Becoming Warren Buffet 2017

Where did he get the money to invest? Over his life he must have invested a lot of money. Far more than the average wage earner. A good part of his success would be this. Not just compounding.

 

I don't think so.
You need to read more about him. Some fascinating insights and philosophies many that aren't even touched on in the doco.

 

You gotta watch the whole video ... I enjoyed it. He is Einstein of value investing.

 

This is true. In the early days, pre 1965 he had an investment partnership, essentially an early hedge fund with capital from friends and family. In the early years Berkshire took some fair bites as well when he believed he had a very high probability of success.

The Buffett story is really more one about business and capital allocation than picking stocks, though he is/was good at that too. Businesses that produce strong free cash allow further investment, money making money. Buffett also cottoned on to the concept of using an insurance company's reserves (float) as a free/cheap source of capital.

I've got a framed chart on the wall showing CAGR (book value) of 19.4% from 1965 to 2015, against the S&P 500s 9.9% over the same 50 years. The business has had no debt for a very long time and always aims to have minimum 50B liquidity in short term T bills. Some of the best Berkshire deals in recent years came about from being the lender of last resort post GFC.

 

That's the way I read it too. It was like he was born to business. I was just reading about his early life and he developed and sold his first business before 20? His life tells me the path to wealth is not being an average PAYG wage earner. Although Buffet was exactly that at times, his enormous wealth was not generated from average PAYG salaries. It shows what you can do if you make shedloads of money and then invest it wisely. Then do this consistently over a lifetime. I take the point about him not leveraging but when he is making a shedload of money he didn't need to. Even an average PAYG wage earner, starting in their 20's and consistently investing half their wage in value investments and reinvesting the returns should be able to retire at 50 without leveraging. That doesn't really help a 50 year old average wage earner, with modest savings though. Unless they start a wildly successful business or win lotto, the no leverage philosophy isn't going to get them far... unless they are keen to not retire until 80! So what can leveraged 50 year old learn from Buffet? Borrowing at 4% and investing at 5% isn't going to get anyone anywhere fast. But if our 50 year old followed Buffets value investing principles, they might have a hope.

Legend

 

+1

 

Video seems to have been removed from YouTube.
Would like to see it.

 

I've used a portion of my offset account the same way. More efficient use of resources. Investments in REA and the big four when they were all low levels have provided some fantastic growth.

Average return on the banks ( 12 months since I started buying ) is 29%. REA 23.79% since May 15. All unlikely to fail.

 

Go to youtube direct and search for "Becoming Warren Buffet".

 

Was a good doco (not great).

The main takeaway I got from it was not that he is an investing genius, that part is already well known, or how he came to be the financial juggernaut that he is (it barely touches on it), the part I found most interesting was the personality of Buffett.

He's clearly on the Asperger's-Autism spectrum. He got to be where he is not just because he has a talent for value investing but also because he has the personality traits that allowed him to identify the opportunities. Not many people would enjoy sitting in a room by themselves reading company financials after company financials. His own kids called him somewhat of a recluse and the undertone of the doco is clearly that he neglected his family in pursuit of this obsessive desire to succeed. The neglect wasn't borne out of being a bad person, he just wasn't a people person. This penchant for preferring to spend time with numbers rather than people created the perfect cocktail (personality + talent + hard work + luck) for ultimate financial success.

 

I agree but I think it is more than that. When I read company financials (and I have) they mean very little to me. They are not much more than numbers on a page. It seems when Buffett reads company financials, he can see into the company's soul. Well, that's what it seems like to me.

 

No doubt. I put that in the "talent" aspect of the cocktail that I mentioned in my post. He looks at a set of numbers and can interpret them at a far deeper level than most can.

 

I was most taken with the fact that Warren Buffet appears to be such a good person - and that has nothing to do with his philanthropy.

 

Not quite.

The Academic Paper That Explains Warren Buffett's Investment Success

As per the article, "Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks."

 

Don't worry @austing . your contribution to this forum in one for the ages.

 

One for the ages, he he perhaps the age of senility.

I would certainly never have the makings for even the tiniest fraction of a Buffet. I can thing of nothing worse than analysing businesses and financial reports especially now retired. Would prefer a fork in the eyeballs than that thanks.

We owned 30 - 40 direct stocks once but got tired of monitoring them. So nowadays I'm happy to leave it to others to do the work for me at a tiny cost in the case of the older LICs / ETFs.

 

Yes your approach is somewhat divergent from Buffet's, yet the beauty is that both of you are extremely happy and well paid by the market for the individual approach adopted.

 

well, the reason that passive investing in ETF's/LIC's is becoming more and more popular is simply because more and more people are realising that they are no Warren Buffett, or even 1% of a Buffett.

 

And interestingly the more the amateurs succumb to passive investing the harder it progressively gets for the remaining professional investors. That is, the results become even more skewed in favour of passive funds.

 

I think the opposite. Less research and less active management = less efficient market and greater opportunity for active managers to outperform.