Investing for Beginners

Strategies from the Greatest Investors

The Greatest Investors of All Time

Warren Buffett

Warren Buffett is widely considered the single best investor of all time, and that’s simply because his numbers are so otherworldly. Since taking the helm at Berkshire Hathaway Inc. in 1965, Buffett returned 19.8% annually for shareholders through the end of 2022, while the S&P 500 posted half those average annual returns (9.9% per year). The duration, consistency, and magnitude of these exceptional returns are literally unmatched, and helped earn early (and even somewhat late-coming) shareholders a fortune. It turns out earning double the annual stock market return for nearly six decades adds up. Between 1965 and the end of 2022, the S&P 500 advanced 24,708% compared to 3,787,464% for Buffett’s Berkshire. It’s little wonder Buffett is also one of the richest people in the world12.

Peter Lynch

Peter Lynch didn’t just post eye-popping returns at Fidelity’s Magellan Fund, he also penned two classic investing books, “One Up on Wall Street” and “Beating the Street.” What gave him authority was his 13-year tenure at Magellan, where Lynch’s growth-focused fund earned 29.2% annually, crushing the 15.8% average return of the S&P 500. Lynch took Magellan from $18 million to $14 billion. If you would’ve invested $10,000 in Magellan in 1977, it would’ve turned into $280,000 by the time Lynch retired. Lynch is perhaps most famous for his common-sense approach to investing32.

John Templeton

John Templeton pioneered the use of diversified mutual funds and had consistently impressive returns over 60 years. In the depressed market of 1939, Templeton borrowed $10,000 and bought 100 shares of every stock under $1 on the New York Stock Exchange. All but four stocks would be profitable, and four years later he sold them for over $40,000. An investment of $10,000 in the Templeton Growth Fund in 1954 would’ve turned into $2 million by 1992. Templeton died in 20082.

Bill Miller

Bill Miller has done something that many of the greatest investors ever have never accomplished: Over a 15-year period (1991–2005), Miller’s Legg Mason Value Trust beat the S&P 500 every year. Morningstar.com named him the “Fund Manager of the Decade” in 1999. Between 1990 and 2006, Miller grew his fund from $750 million to more than $20 billion in assets under management. An unconventional value investor, Miller believes high-growth stocks can be value stocks if they trade for the right price2.

David Swensen

As chief investment officer at Yale University, David Swensen was a financial all-star with an unparalleled track record. Swensen took control of Yale’s endowment in 1985, and in the 36 years until his death in 2021, his investments for the university grew at a compound annual growth rate of 13.7%, beating the returns of the average university endowment by 3.4 percentage points per year. Swensen’s track record also easily topped the performance of the S&P 500; he turned every dollar invested into $103 over 36 years, while the wider stock market would’ve yielded just $50 for the same investment. Swensen’s brilliance was in incorporating modern portfolio theory, which focuses on diversified exposure to different high-return asset classes. Swensen details his approach in his classic investing book, “Pioneering Portfolio Management”2.

Benjamin Graham

Benjamin Graham excelled as an investment manager and financial educator. He authored, among other works, two investment classics of unparalleled importance. He is also universally recognized as the father of two fundamental investment disciplines: security analysis and value investing. The essence of Graham’s value investing is that any investment should be worth substantially more than an investor has to pay for it. He believed in fundamental analysis and sought out companies with strong balance sheets, or those with little debt, above-average profit margins, and ample cash flow4.

George Soros

George Soros is the chairman of Soros Fund Management LLC. He was a master at translating broad-brush economic trends into highly leveraged, killer plays in bonds and currencies. As an investor, Soros was a short-term speculator, making huge bets on the directions of financial markets. In 1973, Soros founded the hedge fund company of Soros Fund Management, which eventually evolved into the well-known and respected Quantum Fund. For almost three decades, he ran this aggressive and successful hedge fund, reportedly racking up returns in excess of an estimated average annual return of 31%4.

Carl Icahn

Carl Icahn is a well-known activist investor who uses ownership positions in publicly held companies to force changes to increase the value of his shares. Icahn started his corporate-raiding activities in earnest in the late 1970s and hit the big leagues with his hostile takeover of TWA in 1985. Icahn is most famous for the “Icahn lift.” This is the Wall Street catchphrase that describes the upward bounce in a company’s stock price that typically happens when Icahn starts buying the stock of a company he believes is poorly managed4.

