Warren Buffett's Net Worth by Age

Post by ethanbond » Mon, Sep 12, 2016, 1:56 PM UTC

JumpCrisscross wrote: post #24

svantana wrote: post #3

Wow, that's an average 26% per year increase (for the non-inflation-adjusted data) over a 70 year timespan. That's definitely not a random walk down wall street [1]. For reference, Dow Jones seems to have about 7% per year for the same time period. [1] https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

"We find that [Buffett's] alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. 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. Decomposing Berkshires’ portfolio into ownership in…

Post by tim333 » Mon, Sep 12, 2016, 2:11 PM UTC

JumpCrisscross wrote: post #24

svantana wrote: post #3

Wow, that's an average 26% per year increase (for the non-inflation-adjusted data) over a 70 year timespan. That's definitely not a random walk down wall street [1]. For reference, Dow Jones seems to have about 7% per year for the same time period. [1] https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

"We find that [Buffett's] alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. 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. Decomposing Berkshires’ portfolio into ownership in…

Post by oli5679 » Mon, Sep 12, 2016, 2:52 PM UTC

tim333 wrote: post #64

oli5679 wrote: post #28

Buffet's approach of combining high leverage with low growth 'value' equities is a large part of his great performance. This is not to say there isn't a skill in noticing the benefits of this approach and convincing creditors and investors to let you take on all the debt, but a surprisingly small proportion of these gains are due to stock picking. http://xqdoc.imedao.com/150c22613c69373fe2602a80.pdf

Buffett actually has very little debt. Most of the leverage comes from insurance float - when you buy insurance with GEICO Buffett invests the money until you crash.

Post by oli5679 » Mon, Sep 12, 2016, 3:01 PM UTC

ethanbond wrote: post #61

JumpCrisscross wrote: post #24

Earlier quoted context omitted.

"We find that [Buffett's] alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. 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. Decomposing Berkshires’ portfolio into ownership in…

Oh so all you've gotta do is pick cheap, safe, quality stocks. Got it.