To Brad McMillan, understanding the technica fundamentals of investing is just one part of a larger puzzle.
The chief investment officer at Commonwealth Financial Network, which oversees about $US114 billion, McMillan thinks it’s crucial for aspiring money managers to also understand the human side of things. And that involves brushing up on history and reading the classics, most notably the works of William Shakespeare.
In an interview with Business Insider, McMillan made a bear market prediction and spoke about
valuations, investor complacency and President Donald Trump’s lessening impact. He also broke down how up-and-coming money managers should prepare themselves for the behavioural side of the investment equation.
Here’s what McMillan had to say (emphasis ours):
While technical knowledge is essential, a broader knowledge base is what takes you to the next level. Read history, read literature, understand how people think, and how they have acted in the past. Markets are all about people. Technical knowledge alone is not enough.
You need to read [Edward] Gibbon’s “The History of the Decline and Fall of the Roman Empire.” Read Shakespeare. There’s more in Shakespeare about power, decision-making, ambition, and how people are blinded by their own needs that’s so incredibly applicable to the investment process. To see it in that context is something that makes it real. It’s not about the P/E ratio. Sure, you need to know that. But ultimately, it’s about the people that are investing.
If you read writing done by Warren Buffett, Charlie Munger, and Howard Marks, they obviously have the technical fundamentals in place. But what they’re focused on is how to think, how to analyse a situation and how to understand where we are in light of where we’ve been. In order to do that, you need a much broader context than the investment universe.
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