I will reveal the secret now. He got a bunch of people together who had the cash. He then invested it in some common sensical companies. Then he waited and waited and waited. There you go, thats it, end of story.
It wasn't the easy ride you make it seem. Buffet and his investors have sat through a few gut wrenching drawdowns. Recently 50% drawdown between 98-2000 and a 60%+ drawdown in the early 70's. With an Average annual return around 28%. I believe he is a good value investor, but he's had a bit of luck with the overall market on his side. Year Buffett % 1966 -8 1967 15.7 1968 82.7 1969 13.5 1970 -7.1 1971 79.5 1972 14.3 1973 -11.3 1974 -43.7 1975 -5 1976 147.3 1977 46.8 1978 13.8 1979 102.5 1980 32.8 1981 31.8 1982 38.4 1983 69 1984 -2.7 1985 93.7 1986 14.2 1987 4.6 1988 59.3 1989 84.6 1990 -23.1 1991 35.6 1992 29.8 1993 38.9 1994 25 1995 57.4 1996 6.2 1997 34.9 1998 52.2 1999 -19.9 2000 26.56 2001 6.47 2002 -3.77 2003 16.04 2004 4.12 2005 0.82
Well, the key is charisma. I think anyone can buy and hold an equity for 20 years and make money off of it. Coca-Cola is one product where you can make a huge amount off of just by buying/holding and letting the dividends reinvest themselves. However, recruiting the investors who are willing to wait these long periods of time is the challenge. Currently, most investors want to see good quarterly results everytime. I certainly dont want to wait 20 years to see a return.
You also have to consider the currency which he used to invest. When this currency dropped (in the mentioned period) by, say, a factor 10 compared to the other major currencies, his results are more obvious. Same as what happens with the DOW nowadays, it is not strange that it breaks new records because the profits of US companies increase because of the weak $. In other currencies (euro) the DOW is flat for the last 5 years.....
The smartest thing Buffett did was buy Berkshire (have publicly traded shares) so that people who wanted to invest, or remove funds could trade shares. This meant that unlike open-end mutual funds, he didn't have to sell shares to cover investor redemptions. This allowed him to constantly compound his returns because capital gains were rarely paid. Just look at Coca-Cola as a perfect example. With even modest return potential, there is no reason to sell it. It is better to hold than realize the gain, pay the taxes and invest the after-tax money in something else.
Asinine and wrong. GBP was $3.50 in the mid 60's. By your logic the FTSE should be trading around 70,000. The Yen was on fire from the late 80's through the mid 90's (JY was HIGHER in 1995 than today!) while the Nikkei was down 80% during that period. Use your freaking imagination, moron.
Ben Graham embedded, yet not static, adaptable to global financial conditions. Sequoia, Tweedy Browne. LMFT,Torray,TAV, Clipper...etc. "Be fearful when others are greedy, be greedy when others are fearful."
That was quite an epiphany he had after 9/11 about the nuclear threat - when he sloughed off the casualty ins. industry's greatest risk onto the US taxpayer. Wonder where he was during the Cold War?
There are a lot of strategies that make money... most people just can't stick to the same one for 20 or 40 years... it's no picnic riding through the DDs and maintaining confidence.