: This musician retired after making $170 million in the stock market. Now he’s sharing his secrets.

United States

When a retired Boston Pops clarinetist gave $ 100 million to Boston University’s medical school last month, everyone focused on his unusual backstory.

Edward Avedisian ended his career as an accomplished musician, but he was the son of Armenian immigrants who’d worked in the mills of Pawtucket, Rhode Island. He and his four siblings had grown up poor but close, and his parents had taught them to serve others. One became a pharmacist, another a nurse, and while Avedisian himself made his living as a clarinetist, he made up for such self-indulgence by giving most of his fortune to Boston University, a school once run by a friend who’d grown up a few doors down in Pawtucket.

Avedisian’s story makes for great reading, but, as a professional money manager, I noticed that almost nobody focused on what interested me most about it: How the hell did a retired clarinetist with no formal investment training amass nearly $ 200 million on a musician’s salary?

So I called him up. Although Avedisian has given nearly all his fortune away, he was happy to share with me out how he’d made it.

Avedisian spoke to me by phone from his home in the Boston suburbs, a comfortable, two-story brick colonial that’s not even close to being a mansion. (I looked it up on Google Maps.) He is plainspoken and understated, a real New Englander.

Now 85 and in poor health, Avedisian is no longer investing. Despite this year’s market volatility, however, he said he was more bullish than ever on the future, and he envied those just beginning to invest.

“It’s a fabulous time to get started,” he said. “Look at what we’re doing with energy, climate, everything. Stuff is just going to explode. Wow! It’s fabulous.”

After speaking to him twice, I’ve concluded that we all can learn many lessons from this man. Some are obvious and well-known. Others, including his secret turbocharging superpower, are not.

What follows is what I call The Avedisian Rules, a distillation of how Edward Avedisian, an ordinary, amateur investor, sowed the seeds of wealth and then reaped them for others.

1. Save money and keep it simple

Anyone who makes nearly $ 200 million on a middle-class salary is remarkable, but Avedisian’s accomplishment is even more astonishing given that he didn’t start investing until he was in his 40s. When he did begin, however, in the 1980s, he kept it simple.

One habit was essential to his success, Avedisian says: He lived a stripped-down life. Avedisian didn’t marry until he was 55, and he never carried any debt. Lacking any demands on his money, he put everything he could into the market. (He would only tell me he earned about $ 55,000 a year in the mid-1980s; judging from news reports, his salary more than doubled by the time he retired.)

“To me, the risk was minimal,” he said. “I had no obligations, and that allowed me to plow everything back in. It’s not something to do if you have a wife and a kid and a house.”

Thus freed, Avedisian stuck to a simple routine. He read two business papers, The Wall Street Journal and Investor’s Business Daily, and on plane rides while touring with the Boston Pops, he would read corporate documents. His favorite reading materials were IPO prospectuses, in which a company going public lays out its own strengths and weaknesses, details how much stock its executives own, and whether they are buyers or sellers of it.

“Anybody who’s not studying these is a fool,” he told me. “You find out what the company’s doing, who’s running it, and especially who wants in and who wants out. I never liked companies where shareholders were selling. You want my money, but you’re heading for the hills? All these kinds of details are in that document.”

Avedisian is reluctant to give details on specific holdings, saying only that they are “major companies, household names you’d recognize.” Ironically, although he devoted most of his philanthropy to it, he never invested heavily in health care — “I don’t know much about it,” he said. And unlike many ordinary Americans who became wealthy in the market, Warren Buffett’s Berkshire Hathaway BRK.B, +3.28% was never a major holding, although “I owned some and did OK with it,” he said.

Technology, however, was a major portfolio concentration. He speaks admiringly of early Boston tech companies like Lotus, which invented the spreadsheet, and of Microsoft MSFT, +2.53% and Bill Gates.

In talking to Avedisian, it’s clear that like Buffett and all other great investors, Avedisian learned early on that a key to investment success was to focus on a few critical variables in a business and how they might set up a company for radical outperformance.

Gates, for example, was a “genius” because he bundled Word, Excel and other office productivity tools together in a single package.

