This is a longer version of a review of Free Capital posted on Amazon UK

[1] Why Free Capital merits 5*s

This is the easiest part. I have read Free Capital twice (disclosure: the first as a proof reader). I expect shortly to start my third read, after I’ve finished my initial work in [3] below. For comparison, I have perhaps twenty investment books, a few of which I’d like to read for a second time, but have yet to do so. You can deduce that I rate Free Capital highly indeed.

Free Capital is excellent “storytelling” about (relatively) low profile private investors – millionaires not billionaires – whose investment performance and lifestyle the reader might aspire to match. It is rather different to the books on Graham, Buffett, Lynch, Soros etc; while theoretically I might match Buffet’s returns I will not be able to do this “at scale” e.g. buying 3% of Tesco with my spare change.

More important than the storytelling is that Free Capital covers material that you will struggle to find elsewhere (Danko’s “The Millionaire Next Door” is probably an inferior read). This is true both of the format (interviews with private investors with seemingly honest self-analysis) and of some of the ideas introduced; while emphatically not a “how to” book – there is not enough detail on methods and execution for that – there are plenty of exploitable concepts if you have the stomach for the work.

Finally the book has both impact and depth; hopefully this come across in (2) below.

[2] The book’s broad content

The content is well covered in several reviews. The 12 investors have different backgrounds, qualifications, skills and personality. Several had to face challenges in terms of illness, disability or redundancy. The book does a good job in comparing how this impacted the paths the investors took. The author – and his interviewees, who seem pleasingly honest – readily admit the role that luck and circumstances can play in excellent investment returns; several of the investors benefited early on from “10-baggers” which always helps! However the phrase “chance favours the prepared mind” (Pasteur) is explored.

Common concepts of the investors:

• Independence of thought and a desire to work things through themselves
• A willingness to “go it alone” not just in terms of investment decisions but often socially
• Clarity of approach to investment (this sometimes took several years to develop)
• Indeed the first year or two was often not great (one forms the impression they were effectively paying to develop investment skill)

Two helpful features of the book:

• Each chapter ends with a summary headed “insights and advice”. These provide a brief reminder of the investor’s approach - an aide-memoire if you will. The book is worth buying for these alone.
• At the end of the book is a “summary table of investor characteristics.” This does what it says on the tin. Just don’t spend too much time on the “Age at leaving last full time job” column; the ages range from 31 to 50!

Other reviewers have given relatively little coverage to what you might call the “deeper” aspects which also make Free Capital noteworthy. Just two examples:

• I was unfamiliar with the concept of holding lots of shares for the purpose of providing liquidity, which is particularly relevant for small caps (all except one of the investors is largely invested in these stocks). There’s not a huge amount of material on how you would in practice “do” the mechanics of small cap investing (there are other books and, again, Free Capital is not a “how to” book) but this is a delicious strong hint.
• I had heard of the “Kelly criterion” but Free Capital provided the motivation to do some work on this. I can now see how this can in principle play a role in asset allocation. Again more work and thought is required, but it beats a finger in the air or (perhaps) copying others.

Fear not: the more technical aspects are set apart in “panels” (you can come back for them later).

[3] The impact it’s had on me (and may have on you)

This is not really the material you’d normally put in a book review, but I feel compelled to do so; surely one test of a book’s value is whether it makes you change something about your life. The biggest lesson for me from Free Capital is that these successful investors really can explain their approach: what they look for, what would cause them to reject a purchase etc.

I was late to the investment party (too busy with the day job) then plunged into the UK stock market. In contrast to the 12 investors, I still do not have coherent buy/sell plans and have not identified any competitive advantage I might have. Free Capital has provided the motivation to put an investment strategy together, which will include a personal (investment) development plan. I'm in my 40s, but am not too old to learn.

I suspect that Guy Thomas has more he could tell us if he so wished; try searching his brief Free Capital blog for diamonds and flower bulbs or how many shares should an investor hold? You’ll find a fascinating insight into the author’s approach to investment.

Another reviewer noted that all investors were full time and asked what those short of time could do. Warren Buffett is on record as saying index tracking is most suitable for the vast majority of investors. But, to be more precise, what if I have 5 hours free per week? Index tracking, investment trusts or limited active investing?

Let’s end on the positive. Free Capital is a fantastic and thought-provoking book. If it's not worth £10 of your money I don’t know what is.