By The Great Courses Staff

After a career spanning four decades, iconic “bond king” Bill Gross has announced his retirement. Gross co-founded the Pacific Investment Management Company and grew its Total Return Fund into the world’s largest mutual fund, and made billions in the process. What final lessons does he have for us?

Gross earned notoriety early on for making money as a professional gambler when he was in college. After reading a book on gambling, he turned $200 into $10,000 one summer in Las Vegas. He utilized some of these tactics when he joined Pacific Mutual Life Insurance Company as a credit analyst. When they created PIMCO, he joined it immediately and helped its Total Return Fund project achieve its peak value of $300 billion. Experts accredit his astonishing winning streak in the bonds market to focusing on global and long-term interests and looking for certain telltale signs to guide investments.

Growth and Stability in an Unpredictable Market

“Gross has had considerable success over the years investing in emerging-markets bonds and [he] provides some specific advice on where to look,” said Dr. John M. Longo, Professor of Professional Practice at the Business School of Rutgers University. “First, he says, look at economies with strong projected long-term growth—4% or higher is his rule of thumb. Next, look for a stable political environment. If a country has a sovereign debt-to-GDP ratio of less than 60%, then Gross views that as a good sign.” Dr. Longo also said that Gross likes countries with high savings rates and laws that emphasize property rights.

By looking at long-term trends to predict which investments are sound, Gross is a top-down investor. “Gross believes that three- to five-year forecast horizons force an investor to avoid the near-term emotional whipsaws of fear and greed,” Dr. Longo said. But there is a flip side. “While three- to five-year investment horizons allow investors to avoid worrying about the latest employment report, Fed meeting, or CNBC talking head, Gross says that forecast periods longer than five years represent guesswork, better left to fortune tellers than to serious investment analysts.”

All of this “rests on two foundations—the ability to formulate and articulate a secular or long-term outlook, and having the correct structural composition within one’s portfolio over time,” Gross said.

“By structural composition, he means the right mix of securities within an asset class, be it stocks or bonds,” Dr. Longo said.

Keeping Emotions Out of Investment Decisions

Investors must also stay calm and avoid emotional short-term decisions, according to Gross’s philosophy. “Such emotions as fear and greed can convince any investor or management firm to do exactly the wrong thing during irrational periods in the market,” Gross said. To maintain confidence and focus, he recommends reading books on economic history. These books provide valuable insights into factors like political trends, demographics, trade policy, and so on.

Another way to stay focused? Yoga. “Gross goes so far as to practice yoga on a daily basis to help clear his mind, and to minimize the temptation of being swayed by short-term market movements,” Dr. Longo said.

Bill Gross may be retiring, but his investment strategies can live on. Gross’s wildly successful method of patient, long-term investment analysis helped him make PIMCO’s Total Return Fund into the world’s largest mutual fund. By keeping a cool head and using his guidelines, your portfolio can offer a much more secure outlook.

Dr. John M. Longo contributed to this article. A Professor of Professional Practice in the Finance & Economics Department at the Business School of Rutgers University, Professor Longo earned an M.B.A. in Finance and a Ph.D. in Finance from Rutgers, where he also received his B.A. degree.