Foreword

The stock market has had a bad time of it over the past decade. After a dot-com bust in the early noughties and a banking crisis eight years later, many people view it as a casino, populated by spivs and charlatans. Or they assume that you need to be a rocket scientist to exploit whatever opportunity it offers. The seemingly easy gains made just from buying and selling houses have only added to the disinterest.

But despite the ups and downs of recent years, shares are unquestionably the best vehicle for long-term savings. Unlike property, they are quick and easy to buy and sell. Unlike bonds, the income they generate through dividends can and usually does rise with inflation. Since the start of the twentieth century, shares have on average returned around 5% a year after allowing for inflation.

Smaller shares have generally done better still. They are more likely to be ignored by big investors, yet more likely to grow rapidly, and more likely to be taken over at a big premium. It’s no coincidence that some of the UK’s most successful fund managers – people like Harry Nimmo at Standard Life, Gervais Williams at Miton and Giles Hargreave at Marlborough – operate in the small cap arena.

They offer superior returns because they are riskier, and managing that risk is crucial to maximising profits. You could argue that Lord Lee, with his background in accountancy and long spells in the boardrooms of quoted companies, has an edge that ordinary investors will struggle to replicate.

But most of his advice is based not on inside knowledge or technical expertise but on common sense. He looks for companies with strong finances, committed managers and improving outlooks – and buys their shares when they are attractive prices. Then he waits, for years if necessary. This is essentially the same approach followed by legendary value investors such as Warren Buffett and Benjamin Graham. It worked in the US back in the 1930s, and it works in the UK now. With patience, method and discipline, anyone can do it.

How to Make a Million – Slowly is a very frank and personal story. John’s successes and his mistakes – which make an absorbing and informative read – are a must for every private investor.

Jonathan Eley
Editor, FT Money
July 2013