He invests for challenge, chance to learn

ASK financial expert Mr Michael Mauboussin, 43, for investing tips and he humbly replies that he has no advice that is 'out of the ordinary'.
Based in the United States, the chief investment strategist at financial firm Legg Mason Capital Management told The Sunday Times in an e-mail interview that investors should try to match their strategies with their objectives.
'If you're saving for the distant future, it's all about the long term. You should think about risk and reward, and carefully assess your own risk tolerance - which can change over time.
'Also, be mindful that when an asset value rises sharply, the investment opportunity has often slipped away. For investors who play the markets for fun, make sure you deploy only money that you can afford to lose,' he said.
For his own finances, he believes in contrarian investing, which means buying into what other investors avoid and avoiding what's hot.
Recently, he wrote a guide to investing wisely, More Than You Know: Finding Financial Wisdom In Unconventional Places - Updated And Expanded. It was named the best business book by BusinessWeek and best economics book by Strategy+Business.
Before joining Legg Mason, Mr Mauboussin was managing director and chief US investment strategist at Swiss banking giant Credit Suisse.
He has been an adjunct professor of finance at the Columbia Business School since 1993. In 2001, BusinessWeek's guide to the best business schools highlighted Mr Mauboussin as one of the school's outstanding faculty members, a distinction only seven professors earned that year.
Mr Mauboussin is married and has five children aged between five and 14.

Q What kind of an investor are you?
A I'm a boring, long-term investor. There is virtually no activity in my account. I tend to buy and hold.
Most of my liquid net worth is invested in our funds, so I am side-by-side with our fund holders.

Q What's your investment philosophy?
A My goal is to make good financial decisions consistently. Knowing markets are subject to probability, I realise not all of the decisions will work out. But the key is good process. For me, that translates into buying and putting away what other people are worried about and avoiding what's hot.
As Roman philosopher Horace said in Ars Poetica, his classic treatise on poetics: 'Many shall be restored that now are fallen and many shall fall that now are in honour.' But following this mantra is easier said than done.
Q How did you get interested in investing?
A My first exposure to markets was in a high school class. Shortly into my first job on Wall Street, I realised that investing specifically and markets in general present a perpetual challenge as well as a learning opportunity.
What I have also learnt over the years is that temperament - not just smarts - is one of the keys to long-term success.
Q What has been a bad investment?
A In the throes of the dot.com era, I invested in an Internet start-up. I knew the probability of success was not high and I certainly did not invest any money that was essential to my financial future.
However, I lost virtually all of my money, which did not feel good. I knew going in that a total loss was a reasonable probability. Still, in retrospect, it looks like a lottery ticket investment.

Q Your best investment to date?
A One individual stock that has served me well for years is that of Berkshire Hathaway.
I'm a big fan of its owner Warren Buffett and have been enriched by both his teachings and the stock of the company.
I have also been a long-term shareholder in Legg Mason Value Trust which, despite some challenging results recently, has been a terrific investment.

Q What's your retirement plan?
A I can't imagine ever retiring. I love what I do too much, and the investing world has more than enough intellectual intrigue to keep me busy.
My role model is investment industry legend Peter Bernstein, who's still going strong in his late 80s. He wrote five books after he turned 70.

Q Do you believe in giving back to society and how do you do it?

A There are two parts to this answer. First, I have been an adjunct professor at Columbia Business School since 1993, in part as a way to try to give back to the investment community. I believe I have gained more from my teaching than I have given, but I have been gratified over the years by students who have told me the course was useful.
Second, my wife and I offer financial support to a number of institutions, most of them related to education. For example, I have donated all of the royalties for my book, More Than You Know, to the Santa Fe Institute, a leading centre for multi-disciplinary research in complex systems theory.
Lorna Tan
Sun, Jan 13, 2008The Sunday Times