Star manager Richard Buxton has listed seven key things he has learnt since starting his career in fund management.
Buxton (pictured) recently quit Schroders after 11 years for Old Mutual Global Investors to manage the £500m UK Alpha Plus fund.
Although he said the fund management world has changed a lot throughout his career, he highlighted seven fundamental observations.
1. Investment is an art, not a science
"The more you can understand human behaviour, the more you understand investors," the manager said. "It is important to realise investment is an art, not a science."
2. Models will not work
"Value is only part of the game, and the game is irrational, so there is a fundamental problem with trying to use models to predict returns," he said. "It is better to be roughly right than precisely wrong."
3. The market loves stories
"Never let a fact get in the way of a good story," Buxton warned. "We all love stories, the market loves stories, so it is important to recognise a good story when it happens and cross-reference it with facts."
4. Remain humble
"Humility is absolutely vital in this business," he said, referring to the attitude a fund manager must have to his own work, striving to remain modest at all times, even when doing well.
5. Don't diversify
Buxton challenged one of the key investment principles, saying: "don't ever diversify, you don't have that many good ideas".
"Put all your eggs in one basket and watch that basket very closely," he said. "Resist the temptation to fiddle [with your portfolio], and run your winners."
6. Good colleagues are valuable
"Fund management attracts a lot of loners, weirdos and fruitcakes, but you need to bounce your ideas off colleagues," the manager said. "So if you can find good people to work with - stick with them."
7. Experience counts
Buxton's final observation is the more you do something, the better you get.
"You have to know yourself both as an investor and as a person, and figure out what makes you tick, to be successful in managing money," he said.
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