Book Review: ‘Simple But Not Easy’

Simple But Not Easy
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Simple But Not Easy

By Richard Oldfield

About the Book

Simple But Not Easy has the tagline of “An autobiographical and heavily biased book about investing”.  The book therefore is a part recounting of the mistakes and lessons learnt by author Richard Oldfield.

About the Author

Richard Oldfield is Executive Chairman of Oldfield Partners LLP, and has held many other positions within investment groups in the UK.  This includes a directorship at Mercury Asset Management and a role as Chairman of the Oxford University Investment Committee.

Review

If I could describe this book in one word, it would be “humble”.  Oldfield casts no illusions, the practice of investment is hard.  The humility with pervades this book is immediately identifiable in the title of the first chapter: “Howlers galore“, which enumerates a number of mistakes he has made during his career as an investment professional.  I really liked the fact that he began the book with this, rather than a list of achievements, as it is a reminder that even professionals make investing mistakes.

Within this first chapter is a fascinating story regarding Russia and Coca-Cola, which serves as a reminder as to the virtues of value-based investing:

In March 1997 its (Coke’s) price-earnings ratio was 42. From 1997 to 2006 its earnings per share rose by 60%. But, no longer a darling, the market attributed to it a price-earnings ratio of 21. Consequently its share price at the end of 2006 was 20% lower than in May 1997 – and 48% below its peak in June 1998.

Richard, Oldfield. Simple But Not Easy: An Autobiographical and Biased Book About Investing (Kindle Locations 216-218). Harriman House. Kindle Edition.

The chapters following this provide insight into Oldfield’s thinking regarding types of investments available and how one should make use of them to aid in diversification.  He then moves on to his thoughts on hedge funds, fees, index investing and how to find and deal with fund managers.  Not being at all interested in letting someone else manage my money, I wasn’t too interested in these chapters, save for some thoughts on indexing that I had considered, but not really given much thought to.

Oldfield highlights the benefits to index investing, but draws attention to the fact that most are market-cap weighted.  This raises an issue; as a company rises in price (and therefore value) an index will buy, rather than sell, more of it.  The more expensive it becomes, the more it is represented in the fund.  I really enjoyed the chapter on indexing, as I see the merits in people committing capital to it at very low cost.  Oldfield however lays bare the downsides, as well as the upsides to this.

The middle third of the book is clearly aimed at people with money to invest, but who are looking to give that money to someone else to do it for them.  If you’re on this site, I’m guessing this isn’t you.  Interesting as these chapters are, they aren’t particularly useful to private investors.

The penultimate chapter feels a bit like a ‘save the best for last’ decision.  It is entitled “Valuation matters”, and as you can guess, Oldfield discusses why valuation is important when looking at a potential investment.  This chapter links back to the first, and neatly rounds off the whole discussion.

All told, this is an author using his experience to help others avoid some of his mistakes, either of commission or omission.  Whilst a proportion of the book may not be relevant to you, I would still recommend it for the insight available.

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