John Neff

John Neff joined Wellington Management Co. in 1964 and stayed with the company for more than 30 years, managing three of its funds. His preferred investment tactic involved investing in popular industries through indirect paths, and he was considered a value investor as he focused on companies with low price-to-earnings (P/E) ratios and strong dividend yields. Neff ran the Windsor Fund for 31 years (ending in 1995) and earned a return of 13.7%, vs. 10.73% for the S&P 500 over the same time span. This amounts to a gain of more than 53 times an initial investment made in 19644.

Jesse Livermore

Jesse Livermore had no formal education or stock-trading experience. He was a self-made man who learned from his winners as well as his losers. It was these successes and failures that helped cement trading ideas that can still be found throughout the market today. Livermore began trading for himself in his early teens, and by the age of 16, he had reportedly produced gains of more than $1,000, which was big money in those days. Over the next several years, he made money betting against the so-called “bucket shops,” which didn’t handle legitimate trades — customers bet against the house on stock price movements4.

John ‘Jack’ Bogle

John ‘Jack’ Bogle founded the Vanguard Group mutual fund company in 1975 and made it into one of the world’s largest and most respected fund sponsors. Bogle pioneered the no-load mutual fund and championed low-cost index investing for millions of investors. Bogle created and introduced the first index fund, Vanguard 500, in 1976. His index investing philosophy advocated capturing market returns by investing in broad-based index mutual funds that are characterized as no load, low cost, low turnover, and passively managed4.

Bill Gross

Bill Gross is considered the “king of bonds.” As the founder and managing director of the PIMCO family of bond funds, he and his team amassed more than $1.86 trillion in fixed-income assets under management (as of February 2024). In 1996, Gross was the first portfolio manager inducted into the Fixed Income Analysts Society hall of fame for his contributions to the advancement of bond and portfolio analysis. In 2014, Gross resigned from PIMCO during a period of internal management struggles, but he continued managing large bond portfolios for firms like Janus Henderson, where he remained until 20194.

What Makes for a Successful Investor?

Becoming a successful investor requires a combination of knowledge, discipline, and a long-term perspective. A bit of good luck is also helpful. It’s important to have a clear and objective investment strategy, based on thorough research and analysis. Investors should also be patient and avoid making impulsive decisions based on short-term market movements and emotions like fear and greed. Diversification and risk management are also important considerations when investing.

How Did Warren Buffett Become So Successful?

Warren Buffett is often considered the world’s best investor of modern times. Buffett started investing at a young age, and was influenced by Benjamin Graham’s value investing philosophy. He also focused on investing in high-quality businesses with strong competitive advantages, or “economic moats,” that would protect their profits over time. Buffett is also known for his long-term approach to investing, and his ability to stay patient and disciplined even during times of market volatility.

What Are Some of the Investment Strategies Used by Top Investors?

The world’s top investors use many different investing philosophies and strategies, including value investing, growth investing, income investing, and index investing.

• Value investing involves finding undervalued companies with strong fundamentals.
• Growth investing focuses on investing in companies with high growth potential.
• Income investing involves seeking out investments that generate a steady stream of income, such as dividend-paying stocks or bonds.
• Index investing involves investing in a diversified portfolio of stocks or bonds that track a market index.

Psychological Insights

Behavioral Finance: Overcoming Bias

Confirmation bias can lead investors to make poor choices. By focusing on fundamentals and quality, investors can avoid emotional decisions and achieve better results.

The Marshmallow Test

In this psychological experiment, children who delayed gratification received a greater reward. Similarly, investors who are patient with quality investments often see greater returns.

Loss Aversion

People fear losses more than they value gains. Understanding this can help investors stay the course with quality investments during market downturns.

Final Thoughts

We looked at 11 of the greatest investors in history, who have made a fortune off of their success and, in some cases, helped others achieve above-average returns. These investors differ widely in the strategies and philosophies that they applied to their trading, but what they have in common is their ability to consistently beat the market.

Becoming a successful investor is not easy, and of course luck played a role. But by learning from the techniques and strategies of the world’s greatest investors, you might be able to increase your own chances of achieving financial success.

Commonly Asked Questions About Quality Investing

What exactly is quality investing?

Quality investing is an investment strategy focused on buying shares in exceptional businesses with strong competitive advantages and holding them for the long term. Unlike other strategies that require frequent buying and selling, quality investing lets business growth do the heavy lifting through compounding returns. This approach depends more on identifying truly superior companies than on timing the market or finding temporary bargains.

How is quality investing different from value investing?

While value investing looks for any company trading below its intrinsic value, quality investing specifically targets exceptional businesses even at fair prices. The key difference is what happens after purchase — value investors sell when price meets value, while quality investors hold indefinitely as the business compounds wealth. Warren Buffett actually evolved from a pure value investor to primarily a quality investor, famously saying it’s better to buy wonderful companies at fair prices than fair companies at wonderful prices.

