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Moneylife » Life » World » Are you sure you want to invest with world’s greatest investor, Warren Buffett?

Are you sure you want to invest with world’s greatest investor, Warren Buffett?

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Andrew Abraham | 21/12/2012 06:19 PM | 

Here is the world’s greatest investor and you see firsthand how hard it really is. I doubt very many of you would have waited eight years to get back to break even. I doubt many of you would have the mental fortitude to withstand a 50% drawdown. Buffett was not alone

There are countless investors who have been blessed to be investors of Warren Buffett. Even though there are legions of investors who believe in Warren Buffett, however no one’s perfect, not even Warren. We all know that Buffett made his money through identifying companies that he believed were worth more than their market value, investing in them and holding that investment for the long-term (actually almost forever). Buffett’s strategy is remarkably simple, but given the ups and downs of the stock market, it takes a high level of discipline, nerve and conviction in your decisions which the vast majority does not have. The words discipline and patience somehow get forgotten along the path and get blinded. Investors want their 15%-20% returns without any periods of drawdowns. At the slightest drawdown investors run. They look for the next so-called guru who will lead them to the “Promised Land”.

They want positive returns without the pain of drawdowns.  In the real world this does not exist. I have to take that back, it existed in the warped dreams of the investors of Madoff and Alan Stanford.

Buffett has his admirers who hang on to every word he says. Counting their riches before time, they buy whatever Buffett does. However, these scores of admirers who mimic his methods & purchases are still wannabees. The vast majority don’t have the needed skills (patience, discipline, dedication and knowledge of compounding) such as basketball pro LeBron James has of dunking a basketball shot. The Class A shares in Buffett’s company Berkshire Hathaway were $15 when he first took over in 1965 and they were valued at $83,500 per share by the end of July 2012.

So the simple question is why isn’t everyone rich?

All you have to do is invest with Buffett and find an island to buy right? Big wrong!

How easy it wasn’t (as you will soon see)

How many would love to generate the rates of return that Buffett has over the long decades? Foolish question right! However, if you look at the chart of the BRKA it becomes a lot more complicated.The following are questions you really need to ask yourself. Here is the world’s most successful investor yet you will see from the following examples how hard it really was/is to have invested with him as well as you will shocked at the compounded returns.


The question will arise if you cannot invest in one of the world’s greatest investors, how will you really succeed in investing period?

Past Performance is not necessarily indicative of future performance

Permission of Chart by Metastock a Thompson Reuters company

In 1998 BRKA suffered more than a 50% drawdown. It took six years to recover. Again in 2007 BRKA suffered another 50% drawdown and going on six years later we still have not surpassed the prior peak. In June 30 1998 shares were approx 78,000 today in November 2012 shares are approximately 133,000.

In 15 years investing with the worlds greatest investor you would have had a 3.62% compounded annual rate of return.

Here is the world’s greatest investor and you see firsthand how hard it really is. There is no “get-rich-quick”. There is no consistent 1% per month or painless “All Weather Funds” or even any fund-of-fund which negates some of the pain. The reality is plain and clear. This is a marathon. I doubt very many of you reading this right now would have waited eight years to get back to break even. I doubt many of you would have the mental fortitude to withstand a 50% drawdown. Buffett was not alone.

He was joined by other stock market gurus.

Ken Heebner (CMG Fund) -56%

Harry Lange (Fidelity Magellan)   -59%

Bill Miller (Legg Mason Value) -50%


There are many other unknown money managers that have surpassed him. In the book “The Bible of Trend Following” I want to introduce you to a select group of money managers that you probably have never heard of, who have compounded annual rates of returns over decades of 12% up to 20% for decades. More so in The Bible of Trend Following I teach you the exact methods of how you can trade for yourself. It is not easy nor is it retirement in a box. I do not sugar-coat anything and there will be periods along the way that will you will have losing periods. While past performance is not necessarily indicative of future results you have the potential to outperform the world’s greatest investor.

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