How about this annual compounding, like this?

[jk90029]

Dear-

Most ETers like to show a good long-term record for his/her investing.
However zero-sum market does NOT allow it, even before commission/tax.

Well-known Buffet shows annually compounded 20% return for almost 50 year, as shown in http://www.berkshirehathaway.com/letters/2014ltr.pdf , unless it is a scam.

His 20% makes initial seed of 100 (no matter 100 is 1K, 100K or 100M) to 100*1.2^50 = 910043.8 which is roughly 9100 times.

Therefore most high winner (roughly less than 10% among all traders) may show annual 10%, 15% or 20% like Buffet.

Tell me your personal opinion for this proposition.

PS) 1) With annual compounded 20%, 9100 times as above
2) With 10%, 100*1.1^50 = 11739.09 shows roughly 117 times
3) With 15%, 100*1.15^50 = 108365.7 shows roughly 1083 times.

 

[jk90029]

For easy and simple, set 50 years (e,g, from 30 to 80) to achieve

1) 100 times for 10%
2) 1000 times for 15%
3) 9000 times for 20%, which happens to be credit card loan rate.

 

[jk90029]

Of course, the above link says that, over the last 50 years, SnP500 showed annual 8% compounded, and threfore BRK shows additional 12%, OUTPERFORMED OVER THE INDEX.

 

[ETcallhome]

buy an insurance company and invest the premiums? It's like having a good job and including your salary in your performance results.

 

[jk90029]

buy an insurance company and invest the premiums? It's like having a good job and including your salary in your performance results.

Of course, getting a job with salary is like this too.
Suppose you are expected to work for 40 years from 20 to 60, with average yearly (after tax) income of 100K (or 50K). This is equivalent to 4000K (or 2000K) lifetime.

However compare, with initial seed of 10K and compounded return of 20%, your lifetime saving 10K*9000 is bigger than the above two (4000K and 2000K).

 

[jk90029]

buy an insurance company and invest the premiums?

Probably paying premium for insurance, is same as buying an option, which is definitely derivative, if my understanding is correct.

 

[ETcallhome]

it's probably impossible, but go back and check his return ex geico

 

[Stockmarketmap]

There's been somewhat esoteric security selection and allocation sizing decisions within BRK's investing history and the "down homesy" feel of it's proprietors and "invest in well run, quality businesses" thinking that is implied, doesn't jive with some of the actual portfolio activity that transpired . Much of it's compound performance in the 90's came from an oversized position in KO. In 1987, BRK had a $1billion spread over just 3 stock positions. The KO position was built over the next few years and became a majority of the portfolio. In the early 2000's, 25% of the portfolio was allocated towards a short position in the U.S. dollar which didn't pan out. A "large" position bought in Conoco PHillips at the peak of oil prices in 2007 - 2008 was a mistake, and a continued "large" position in Wells Fargo has beaten the S&P500 but not the midcap S&P400 ( since 2001 ).

The Mid cap SP400 has beaten BRK-A for 20+ years ( since 1996 ) and most rolling starting points in between . In light of this, when Buffet says that investors "would do well with just investing in an index fund", he's been right. Accordingly, as one of the one of the golden rules of investing is to "not take "outsized" bets", this low odds endeavour seems to have caught up with BRK's performance stats ...

 

[jk90029]

There's been somewhat esoteric security selection and allocation sizing decisions within BRK's investing history and the "down homesy" feel of it's proprietors and "invest in well run, quality businesses" thinking that is implied, doesn't jive with some of the actual portfolio activity that transpired . Much of it's compound performance in the 90's came from an oversized position in KO. In 1987, BRK had a $1billion spread over just 3 stock positions. The KO position was built over the next few years and became a majority of the portfolio. In the early 2000's, 25% of the portfolio was allocated towards a short position in the U.S. dollar which didn't pan out. A "large" position bought in Conoco PHillips at the peak of oil prices in 2007 - 2008 was a mistake, and a continued "large" position in Wells Fargo has beaten the S&P500 but not the midcap S&P400 ( since 2001 ).

The Mid cap SP400 has beaten BRK-A for 20+ years ( since 1996 ) and most rolling starting points in between . In light of this, when Buffet says that investors "would do well with just investing in an index fund", he's been right. Accordingly, as one of the one of the golden rules of investing is to "not take "outsized" bets", this low odds endeavour seems to have caught up with BRK's performance stats ...

[Stockmarket] I don't care what and how Buffet did. But we are talking about his record for 50 years. For example, among thousands in watchlist, one should select a few equities in timely manner, to achieve outperformance over the index.

The 12% might be very important, and almost no other logic may outperform over Buffet for 50 years.
If you don't agree, tell me some logic shows 13% or higher for 50 years.

 

[lawrence-lugar]

Compounding is explosive -- the 8'th wonder of the world.