The Almanack of Stanley Druckenmiller: 40 Years of Investing Wisdom

Stanley Druckenmiller is the greatest investor ever. He has never had a down year. His fund returned 30% annually for 30 years.

Here are 7 investing lessons I learnt reading his book over the holidays:

Learn different asset classes

All asset classes have markets of their own and all of them have their own inefficiencies. More asset classes you know, more inefficiencies you can see to exploit.

When you have conviction, bet big

Good opportunities are rare. When you spot what you think is a good opportunity, betting small is almost as bad as not betting at all. As Warren Buffett also says, when you see the opportunity, you should bet, and bet big.

It's not whether you are right or wrong, it's how much you make when you are right

Investing isn't a game where higher hit rate wins the game, it's a game where magnitude wins the game. Bet on asymmetric plays where you lose small if you lose but win big if you win.

Always observe the liquidity

Druckenmiller believes that what moves the market is the liquidity, not earnings. "Earnings don’t move the market; it’s the Federal Reserve. It’s liquidity that moves markets."

Never invest in present, always invest in future

Present moment is always more correctly priced by the markets than future. You have to predict where the business will be in the future and make investment decisions based on that.

You can't always be right in investing. The key is changing your mind when you see you are wrong. Druckenmiller says: "When you're betting the ranch and the circumstances change, you have to change, and that's how I've always managed money."

Last but not least a quote that resonates with me. It's also the essence of entrepreneurship

I believe that good investors are successful not because of their IQ, but because they have an investing discipline. But, what is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill.

Stanley Druckenmiller

SsF

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