      3. Enjoying the process, not the proceeds
      4. Not team players
    4. Working methods
      1. Foxes, not hedgehogs
      2. Applying sophistication in different dimensions
      3. Concentrated portfolios
      4. Mainly smaller companies
      5. Not taking advice
      6. Bulletin boards
      7. A craft, not a science
      8. Summary table of investor characteristics
  12. A Note on Research Methods
  13. Acknowledgements
  14. Epilogue: What Happened Next (2nd edition update)
    1. Luke
    2. Nigel
    3. Bill
    4. John Lee
    5. Sushil
    6. Taylor
    7. Vernon
    8. Eric
    9. Owen
    10. Peter Gyllenhammar
    11. Khalid
    12. Vince
    13. Investing books from Harriman House