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As the CEO of Pershing Square Capital Management, the hedge fund he founded, he oversees $19 billion in assets.
But before he became one of the elite, he learned the basics of investing in his early 20s.
He gave a Big Think presentation in late 2012 aimed at young professionals just starting out, as well as those who are more experienced but lack a financial background.
Ackman takes viewers through the founding of a lemonade stand to teach the basics, explaining how investors pay for equity, a word interchangeable with "stock." In the example, the owner starts with $750, with $250 of that coming from a loan.
Here's an income statement tracking the healthy growth of the lemonade business. By year five, the company has seven stands, supported by an increased margin on products, and makes a profit of $2,311 (earnings before tax).
YouTube/Big Think
A business owner can take money from a lender, who profits from interest on his loan, or an equity investor, who buys shares in the company. An equity investor stands to make much more money than a lender due to the level of risk involved — if the company doesn't make money, neither does the investor.
YouTube/Big Think
For instance, an investor makes a small amount of interest from government bonds because the risk is low — the US government is more secure than any corporation. An investor makes a large amount of interest from loans to business owners because the risk is high.
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Equity is a "residual claim" because debt must be paid off before investors can profit. Shareholders may make money from company profits called "dividends."
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When a company has grown significantly, its owner can sell it for a typically large sum of money, in exchange for control of the business and a shot at future profits.
YouTube/Big Think
Instead of growing a business further, an owner can pay himself dividends to put cash in his pocket rather than in the company.
At a moment of strong growth, the business owner can either share profits with a private investor or go public.
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When a business files for an initial public offering (IPO), its owners offer a portion of it to the general public, which raises cash, and the company gets listed on an exchange. It requires being transparent and, in the US, reporting to the Securities and Exchange Commission.
YouTube/Big Think
Ackman's nine tips for successful investing are about minimizing risk.
YouTube/Big Think
Similarly, he recommends that you only begin investing when you pay off debt and set aside an emergency fund.
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And when you do become an investor, Ackman says success requires developing a resistance to the human tendency of following the herd's reactions to short-term market fluctuations.
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If you don't have the time or desire to invest in individual stocks, you can invest in mutual funds, large pools of funds managed by a professional investor.
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You can also outsource your investing to a money manager.
YouTube/Big Think
Ackman says his presentation is just a brief introduction to the world of finance. For a next step, he recommends Benjamin Graham's classic "The Intelligent Investor"), which Ackman says changed his life dramatically after he read it in his early 20s.
YouTube/Big Think
Check out the full video below:
Richard Feloni
Correspondent, Strategy
Richard wrote for Business Insider's Strategy vertical, where he oversaw the Better Capitalism series. He was also the host of Business Insider's podcast "This Is Success."At Business Insider, he investigated Dan Gilbert's multibillion-dollar project in Detroit, analyzed the highly unusual management cultures at Bridgewater and Zappos, and examined Wall Street's love of Transcendental Meditation.In 2016 he helped launch Business Insider Italia in Milan.He joined Business Insider in 2013, and is an alumnus of Boston College and the Columbia University Graduate School of Journalism. He left the company in 2020 to become editorial director at Just Capital.
Ackman's a “value investor”: he looks for good, hard-to-compete-with companies that he thinks the market's underestimating. He then holds on to investments in those firms while they grow in value.
Ackman is an investor known for ruthless tactics that made him a billionaire — even if his most memorable gamble was a disastrous $1 billion bet against Herbalife. But in recent years, he moved his day job away from the kind of loud corporate activism that made executives fear him.
In 1988, he received a Bachelor of Arts degree magna cum laude in social studies from Harvard College. His thesis was titled Scaling the Ivy Wall: The Jewish and Asian American Experience in Harvard Admissions. In 1992, he received a Master of Business Administration degree from Harvard Business School.
Pershing Square USA is being sold at US$50 per share with a minimum required purchase of 100 shares for US$5,000. Pershing Square Capital is waiving a 2% management fee for the first year and will not receive an incentive fee, typically 20% of the growth in the fund's net asset value.
emotions such as fear and greed often drive people to make impulsive decisions. 3. What's one of Ackman's strategies for preventing emotional mistakes? Diversify Your Investments.
Ackman's main current investment vehicle, Pershing Square Holdings, a European-listed closed-end fund with a market value of about $10 billion, was up 5.7% through June 30 based on its net asset value (NAV), according to the fund's website. That's behind a 15.2% total return for the S&P 500 index.
Age: Ackman was born in 1966. Source of wealth: Ackman made his money investing. He started his professional investing career by launching a hedge fund shortly after completing his MBA at Harvard. Marital status: Ackman married to Neri Oxman in 2019 after divorcing his first wife, Karen Ann Herskovitz, in 2016.
Ackman's proposal aims to tackle wealth inequality by “creating a way for those with no investment assets to participate in the success of capitalism.” He would have the government create and fund an investment account for every child, which he dubs a “Birthright fund”, that would be invested in zero-cost equity index ...
(Reuters) - Pershing Square USA, a fund managed by billionaire Bill Ackman, said on Friday it plans to offer shares at $50 each in its initial public offering in New York. Ackman is launching a new investment portfolio that will be available to anyone who can invest in the United States, including retail investors.
Conservative investing prioritizes preserving the purchasing power of one's capital with the least amount of risk. Conservative investment strategies will typically include a relatively high weighting to low-risk securities such as Treasuries and other high-quality bonds, money markets, and cash equivalents.
Pershing Square Holdings, founded by renowned investor Bill Ackman, is known for its unique investment strategy that combines concentrated portfolio management and activist investing.
An investment philosophy is a set of beliefs and principles that guide an investor's decision-making process. It is not a narrow set of rules or laws, but more a set of guidelines and strategies that take into account one's goals, risk tolerance, time horizon, and expectations.
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