Investor Profile | From 150,000 to 1.6 billion, he still goes to work every day at the age of 94

This article is compiled from "Red and Green".

Roy Neuberger was born in the United States in 1903 and entered Wall Street in 1929. He became an investment master, growing his wealth from $150,000 to $1.6 billion. He did not attend college or business school, but he was constantly learning. His success not only brought him immense wealth, but also longevity and a happy family.

1. Striking Gold in the Stock Market Crash and Founding the American Mutual Fund

Roy Neuberger was born on July 21, 1903, in Connecticut, USA. When he was in his teens, his parents passed away, leaving him with a $30,000 property and some blue-chip stocks, which became his capital for "striking gold" in the stock market.

In March 1929, at the age of less than 26, Roy Neuberger arrived on Wall Street with the intention of making a name for himself. However, he became a witness to the Great Depression in the United States. Before the Great Depression, Roy Neuberger sold all of his first mortgage bonds on real estate, even though they had previously brought him a 5.5% annual return. He then invested all of these funds into stocks. By May 1929, he had made $5,000 from stock investments.

But with the outbreak of the Great Depression, he quickly lost that $5,000. At that time, Roy Neuberger noticed that the stock price of the American Radio Corporation had fallen from a high of $574 to less than $500, and the company was undergoing a capital split into five shares. He believed that radio was just a new type of tool that was not very useful and had no future. When the split stock price dropped to $100, he shorted 300 shares of radio stock, which happened to be equal to the $30,000 market value of his blue-chip stocks.

Later, the radio stock dropped to a low of $2 per share, proving how wise Roy Neuberger's decision was at the time. He used the profits from the radio stock to offset the losses from the blue-chip stocks. This was his first successful hedging trade, which allowed him to survive the Great Depression. It not only preserved his capital, but also strengthened his confidence in hedging operations in the stock market.

From 1930 to 1940, Roy Neuberger worked at Harris, Upham & Co., where he learned to see things for what they really were, rather than just appearances. He said that the market has its own rules, just like the waves of the sea. The stock market changes every few months, and investors can only achieve victory by adapting to the constantly changing waves.

In the 1950s, Roy Neuberger believed that mutual funds were a wonderful and smart investment method. By pooling the funds of many people into one fund, small investors could hold various valuable securities of large companies. However, mutual funds had a major flaw at the time, which was an 8.5% upfront commission. Before investors purchased their first fund, they had to pay an 8.5% commission fee, which went directly into the pockets of the fund promoters, leaving them with only 91.5% of their capital. According to Roy Neuberger, prepaid commissions are not conducive to building trust and encouraging investment because these commissions are not paid to the people who manage the funds or make investment decisions, but rather go into the pockets of fund salespeople. Therefore, there is no need for prepaid commissions. He believes that there should be a type of fund that generates profits by bringing returns to investors, rather than charging a certain commission upfront. So he wanted to establish a mutual fund that does not charge prepaid commissions. This practice was unprecedented at the time. After relentless efforts, on June 1, 1950, Roy Neuberger's "Guardian" mutual fund company was established, and he created a mutual fund that does not charge an 8.5% prepaid commission. Although the fund initially grew slowly, people eventually realized that investing in the "Guardian" fund was a wise choice. The "Guardian" mutual fund company initially had a size of only $150,000, and a few years later, the fund's size expanded to $1 million. As of August 2008, the company managed funds totaling over $230 billion.

Second, success comes from curiosity about life

At the age of 94, Neuberger looked back on his life and said, "I still remember how much I hated my 50th birthday. 50 years old, half a century! So old! I was younger then than I am now. I still go to work every day. For me, work is play. Trading on Wall Street aroused my curiosity, and I found it particularly interesting and exciting. I still enjoy making money, and I hope you can also earn the money you need and use it for an important purpose - to make yourself happy and help others. I found that to be the true happiness of life."

He didn't go to college or business school. So how did he achieve success? He said, "My success comes from curiosity about life and the high intuition required for securities trading; and this intuition requires you to cultivate yourself as a student in life. In Paris, it was from that time onwards that I continued to learn, studying people, studying life, observing, listening, and reading books and magazines. I never thought that learning anything was a waste of time."

Third, Neuberger's daily "to-do" list

Compared to his outstanding performance in the stock market, people may be more interested in Neuberger's secret to longevity. Neuberger has been asked about the secret to his longevity before, and his answer is that he often engages in "a sport that is almost extinct by cars" - walking. According to Neuberger, he only spent 12 years with his father. When his father was alive, he often quoted Benjamin Franklin's saying to teach him: "Early to bed and early to rise makes a man healthy, wealthy, and wise." Neuberger thought this statement made sense when he was young, and now he thinks it makes even more sense.

