Sunday Musings: Sharing Investment Success

As you know from my weekly newsletter and published articles, as well as this blog, my investment preference is the use of a methodical and mechanical approach to investing, which eliminates emotional and irrational decision making.

Trend Tracking (or trend following) has had its share of supporters for a long time, some who have amassed huge fortunes via fairly simple but successful trading approaches based on nothing else but measuring prices, breakouts and the resulting long-term trends. Over the last 20 years, with the advancement of computers and programs, many of the systems have been automated to enable the user to easily scan entire world markets for certain investment criteria in only a few minutes.

Can such an investment methodology using a trend following approach be taught to others?

Author Michael Covel’s book “The Complete Turtle Trader” features the story of Wall Street legend Richard Dennis, who made a fortune by investing according to a few simple rules.

Convinced that great trading was a skill that could be taught to anyone, he made a bet with his partner and ran a classified ad in the Wall Street Journal looking for novices to train. His recruits, later known as the Turtles, had anything but traditional Wall Street backgrounds; they included a professional blackjack player, a pianist, and a fantasy game designer among others.

For two weeks, Dennis taught them his investment rules and philosophy, and set them loose to start trading, each with a million of his money. By the time the experiment ended, Dennis had made a hundred million dollars from his Turtles and created one killer Wall Street legend.

In this book, Michael Covel tells their riveting story with the first ever on the record interviews with individual Turtles. He describes how Dennis interviewed and selected his students, details their education and experiences while working for him, and breaks down the Turtle system and rules in full. He reveals how they made astounding fortunes, and follows their lives from the original experiment to the present day. Some have grown even wealthier than ever, and include some of today’s top hedge fund managers.

Equally important are those who passed along their approach to a second generation of Turtles, proving that the Turtles’ system is reproducible, and that anyone with the discipline and the desire to succeed can do as well as—or even better than—Wall Street’s top hedge fund wizards.

It’s a fascinating story and supports my view that most investment advice provided in the media or promoted via Wall Street is nothing but fluff without substance and designed to have entertainment value, but not much else.

As this book outlines, using a mechanical, computerized approach to systematic investing has tremendous advantages; I believe that it’s the way of the future because it gets investors away from the mindless self serving Buy and Hold promotions. It’s a must read for today’s investor.