How to Own the World

The Purvis Society was delighted to welcome Mr Andrew Craig to the second meeting of the term. Mr Craig is an Old Cranleighan and is now an investment banker who has worked in the financial sector, for a variety of organisations (including a lengthy stay in New York), for nearly 20 years.  In addition to the ‘day job’, as he termed it, he has founded a financial advice website and written a book entitled “How to Own the World”.

“I was frustrated by people’s perception of finance,” he told us. “They view it as boring.” He maintained that anyone ought to be able to make as much from investments as they earn from their lifetime salary.  Through questioning the young audience he revealed some surprising facts: the average salary in the UK at the moment is about £26,000.  To achieve that sum as a pension would require a saving pot of about £650,000.  The average saving held is £30,000.  The obvious shortfall had a few people shaking their heads.  “It’s OK,” he said. “The Government will pay for me, right?”  NO.  “I’m 40,” he said. “When I retire the government will not be able to pay for me.” He reminded us that the current state pension scheme was dreamed up in 1909, when life expectancy was considerably lower than it is now and retirees aged over 70 were rare.  Nowadays, he hinted, we simply live too long and the underlying message was that we need to do something about our finances; we need to help ourselves.

There is good news, however. If a wealthy relative invests £5,000 on the day your child is born and a return of 10% per annum is achieved, how much will that child have at the earliest retirement age of 55?  £945,000 – £1.2M, depending on how it compounds.

He moved on to show how one might achieve this miracle with a brief explanation of the excellence of today’s financial services products (he claims they are the best they have ever been), extolling the virtues of the ISA, of SIPPs and of spread-betting, agreeing that whilst the last is risky, considerable work is required to make it a success (90% of bets lead to loss) and most people simply do not bother. “The more I work the luckier I become” (allegedly the words of Thomas Jefferson).  Quoting Warren Buffet – “I have two rules: one, never make a loss and two, see number one” – Mr Craig continually pointed out that he was not trying to tell us how to do it, merely to plant a seed of interest.

The world is becoming increasingly wealthy: from the year 2000 to date the world’s collective wealth has grown from $32 trillion to over $85 trillion and he stated, very clearly, that the route to wealth was to own a part of the world. What on earth does this mean, we wondered.  “It’s simple,” he said, “You are diversified…” Shares, bonds, commodities, precious metals, cash and by geography.  He reinforced this last statement by quoting Jack Meyer, who managed Harvard University’s multi-billion investment fund and achieved an average return of 15.9% per annum for 15 consecutive years.  “Diversification is the only free lunch in investing…”

Picking up a theme easily recognised by the many Economics students present, he reminded us of the four economic phases (prosperity, inflation, recession, deflation) and suggested simple strategies with which to cope in each stage. “Over broad periods of time, the winning investments add more value to the portfolio than the losing investments take away…”

He concluded with a slide entitled Simplification and Automation which summarised his overall strategy. This splendidly presented talk was followed by a lengthy and intelligent discussion with many perceptive questions from the audience.  The positive reaction to his talk was such that the book-signing meant that Mr Craig and his fiancée returned to London with a large suitcase considerably lighter than when they had arrived.

Dr Christopher Mann