Bonds have never been an attractive type of Investment. People consider them boring, conservative, with the least potentiality and the maximum uncertainty of the risk of losing money.
Bill Gross, the co-founder of PIMCO (Pacific Investment Management Co.) managed to win the fear of the Bond market. He took his graduation degree in psychology in Duke University (1966) and had a MBA degree from California University. He then gained Certified Financial Analyst credentials during his work as an investment analyst for Pacific Mutual Life in Los Angeles. But outside his large successful career in the bonds market, he never got much attention until a few years ago, when his top three elements gained him huge prominence.
A maestro of the bonds market who realized the untapped potential of the bonds market seeking to eliminate emotions from his work and keeping himself from the temporary passions that only guarantee a short term stay in the market.
A man who handles over $1 Trillion value of assets looks at the world from a different angle; his thirty year-old career in the market has disillusioned him from the traditional wisdom of life. This viewpoint has paid off as he systematically delivers returns averaging 10 percent annually.
The complexity of his personality and his work philosophy are nothing short of fascinating. Perhaps he has a rationale for quitting PIMCO for distant rival Janus Capital Group Inc on Friday. But what is the secret of Bill Gross? What principles does he follow?
The principles are not unknown to us. Most of the people know about the principles. But most investors keep forgetting them. Excessive greediness makes them fool. Let’s see these core principles:
- Know what you are doing
Bond market is very mush risky. Everything is uncertain for the greedy players. Bill Gross uses mathematics and his knowledge to win the uncertainty. So the first principle is to know what is going on using your data and analytical power.
- Control your greediness
Most of the investors focus on the amount of money not on the related risk. Bill Gross said that if there is 5% edge someone should invest 5% of his or her wealth. Over betting ruins the investor. So the second principle is to control your lust for money.
- Diversify reduces your risk
Bond Market and stock market are not always predictable. There are risks. So the principle of diversification is very effective to reduce the risks. You should put your wealth in different baskets rather than in one basket. Sometimes you can predict more accurately about your situation. If you are sure about a good basket, then you can put more eggs on it but not all of them. Greediness should be avoided here, too.
- Play the game for long term basis
There is no twist in short term investing; if you want to get good fruit, you have to wait until the tree grows.
Bill Gross style is not something new for the world. Those are the principles of investing which made Warren Buffett ‘The King of Stock Market’; and those are the principles that have also made Bill Gross ‘The King of Bond Market’.
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