What characteristics make a “quality” company according to top investors?

Top investors look for several key traits in quality companies:

• High returns on invested capital (ability to generate strong profits with minimal investment)
• Durable competitive advantages or “moats” that protect profits from competitors
• Trustworthy management that allocates capital wisely and thinks long-term
• Growth runway with opportunities to reinvest profits at high rates
• Financial strength with low debt and strong cash flow
• Pricing power that allows raising prices without losing customers

Companies possessing these characteristics can often compound shareholder value for decades, which explains why patient ownership of these rare businesses produces exceptional returns.

Which investors are most associated with quality investing?

Several legendary investors have championed quality investing:

• Warren Buffett transformed from value investing to quality with his “wonderful companies at fair prices” approach
• Charlie Munger emphasized finding businesses with “moats” and high returns on capital
• Terry Smith simplified quality investing to “buy good companies, don’t pay too much, and do nothing”
• Phil Fisher pioneered deep qualitative research to find superior businesses
• Chuck Akre developed the “three-legged stool” model to identify compounding machines
• Nick Sleep focused on companies that share productivity gains with customers

Each of these investors recognized that exceptional business quality, more than any other factor, drives long-term investment returns.

How many stocks should I own in a quality investing portfolio?

Most quality investors recommend owning between 15–25 exceptional businesses. This provides enough diversification to manage risk while allowing each position to meaningfully impact overall returns. Warren Buffett famously argued for a “20-slot punch card” approach where you limit yourself to just 20 investment decisions in your lifetime, forcing extreme selectivity. Terry Smith’s Fundsmith typically holds around 20–30 companies, focusing on only the highest quality businesses worldwide.

When should I sell a quality company?

You should only consider selling a quality company when:

1. The competitive position fundamentally deteriorates (losing market share or pricing power)
2. Management changes in ways that hurt long-term value (becoming short-term focused)
3. The industry faces significant disruption that threatens the business model
4. Financial performance consistently declines with falling returns on capital

What you should not do is sell simply because the stock price has increased dramatically or temporarily dropped. Price movements alone rarely justify selling truly exceptional businesses that continue compounding value.

What are the biggest mistakes people make with quality investing?

Common quality investing pitfalls include:

• Overpaying dramatically for even the best companies (valuation still matters)
• Confusing popular or trendy companies with true quality businesses
• Trading too frequently and disrupting the compounding process
• Panic selling during market crashes rather than focusing on business fundamentals
• Not doing enough research to build the conviction needed for long-term holding
• Misidentifying average businesses as exceptional ones

The biggest mistake of all might be impatience — not giving the compounding process enough time to work its magic.

How do I know if I’m paying too much for a quality company?

While quality investors willingly pay fair prices, they still care about valuation. Useful metrics include:

• Price-to-earnings ratio compared to the company’s growth rate
• Free cash flow yield relative to risk-free rates (like treasury bonds)
• Enterprise value to operating earnings compared to industry averages
• Return on invested capital versus the company’s cost of capital

The key is understanding that a seemingly expensive price can be justified by exceptional quality and growth, but there’s still a limit to what makes mathematical sense. Joel Greenblatt’s Magic Formula specifically tries to identify quality companies at reasonable prices.

How long should I hold quality investments?

The ideal holding period for truly exceptional businesses is measured in decades, not years. Warren Buffett’s most successful investments (Coca-Cola, American Express, Apple) have been held for extremely long periods, allowing compounding to work uninterrupted. Terry Smith advises that after buying good companies at reasonable prices, the best action is to “do nothing.” This patient approach keeps transaction costs and taxes low while maximizing the power of compound growth.

Can I use quality investing for retirement planning?

Quality investing is ideally suited for long-term goals like retirement. By focusing on businesses that can compound capital at above-average rates for decades, you align your investment horizon with your retirement timeline. The patient nature of quality investing also reduces the anxiety and mistakes that come with frequent trading. Many successful investors have built significant retirement wealth through holding a concentrated portfolio of exceptional businesses through market cycles.

How do I start implementing a quality investing approach?

To begin quality investing:

1. Start by studying the approaches of successful quality investors like Buffett, Munger, and Smith
2. Develop your own quality checklist based on their principles
3. Focus initially on businesses you truly understand from your professional or personal experience
4. Build a watchlist of exceptional companies and study them thoroughly
5. Begin with a few highest-conviction ideas rather than immediately building a full portfolio
6. Set realistic expectations about short-term performance — quality investing works over years, not months

The most important step is developing the temperament for patient ownership, which means focusing on business progress rather than stock price movements.