Why Self-Directed Investors Can Massively Outperform Professional Money Managers (part 2)
Hi! You might want to begin by reading part one, if you haven’t already. Now, let’s get right back into looking at even more asymmetries that favor the self-directed investor over professional money managers.
I have domain expertise
Because I usually end up diving very deeply into almost any subject area that I put my attention on, it’s fair to say that I am an expert in many domains, not just the ones that I have official qualifications in, or have been paid for, such as engineering and psychology.
Most fund managers, or the analysts who report to them, usually have backgrounds in finance, have MBAs, and/or are relatively young and inexperienced. In comparison, I have decades of experience as an employee in the semiconductor industry, for example, including many years of struggling at the very forefront of technology, filing patent applications, and pushing out one world-changing product after another. I love writing like this; totally no holds barred, not caring if you judge me as arrogant.
It not hard for me (or for you) to have much greater clarity than a professional analyst about the direction and future of a company in an industry with which I am intimately familiar. The level of domain expertise that us regular folks have is often incomparably deeper and richer than someone who not only may not really understand the technical underpinnings of the business, but possibly also spends most of their time focused on the words of CEOs and CFOs, which is often essentially sales talk.
You might want to assert that I don’t have the financial background to properly evaluate companies from an investing perspective. That was true for me 18 months ago. However, it’s been surprisingly easy to develop those skills, with the help of my mentors Phil Town, Warren Buffett, Charlie Munger, Guy Spier, and Mohnish Pabrai, all to whom I feel immensely grateful.
I have had to build on my knowledge of accounting and business to gather some competence in securities analysis, and it’s an ongoing process for me; I’m continually learning and building on what I already know. After almost 18 months of focusing on this area, I can now thoroughly analyze and…