05/06/2012 04:55 pm ET Updated Jul 06, 2012

Invest Like a Billionaire: The Seven Pearls of Financial Wisdom

There are endless articles online encouraging investors to buy the same stocks as well-known billionaires like Warren Buffett, Bill Gates or Carlos Slim. It's easy to get whirled up in the excitement of a major move in the market and headlines like "Buy Railways Like Gates!" and "Consider China, Buffett's Best Move!" The problem is many potential investors who are reading these stories don't have the same diversification of assets and are taking on a different level of risk from billionaire investors.

There is however a way to Invest Like a Billionaire no matter what your net worth, and it's all explained in The Seven Pearls of Financial Wisdom: A Woman's Guide to Enjoying Wealth and Power.

The first chapter of the book focuses on the first pearl: A Woman Must Build Her Own Wealth. A set of disciplines and ideas are designed to encourage women to enjoy their money and grow their wealth and in the investment section women learn how to think like a family office.

My co-author Carol Pepper is an award-winning high net worth wealth manager and founder of Pepper International: a family office for families with $100 million and more. Together we used my background covering wealth, billionaires and Wall Street and Carol's expertise running Pepper International to share some of the secrets of the very rich with you.

A family office offers the Rolls Royce of wealth management services, integrated advice on investment management, tax planning, estate planning, philanthropy and financial education for children. Billionaires who have family offices include both media mogul Oprah Winfrey and Google founder Sergey Brin.

According to the 2011 Multifamily Office Study, conducted by the Family Wealth Alliance, the top seventy-two multi-family offices manage a staggering $320 billion in the United States; the average amount of assets for each client is $48.4 million.

One of the goals in writing the book was to clear away the nonsense and the fear around investing for readers. This is not a mysterious science and there are long trusted principles that can support your mission to build your own wealth, which the very rich benefit from all the time from revocable living trusts to financial planning. The Family Wealth Alliance 2010 Multifamily Office Study showed that 97 percent of families offices offer financial planning services and that 77 percent of their clients take advantage of them. Yet in a small poll published in 2010 conducted by the Certified Financial Planner Board of Standards Inc. only 28% of Americans surveyed said that they used a financial planner.

In this blog, I want to concentrate on Investing Like a Billionaire in the financial markets and that means developing an investment philosophy for a family, which is one of the most important roles of a family office. Carol and I feel strongly that one of the best things you can do to build your own wealth is to copy the rich and develop an investment philosophy for yourself.

Some elements of your investment philosophy are going to be universal-good practices that all investors should follow, regardless of their personal preferences- and some are going to be unique to your own situation.

First, let's look at adopting some universal keys to good investing in a short primer here and know there is even more helpful detail in the book.

In the beginning it's wise to ask yourself why you're investing in the first place. The only reason to make an investment is to achieve a return on it, therefore the first key is:

"I am going to invest my money only where I think I can make a return; that is, I have conviction when I invest."

Then you must ask yourself why you believe this particular investment will give you a return. Warren Buffett is famous for investing only in companies and businesses that he understands. Not understanding how an investment proposes to give you a return is a big mistake so the second key is:

"I invest only where I have an understanding of how it will make money for me."

It is critical to have the information necessary to monitor investments so that you can determine whether your original conviction and understanding prove to be correct. You should choose only investments that give very detailed disclosure of how they are performing and how fees are being charged. So the third universal key is:

"I invest only where there is transparency on an investment's performance and fees."

You now have the three universal keys of our investment philosophy: conviction, understanding and transparency -- or CUT. With these, a woman can "cut" through a great deal of hype and focus in only on the most suitable investments.

Your next important task under the first pearl is to: Customize Your Philosophy to Reflect Your Preferences.

Are you a growth investor or a value investor?

If you like bargains and hate to overpay, you are going to be happier following the value investing path.

If you are looking for the next great success, then growth investing will be more appealing to you.

You should also work out your investing style according to your beliefs and principles and share the answers with your advisers. For example: Are you comfortable investing in alcohol, tobacco and firearms companies? Do you want to invest only in socially responsible companies? Do you have the time or expertise to watch the market closely and trade individual stocks or would it be wiser to choose well-managed funds?

Now you've had a chance to consider investing principles and think about your investing style, in the next post in this series I will get down to the business of helping readers design an investment policy statement based on your investment philosophy.