“Make life easier, collect more money,” is how Avedisian described Microsoft’s business strategy, and it’s true: Since its IPO in 1986, about when Avedisian began to invest, Microsoft has appreciated 2,400-fold, or a compound annual rate of 24%, far more than the market average over that time.

By committing to doing research on individual companies, he chose the route most great investors from Buffett to John Templeton to Peter Lynch have chosen. Rather than simply take the market averages via index funds, Avedisian tried to identify a few, great businesses that he could buy and hold for decades. When he gained conviction on a business, he concentrated his bets; at any one time, he said, he usually owned less than a dozen companies.

While saving money and putting every dollar you can is clearly important, for me this is the cardinal rule of The Avedisian Rules: Owning a few great businesses that can grow for generations will generate you great wealth. The magic of compounding will see to that.

2. Stay calm, stay invested and keep your own counsel

Many people, usually at cocktail parties, will tell you that they timed the market perfectly. “Oh, I got out in early 2022,” they’ll say, or “I went all in when the market bottomed in 2009.” These are wonderful claims and make people look smart, at least until a smart aleck like me, who knows how tough it is to time the market, asks to see their brokerage statements. After that, somehow the conversation peters out.

Avedisian makes no such claims, because he never did try to time the market. “I just let it ride,” he said. “The market always comes back.”

Avedisian did, however, manage his portfolio actively; he wasn’t a “one decision stock” kind of guy. Instead, he would plow more money into companies that were doing well, and he would sell those that were faltering. In other words, he paid attention to a business’ competitive advantage and whether it was waxing or waning, and he enthusiastically agrees with the Peter Lynch mantra, “water your flowers and cut your weeds.”

Did he know Lynch, a fellow Boston investor, I asked? No, but Avedisian did have an informal network of fellow investors to compare notes. “I had casual friends I’d talk to about investing over the years,” Avedisian told me. “They were money managers outside the Boston area. But ultimately it was my decision.”

Continuing with the gardening metaphor, Avedisian said that investing is a solitary pursuit. Collaboration and seeking others’ counsel is fine, he said, but “ultimately it’s your yard, and you have to decide what you’re going to do.”

This is another important one of The Avedisian Rules: Be self-reliant. Avedisian said that investing was in many ways a contrast to his day job, which involved performing with others in a large ensemble. On the other hand, he said, the craft of investing was identical to that of making music. Both require creativity and interpretation, and while one is primarily solitary and the other collaborative, both come down to the individual.

 “In music, it’s between you and what’s there on your music stand,” he said. “It’s the same thing in the business world with stocks.”

3. Some things you should not try at home

Save money, rely on yourself, stay calm and stay invested — these lessons form the core of The Avedisian Rules, and they should suffice for anyone interested in compounding their wealth via the stock market. However, Avedisian also used two aggressive techniques to juice his returns by several percentage points.

Fairly early on, Avedisian used margin — money he’d borrowed from brokers using his stocks as collateral — to put even more money into the market. When his initial attempts were successful, he borrowed more. At one point, he had 13 brokerage accounts, mainly so he could maximize his allocation of IPO shares, but also to compare margin rates between them.

“The more assets I had, the more I could borrow, and the lower the rate I had to pay,” he said.

A sound investment strategy has rightly been compared to rolling a snowball downhill. As the snowball packs on snow, it gets larger and larger, building on itself as it continues to descend. A small snowball at the top of the hill collects snow slowly, but toward the end of its journey the snowball becomes ever more massive, growing exponentially as snow collects upon snow. This phenomenon is powerful enough on its own, but by using borrowed money, Avedisian was in effect running next to the snowball and adding extra borrowed flakes along the way.

So long as his return exceeded the interest he had to pay on the borrowed money, his snowball would continue to grow faster than it would have on its own. To supplement this strategy, Avedisian also became a student of, and buyer of, options, another form of leverage that gives an investor outsized exposure to the movements in the stocks underlying the option.

During the interview, Avedisian pointed out more than once that he doesn’t recommend these strategies. Anyone with a family to support and a mortgage to service should in fact avoid them. Only savers, he said, can afford to take the risks he did.

