The Blog of Author Tim Ferriss - Latest Comments in Picking Warren Buffett’s Brain: Notes from a Novice

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Chetan — Fri, 17 Apr 2009 22:18:27 -0000

Hi Tim,
I was actually at the AGM (as a student attendee) and remember hearing this question. Didn't realize it was YOU asking it. Great question, would have loved to meet up if I knew it was you.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Steve — Mon, 13 Apr 2009 10:35:58 -0000

As soon as I read Buffet's response, I thought the old saying, there is nothing new under the sun. Buffet just rephrased a quote by Confuscious;
"Before enlightenment, chop wood, carry water. After enlightenment, chop wood, carry water."

Which reminds me, I need to go chop wood and carry water, now.

Steve

Re: Picking Warren Buffett’s Brain: Notes from a Novice

XK — Sat, 11 Apr 2009 00:22:32 -0000

M: “The whole secret of successful investing [full-timers] is non-diversification. If you know nothing –> diversity.” B: “There are situations, for the full-time investor, where it’d be a mistake not to invest 50% of your net worth in one business.” If more aggressive: small stocks and specialized bonds, but no currencies.

I read through the comments and realized very few people mentioned this part of the conversation. They are suggesting non-diversification isn't it? Then your $1 million ought to be put into say at most 5-8 specific businesses' stocks/bonds (which is what they are doing in Berkshire now - buying bonds/stocks of Goldman,GE,etc)? And not "10% in X sector, 20% in Y sector, etc..", unless if you know nothing :)

Peace

Re: Picking Warren Buffett’s Brain: Notes from a Novice

B.D. — Fri, 20 Mar 2009 11:01:05 -0000

Hi..

Are you still looking for the answer to how to invest your first mil?

I would put it in one basket and watch that basket very carefully...stay away from the stock market and currencies..the whole world has become Vegas...

The basket I suggest is - real estate...Real estate will always work against inflation(in the long term)..Governments have a habit of printing money every few years..(this year more than others)..

And of course, watch your expenses very, very carefully...

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Laura — Wed, 04 Mar 2009 18:16:35 -0000

I was not surprised at the % of "volatility able" voters. However, I have experience: After 9/11, my 401K bled $700 per month while I was putting in $500. I had a "moderate risk" spread of stocks and bonds and whatever else. The seller/manager had promised "You'll at least get your investment back." Yeah, right. Not at this rate. After three months, I couldn't stand the bleeding and stood my ground to move out of stocks completely. He practically begged me to keep the stocks as part of my spread, but I refused. I have no idea what the percentage was, nor did I feel panicky -- I just wasn't going to waste my money anymore. Bitte.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Robert dCZ — Wed, 04 Mar 2009 01:28:03 -0000

The answer to the question of how a 30 year old should invest his or her first million really depends on what the aim is:

- Do you want security and a steadily growing net worth?
- Do you want asset protection and disposable cash flow?

In my opinion the smart answer would to look for the prior for the first 10-15 years, and then shift increasingly to the latter in the subsequent 10.

If you agree with that view, then there are certain types of property classes you can hardly go wrong with, as long as you diversify across borders.
More precise, working class rental properties in countries that are not yet quite industrialised and that have a growing (young) population, will produce both, cash flow and capital growth.
The emotional reward of giving less fortunate people decent housing at affordable rates while making decent profits at the same time, is f.o.c.

As the portfolio matures (ie. you get older) and you require more disposable cash flow, you start adding rentals in growth areas for the lower middle class, as well as commercial property in the same areas.

Throw in an occasional purchase of agricultural land (orchards, forests, etc.) in the same countries, and you should be set for a life in comfort, a few years after starting, because you never have to sweat stock market turbulences, wonder about the global recession, nor do you need to check if the millionnaire in your top of the line holiday rental had everything with Madoff.

Poor people also have much better payment morale, especially when it comes to their rent.

Cheers,
Robert.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Patrick — Sat, 07 Feb 2009 16:27:46 -0000

Hi Tim and others,

the reason he gave you this advice:

Buffett let out a small laugh and began. “I’d put it all in a low-cost index fund that tracks the S&P; 500 and get back to work…”

is not that he doesn't like you, it's that you were part of the public that is not a sophisticated investor like he is.
Like most financial advisers nowadays talk about, save money and invest in mutual funds, he gave you the same advice.

If you were more sophisticated you would have not asked that question in the first place, you would have asked a better question.

This is not to be negative towards your question all I'm saying is, this is the advice that is the best for the poor and middle class public these days.

Patrick, investor.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Cole — Fri, 26 Dec 2008 23:53:39 -0000

Tim,

I would invest in optimizing your web businesses w/ respect to conversion rates, opt-ins, etc. Investing in your own business to optimize what is already successful almost always yields the highest returns year over year. I know you are more interested in free time than more money at this point, so the investment could come in the form of a firm to work on that for you on a results-only basis. $1million invested in reducing your business returns, tweeking adwords or upgrading your own marketing systems can easily yield a 30% return year after year is easier (lower risk) and more profitable than virtually any other type of investment.

Warmest,

Cole

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Denise — Sun, 26 Oct 2008 17:10:41 -0000

Hi Tim,

A few months back you mentioned, "choosing sectors, economies, markets with a moral compass... putting capital to work in positive ways — while hedging risk — is almost a moral obligation".

