About
Terry Smith is a British fund manager, author, and outspoken investment commentator who has become one of the UK's most prominent and successful investors. Here's who he is:
Terry Smith was born in 1953 and built his reputation through decades in financial services, including roles at PwC, UBS, and Collins Stewart, before founding Fundsmith in 2010. As manager of the Fundsmith Equity Fund, he has delivered exceptional performance since inception, generating annualized returns of over 13% through 2024 while significantly outperforming major indices. His fund focuses on high-quality companies with strong competitive positions, pricing power, and consistent cash generation.
Smith is known for his "buy good companies, don't overpay, do nothing" investment philosophy, which emphasizes finding businesses with sustainable competitive advantages and holding them for the long term. He advocates for investing in companies with high returns on capital, strong cash flows, and resilient business models. His approach deliberately avoids complex financial engineering, frequent trading, and trendy sectors.
Beyond fund management, Smith has authored several influential books including "Accounting for Growth" (which exposed accounting manipulation practices in the 1990s) and regularly shares his views through annual letters that are widely read for their wit and insight. He's known for his direct, often acerbic commentary on market trends, poor corporate governance, and investment industry practices. His combination of strong performance and entertaining communication style has made him a prominent figure in British investing.
Terry Smith's Best Quotes
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"Our investment strategy can be summarized in three words: Buy good companies, don't overpay, do nothing."
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"The stock market is designed to transfer money from the impatient to the patient."
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"If you can't explain your investment strategy in simple terms, you probably don't understand it yourself."
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"We don't invest in banks because we can't understand their balance sheets, and neither can they."
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"The best businesses are those that can raise prices without losing customers – that's real pricing power."
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"ESG investing is largely a marketing exercise designed to collect higher fees for doing what fund managers should have been doing anyway."
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"We're not trying to be clever. We're trying to be right."
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"The most expensive words in investing are 'this time it's different.'"
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"Good companies compound wealth; bad companies destroy it. The difference is surprisingly easy to spot if you look at the right metrics."
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"I'd rather buy a wonderful company at a fair price than a fair company at a wonderful price – though Warren Buffett said it first and better."
Written Works
Accounting for Growth: Stripping the Camouflage from Company Accounts
Smith's breakthrough book exposed creative accounting practices used by UK companies to inflate their apparent performance. Written while he was an analyst, the book systematically identified accounting tricks that companies used to manipulate earnings, cash flows, and balance sheets. The book became a sensation in financial circles and established Smith as a fearless critic of corporate accounting practices. It remains a classic guide to reading financial statements skeptically and identifying potential red flags.
Fundsmith Annual Letters
Smith's annual letters to Fundsmith investors have gained a cult following for their combination of investment insight and entertaining commentary. These letters explain his investment philosophy in detail, provide transparent analysis of portfolio performance, and offer sharp criticism of industry practices he disagrees with. His letters are known for their directness, humor, and practical insights into long-term investing, often going viral in investment circles for their quotable observations.
"The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions"
While not authored by Smith, this book by Lee Freeman-Shor features extensive analysis of Smith's investment approach and includes his own commentary on execution in fund management. Smith's contributions focus on the importance of doing nothing once you own quality companies and the discipline required to resist market noise and maintain long-term positions.
Fundsmith Emerging Equities Trust Reports and Commentary
Through his emerging markets fund, Smith has written extensively about investing in developing countries, the challenges of corporate governance in emerging markets, and how to identify quality companies in less developed financial markets. His reports provide practical insights into international investing and the additional due diligence required when investing outside developed markets.