Source: Internet

These are some materials I found online about Neuberger's daily life, which you can refer to. Mr. Newberg never sleeps in. He wakes up between 5:30-6:00 every morning, does some moderate exercise right after getting up, and then takes a shower. He then turns on CNN to watch the morning news and stay updated on the latest events from the previous night.

He has breakfast at 7:00 sharp and tries to finish reading three newspapers: The New York Times, The Wall Street Journal, and The Investor's Business Daily. If he can't finish them, he takes the last two newspapers to the office to read. Usually, he leaves The New York Times to read later and gives the Tuesday science section to his driver, who knows a lot about science.

Between 7:50-8:00, no later than 8:00, Mr. Newberg goes to Central Park to take a walk with his friends. Central Park is less windy than Fifth Avenue and is suitable for walking. Even when he was 80 years old, he could walk a long distance. Even when he was in his 90s, he still walked with many people. His regular walking companions include investment advisor Al Feynman and old friend Abe Connor, whom Mr. Newberg considers a good person, a true intellectual, and a successful businessman. They usually walk until around 8:30 and then go to their respective offices. At 8:45, Mr. Newberg arrives at the office, turns on his computer, and prepares to face the challenges of the new day.

Three times a week (Monday, Wednesday, and Friday), from 5:00-5:45 in the afternoon, he exercises with a personal trainer outside. During those 45 minutes, he does 42 exercises. Some exercises last more than a minute, while others are less than a minute. This exercise costs $45, exactly $1 per minute, but he thinks it's worth it. It's a simple exercise that anyone can do:

1. Lean against a chair, lift one leg, bend over, and kick. Repeat 10 times, then switch to the other leg.

2. Stand up and sit down from a chair 20 times.

3. Lie flat on the couch, hug your knees to your chest 24 times.

4. Lift 1-2 kg weights.

These four exercises, along with the other 38 exercises, can be done standing, lying down, or sitting on a chair. He emphasizes the importance of improving leg strength so that he can walk faster and farther.

IV. Ten Principles of Successful Investment

Newberg believes that investors should avoid blindly following the crowd, as it can easily lead to being taken advantage of by the market.

Know Yourself

I believe that my own qualities are suitable for working on Wall Street. When I was still a buyer for B. Altman, I converted all my stocks into cash and then back into stocks. For me, trading is more about instinct, talent, and making quick decisions. It doesn't require the patience needed for long-term investments.

After analyzing various complex factors, if you can make favorable decisions, then you are the type of person suitable for entering the market. Test your temperament and disposition. Do you have a speculative mindset? Do you feel uneasy about taking risks? You need to answer these questions honestly and with complete sincerity.

When making judgments, you should be calm and composed, but composed doesn't mean slow. Sometimes, action needs to be taken quickly. Being composed means making cautious judgments based on the actual situation. If you have done your preparation work well in advance, making quick decisions won't be a problem. If you feel that you are wrong, quickly withdraw. The stock market is not like real estate, where it takes a long time to process procedures before you can make corrections. You can exit at any time. You need to have a lot of energy, the ability to react quickly to numbers, and most importantly, common sense.

You should be interested in what you do. Initially, I was interested in this market not for money, but because I didn't want to lose, I wanted to win. The success of investors is built on existing knowledge and experience.

It is best to make professional investments in fields you are familiar with. If you know very little or have not analyzed the company and its details, it is best to stay away from it. I don't put money into overseas investments because I don't understand overseas markets, and I have hardly traded in foreign securities markets. I mainly invest domestically.

My international investments are also made through domestic companies. Most of them are global enterprises, like IBM, which derives half of its profits from overseas. Individuality plays a very important role in modern techniques. For example, index funds, the S&P 500 index in futures, and other stock indexes.

How to choose is more important now than it was 20 or 30 years ago. But I don't focus on that. I only occasionally trade futures in daily commodities. But I don't give advice on this to individual investors. Before you truly become an investor, you should also check if your physical and mental conditions are qualified. A good physical condition is the basis for making wise judgments, do not underestimate it.

Source: Internet

Learn from successful investors

Even successful investors, many of them have gone through a difficult period at the end of this century. I have talked to many of them, and only a small number of them believe that they can grasp the market situation in 1996 when stocks were rising.

Many outstanding investors have had difficult times in today's market. However, their experiences and lessons are inspiring to us at any time, especially in the crazy era of the 1990s.