“Again, I had no obligations,” he said. “I could’ve lost my shirt.”

4. Find a higher purpose

Avedisian invested for about 40 years. As anyone who has tried to make money in the stock market over a sustained period can attest, it is difficult to stay the course. The highs are high, the lows are low, and the boring in-between times can make you feel like a windless ship becalmed in the ocean.

Two things kept Avedisian going, he said. First, it was fun — the challenge kept him engaged. Second, and perhaps more important, he wasn’t investing for himself. He had others in mind.

Much of this spirit came from how his parents raised him.

“My parents were immigrants,” he said, “and they were always helping the next guy off the boat. They were my heroes.

“The day my younger brother was born, my father didn’t show up at the hospital for five days. Everyone there was whispering, ‘Where’s the father, where’s the father?’ When he finally showed up, they asked him where he’d been. He’d gone off to help some other immigrant family who was in crisis. ‘Someone else needed me,’ he said.”

I asked the obvious question: Was your mother upset?

“No,” he said, laughing. “She understood. She would’ve done the same thing.”

While Avedisian’s recent $ 100 million gift to Boston University got the big headlines, the truth is that he began giving his money away less than a decade after he began to invest it. He’s given to the University of Rhode Island, the American University of Armenia, and to various Armenian causes.

His first gift was to endow a school for children in Yerevan, Armenia’s capital. When it began 30 years ago, 75 students went there for free. Today, there’s 700 — another, richer form of compounding. Soon, Avedisian told me, there would be 900 free places.

Not surprisingly, none of his gifts to this point have had Edward Avedisian’s name attached to them. They did, however, have his relatives’ names attached. The school in Yerevan is named after his parents, Khoren and Shooshanig. The $ 5 million he gave to URI’s pharmacy school honored his older brother, Paramaz, who graduated from the college. The Zvart Avedisian Onanian School of Nursing, also at URI, was named after his sister and represented a payback of sorts; in the 1950s, when it was time for Edward to go to college, his sister earned a quicker, cheaper nursing degree so the family could support her brother’s education.

As for the recent BU medical school gift, $ 50 million of it will go to scholarships. The other $ 50 million will go to endow professorships and to fund new programs. But with this last gift, Avedisian has broken his own rule: He has allowed the school to be renamed the Aram V. Chobanian & Edward Avedisian School of Medicine.

Why the change of heart? After years of working hard to build his fortune, did Avedisian’s ego finally assert itself?

“No,” he said, laughing again. “I didn’t want my name on it, I wanted Aram’s name on it. He was my older brother’s friend who became a tremendous cardiologist and then president of Boston University. He made huge advances in the study of high blood pressure, and I always looked up to him.

“But when I went to Aram and told him I wanted to name the school after him, he said, ‘No, your name should be on it.’ I said, ‘People don’t know me, I’m just the guy who signs the checks.’ Back and forth we went until his kids came up with a good solution. The kids said to Aram, ‘If your name goes on it, insist that Edward’s name goes on it, too.’

“How do you refuse that solution?” Avedisian said. “I’d be a hypocrite if I didn’t accept it. Here I am asking him to accept naming it for him, but I won’t accept naming it for me? It would have been unforgivable for me to refuse.”

Avedisian has thus ended both his investing and his philanthropic career in the same way he began them: gracefully and with understatement. Although he remains a little uncomfortable with his name on the building, he’s happy that the compromise he forged with his older brother’s friend will lead to generations of new medical professionals who will leave school the way Avedisian lived his entire life: unencumbered by financial obligations.

 “It’s a good way to write the conclusion, to help kids be doctors, especially GPs, where there’s a huge shortage,” he said. “All these kids have way too much debt anyway.

“You’ve got to help people out when they need it,” Avedisian said. “What did what’s his name say? Carnegie — ‘I want to die broke.’ I’m the same.”

Adam Seessel is the founder and chief investment officer of Gravity Capital Management in New York and the author of “Where the Money Is: Value Investing in the Digital Age.