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Edward C. Johnson IIInvestor
Country:
 USA |
Content:
Edward C. Johnson II: A Biography of an Investor
Edward C. Johnson II founded Fidelity Management and Research Company in 1946 and managed the firm until 1971 when he handed over the reins to his son. At the time, the company had 14 funds and managed approximately two billion dollars. Today, it is the largest mutual fund company. Johnson began his investment career in the 1920s and relied more on intuition than science throughout the years. He believed that investing was an art rather than a science, stating, "I have been absorbed and immersed in the business since 1924, and I know it is not a science. It is an art. Now we have computers and all kinds of statistics, but the market remains the same, and understanding it has not become any easier."
Client Interests First
Johnson was primarily concerned with satisfying his clients and always put their interests first. He felt a painful sense of guilt if he believed his firm had made too much money. During the mid-1960s, when Fidelity made $5.5 million, he said, "A company like ours should never make such big money." He felt this way because Fidelity did not produce anything; it was "only a business of ideas." When it came to investing, Johnson emphasized two points: "First... make only those investment decisions in which you have reasonably high confidence. This is a simple but often overlooked lesson: you cannot make a profit if you constantly second-guess yourself... Second, cut losses, and cut them quickly; do not delve into reasons or emotions, just say goodbye."
Unorthodox Thinking
According to his son Edward III, Johnson always supported unconventional thinking. "He believed that too much security leads to problems. From the beginning of the firm's existence, he encouraged us to speak out against orthodox thinking." But you also had to respect the driving forces. "My father instilled in me a healthy respect for the market - a respect derived from his own experience of observing an entire generation lose money in the late 1920s and 1930s." Johnson's key to success was contrarianism; he adapted to market forces and when people were timid, he was bold, and vice versa. In "A Contrarian Approach to Stock Market Work," he explains why you should pay attention to the "tuning fork" inside your own body.
