‘Want to succeed? Invest like Norway’s wealth fund’
OSLO (Reuters) – Norway’s sovereign wealth fund has lessons for retail investors, according to a book released last week: Think long term, don’t sell when stocks markets go down, and be mindful of your home biases.
The fund invests revenues from the Nordic country’s oil and gas production in stocks, bonds and property.
Set up as a sovereign wealth fund in 1998, after a first cash injection in 1996 of 1.98 billion crowns ($255 million), the fund has grown into the world’s largest and is now worth $1 trillion, or $197,000 for every Norwegian man, woman and child.
For Clemens Bomsdorf, a financial journalist who has worked for The Wall Street Journal, Die Zeit and Focus, there were lessons that retail investors could learn from.
His book, How to Become Rich Like Norway: Easy Tips on How to Build a Fortune, came out in Germany last week, with translations into English and Norwegian planned.
“What strikes me... about the Norwegian wealth fund is that many countries have been rich because of oil,” the 41-year-old told Reuters. “But they have squandered the riches, whereas Norway has not. For the average investor, the fund is a very good blueprint.”
The first lesson is to think long term, he said. The fund was set up for future generations, not to generate cash for every purpose.
“So for retail investors, that means think of putting it away for 15 years at least,” Bomsdorf said.
The fund tends to always buy stocks, even when markets are low. The 2008 financial crisis coincided with a period when the fund was increasing its share of equities in its portfolio to 60% from 40%, which in hindsight was an opportunity.
The fund’s worst year ever, 2008, when it lost 23.3% of its value, was followed by its best, when it returned 25.6% in 2009, partly as a result of that move.
But Bomsdorf also said there were things retail investors should not do like the fund, such as its tendency to ignore stocks from emerging markets and small caps.