Those successful investors all lead to success. Loewi Price saw the resurgence of industrial growth and achieved success; Ben Graham respected the law of fundamental value; Warren Buffett studied the experience taught by his teacher Ben Graham at Columbia University seriously; George Soros applied his theoretical thinking to the international financial field; Jim Rogers discovered defense industry stocks and shared his ideas and analysis with his boss Soros - each of them achieved great success in their own way.

"Bull market" thinking

You can learn from the experiences of successful investors, but don't blindly follow them. Because your personality and needs are different from others. You can learn from success and failure, and choose what suits you and the surrounding environment. The impact of individual investors on a stock can sometimes cause it to fluctuate by 10 percentage points, but that is only temporary, usually within a day and not exceeding a week. This kind of market is neither a bull market nor a bear market.

I call this kind of market a "sheep market". Sometimes the flock of sheep will be slaughtered, sometimes they will be sheared. Sometimes you can luckily escape and keep your wool. The "sheep market" is somewhat similar to the fashion industry. When a fashion designer creates a new design, second-rate designers imitate it, and countless people chase after it, so the length of the skirt keeps changing.

Do not underestimate the role of psychology in stocks. Buying stocks is more nerve-wracking than selling them, and vice versa. In addition to economic statistics and securities analysis factors, many factors influence the judgment of both buyers and sellers. A minor headache can cause a wrong transaction.

In a sheep market, people try to think about what the majority would do. They believe that the majority will surely find a favorable solution by overcoming difficulties. This kind of thinking is dangerous and will cause missed opportunities. Imagine that the majority is an institutional group, and sometimes they will drag each other down and become their own sacrifices.

Stick to long-term thinking

Focusing on short-term investments easily overlooks the importance of long-term investments. Companies often invest a large amount of capital in long-term investments, and of course, there will be short-term effects. If short-term effects dominate, it will harm the company's development and prospects.

Profit should be based on long-term investments, effective management, and seizing opportunities. If these are arranged properly, short-term investments will not dominate.

When analyzing a popular stock from a small perspective, if it fails to meet its quarterly goals, market panic will cause the stock price to fall.

Timely entry and exit

When is the right time to enter the market and buy stocks? When is the right time to sell stocks and observe from the sidelines? Timing may not determine everything, but it can determine many things. It could have been a good long-term investment, but if you buy it at the wrong time, the situation will be bad. Sometimes, if you timely buy a high-speculative stock, you can also make money. Excellent securities analysts can do well without following the market trend, but it is easier to operate if you go with the flow.

A speculator or investor often succeeds because they invest a large amount of money when the market is weak, so they can buy more stocks with the same amount of capital. On the contrary, investors sell stocks at high prices during a strong market, and although they sell fewer stocks, they can make a lot of money. This principle is simple.

Grasping favorable opportunities partly relies on intuition, but partly the opposite. The selection of timing relies on independent thinking. In economic operations, an upward trend may emerge from a downward trend, and a recession may start from a peak.

What is the importance of intuition? The great economist Paul Samuelson believed that the stock market "predicted eight times in the past three major recessions," which is completely correct. Therefore, momentary intuition is almost as important as the ability to analyze securities.

Timing is subtle and meticulous. If you go short at the wrong time (during an upward trend), the cost will be expensive. Just ask those who went short on stocks like Lipton, Telecom Corporation, Levitz Furniture, and Monmorex. They were right, but the timing was wrong, and they sold too quickly. I know someone who lost everything because they went short at the peak of the bull market in the summer of 1929, and it wasn't until autumn that they started again. Bull markets generally last longer than bear markets. During a bull market, stock prices grow slowly and irregularly, and may be even more irregular than during a bear market. Bear markets, on the other hand, are short-lived and highly volatile. However, the market ultimately follows certain patterns. Stock markets rarely rise continuously for more than 6 months, and they rarely decline continuously for more than 6 months.

In addition, some investors, upon seeing a loss report, immediately close their positions without evaluating the current situation. More often than not, the stocks sold in this situation should have been bought instead of sold. In this situation, the first thing people should learn is that the market does not care about individual behavior. The price at which you purchase securities is not something unimaginable.

It is quite difficult for people to understand the peculiarities of prices and the theory of value reassessment, and it is not just amateur investors who fail to realize this. Many investment advisors believe in long-term investments in utility stocks. However, they hold onto a stock for too long, and I believe that when the stock price reaches a high level, whether it is for government employees, teachers, or other retirement funds, it should be sold.

When a stock is sold at a reasonable price, your only concern is the tax you have to pay upon selling. People always try to avoid taxes, which is a big mistake. Taxes should be paid immediately.

Although the stock price has not reached its peak, it is still better to exit if you have made a profit. Bernard Baruch was an investor who could seize the opportunity the best. His philosophy was to do well but not be greedy. He never waited for the highest or lowest point. He bought in weak markets and sold in strong markets. He advocated selling early. Our company was honored to have him as our client in his later years.

At certain times, common stocks are the best investment, but at other times, perhaps real estate is the best. Everything is changing, and people must learn to adapt. I do not believe that there is an industry that remains unchanged forever.

Thoroughly analyze the company's situation

It is necessary to carefully study the company's management, leadership, performance, and goals, especially the true asset situation of the company, including equipment value and net asset per share. This concept was widely valued at the beginning of the century but has been almost forgotten since then.

Dividend distribution by the company is also very important and needs to be considered. If its distribution plan is appropriate, its stock price can rise to a higher level. If a company distributes 90% of its profits, note that this is a dangerous signal and it will not distribute dividends next time; if a company only distributes 10% of its profits, this is also a warning. Generally, companies distribute 40% to 60% of their profits. The dividend ratio of many utility stocks is even higher. Many investment institutions do not really value dividends, but individual investors see dividends as an important way to increase income.

What is a growth stock? Its smart followers discover its potential value in the early stages of the company's development. However, in general, a company's brand recognition comes after it has matured. Growth is slow, and individuals and institutions continue to buy its stocks because their predictions are more realistic.

People have spent too much energy on assumed growth, without considering economic recessions, outbreaks of war, government reassessment of growth indices, and changes in growth indices themselves. A stock's price-to-earnings ratio rarely stays around 15 times, because people's expectations for the company's prospects are usually higher than that. This idea may not always be correct. We know there are exceptions, but unexpected opportunities only account for 1%. So this kind of fantasy affects you, causing people to buy stocks at high prices when the P/E ratio is high.

I accept a P/E ratio that is one times higher than the 10-15 times for outstanding companies. Many of them have P/E ratios between 6 and 10, which is beneficial for both parties.

If you can control the overall market value of a certain company, you can gain more profit from it.

Don't fall into emotional traps

In this adventurous world, because there are many possibilities, people can become obsessed with certain ideas, individuals, or ideals. In the end, perhaps the obsession is stocks. But it is just a piece of paper that proves your ownership of a company, and it is only a symbol of money.

It is right to love a stock, but it is better for others to love it when its stock price is high.

Diversify your investments, but avoid hedging

Hedging means going long on some stocks and short on others. Professionals use hedging to avoid risks in daily markets. Sometimes, hedging as a newcomer to the market is just gambling. I do not endorse this approach. But there is no law prohibiting it. Hedging is indeed a transformation of modern stocks. A century ago, when you bought the same stock from the New York and London markets, the price difference between the cities was only slight. Experts buy a stock from one market and sell it in another, although the profit is small, it is still profitable.

The profit and risk factors are low compared to today's stock market. But believe me, today's stock market is quite risky. If you insist on hedging and are confident that you have the experience to help you, remember to diversify it, take a holistic view, and make sure your rules are correct. If you want to diversify your investments, you need to increase your income as much as possible, such as capital.

Observe the surrounding environment

The environment I am referring to is the market trend and the overall world environment. You need to adapt the patterns I give you to fit the operation of the market you are in. In market evaluation, pay more attention to percentage changes rather than quantities. A 100-point drop may have a large fluctuation, but it may only be 2% of the index.

Paying attention to the market allows me to discover when the market starts to decline and when it starts to recover. This also often gives investors opportunities to invest in so-called conservative aspects, such as short-term interest-free treasury bonds, long-term treasury bonds, and treasury bills. Short-term interest-free treasury bonds are the main investment direction for large investors. They are safer than any other investment and even safer than keeping money under the pillow. You don't need an economist to tell you how to study interest rates. There is nothing more important than predicting market trends. The same goes for interest rates. The low level of long-term interest rates can explain the severity of the economic situation better than any other fact.

In general, if short-term and long-term interest rates start to rise, it is telling stock investors that an upward trend is coming. Stocks are not seasonal, and investing according to the calendar is unnecessary. Remember, for investors, it is always risky. For those who enjoy life and the joy of investing, although the seasons change, opportunities are always there. Don't stick to the old rules

It is necessary to change one's way of thinking according to the changes in the situation. In my opinion, you should proactively adapt to the changes in economic and political factors. As for technology, sometimes we can control it, but sometimes it is beyond our control.

I am good at bear market thinking, going against the optimism of others. However, if most people are pessimistic, I will think like a bull market; conversely, I will engage in hedging trades.