I was impressed by this stance and completely agree. The world economy and markets are suffering because of businesses and individuals run by greed. If I was opening a new account (I already have Vanguard), I would choose a mutual fund called Amana. Most people might never consider it, but Amana does not invest in liquor, pornography, gambling, or banks. These may all be booming businesses, but unfortunately just add to the detriment in our society.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Sclous — Fri, 24 Oct 2008 19:27:29 -0000

Hiya Tim! If I'm reading you correctly, and WB :)

1. The reasoning is, for the least amount of effort, and cost to you, over 30 years and even less time, the ease of access and history of the US stock market is hard to beat. It wins against most things for a 10 to 20 year period as well. (Need money, try to sell a house now! vs. please sell enough to give me X dollars.)

2. Your effort to manage the money is ZERO, after you put the million in.

Think about that! -- How many activities don't require you to do anything? And actually have a track record of earning money?

(I'm trying to promote my music, and yeap, it's work, ditto a book :) or any job. Being a landlord? REITs are far less work....)

He's offering you a great return with no work -- but with RISK.

2.a. Risk, will my life continue if I lose it all. Will I need the money back before it makes more money, at least enough to beat INFLATION. You are a go getter, so why be fearful about things? Dude, let's face it, doing something on an adventure is far more likely to happen to you than ;) going quietly into that good night.
b. Reward? Pays between 9% to 12% on average per year. No effort on your part. Lot easier than witting and promoting a book :)

3. 100% of your time is now freed up to make money other ways.

4. The index seems to beat MANY mutual funds, and many stocks, about 85% of the time, and keeps "self-correcting" by dropping losers, such as Enron, again, no effort. (I am sure later folks can find examples for this -- but again, it's a zero effort to you.)

5. There are guys who can beat the market for a time... but only for a time. They charge more money to play, than Vanguard does, although Fidelity also has index funds, etc. at good rates. Vanguard's fees are hard to beat if you have $1000, $100,000, or the million.

5. Customer service, ease of use, and focus on the "small investor" Boogle, the founder of Vanguard, has opinions, and let's put it into perspective -- a million is NOT by their standards, with at one point, 4 Trillion dollars under management, not a large account. However, I can speak from my own experience, Vanguard will provide wonderful customer service, spending 50 minutes last night with me, as we worked through some transactions, purchases, and exchanges.

6. WB takes risks, but in giving this advice, he's providing great advice that historically has held true-- even with all our issues in the USA, we are more transparent about what our companies are doing than many other companies around the world. The US stock market represents international companies, as well as domestic ones. This is part of risk.

7. To put things into perspective further -- how much did your plane flight, trip, and question cost? Vs. say, his book. $1000 vs. $25 -- If you had invested the money this week, on some days, it would have earned 5%-- and lost 5% the next day -- we are in weird times... but it make a great intro to a blog post, to promote your book -- you are clever, but too busy -- still you get to deduct the trip on your taxes now, as a business expense, etc. your accounting friends, or your own thinking is clear enough -- and you likely sold some books, made appearances :)

However, if the choice had simply been see speaker X, vs. stay home and invest... stay home, invest. :) Then...

8. Go on with life.

8.a Yes, there is a place for diversification, and I am, and you should be too :) But at the end of the day, age of the investor, and hopes of return, it's simple personal finance stuff that should be taught to everyone. It's blessed my life with the ability to pay for some key things, and not worry about the money future, even when the market is down. For most people, they don't have a million in one place, so their time frame, goals, etc. are different.

9. However, for you Tim, it's all one -- your life is promoting your message = you message is your life -- ditto Derek S. of Cdbaby...

for me, it's something like that, the message is about helping people
-by raising dogs for people in wheelchairs,
-adopting and raising kids from foster care,
-writing music for people who are dying from cancer, and need encouragement, etc.
-However, my motivation isn't pure profit. I have been blessed because being able to step back and look at other things, I feel less forced into riskier or greedy decisions.

(Greed and Fear, my dad would say move us in investing... but there can be love and caring for others as well. And yes, humor, hopes, foolish and otherwise... and then looking at it as one of the only games in town....)

This last would bring out my chief question to you,

Tim, do you want to put your money in as a blind investment ?

You need to ask yourself, "I am interested in a return, I don't care about where the money goes-- or you want to support some causes, even if it costs vs. the Index?"

I read some time ago about the the no pork/no usury Muslim Mutual funds have done pretty well vs. funds with lots of banks in them... they have oil as the basis, not credit... :) That was before the price of oil dropped dramatically....

But, overall, you might want to consider a fund with a focus on things you believe in...

But the final point of view I came to, was it was the money I'd take out of it, and how I'd use that money, defined my character, more than what exactly it was invested in... And that I would give now, not just when I die, to the various causes, schools, and people that meant the most to me.

Volunteering should be easy for some one working only 4 hours a week :)

I will, in the interest of full disclosure, mention I also have holdings in a mutual funds that "screens" out casinos, and some other morally questionable businesses -- and interestingly enough, it's done better than the stock market index -- some of these companies don't do well long term.... certainly not when people don't have money to gamble...

Social funds, may beat out the index, but generally have higher costs, and more risks... back to WB and Boogle...

...[sorry, comment rules!]...

Thanks for your interesting blog posting.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

timferriss — Thu, 23 Oct 2008 13:35:31 -0000

@Arlo,

Munger said Ben Franklin. He's a big fan, as am I.

Best,

Tim

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Arlo — Thu, 23 Oct 2008 05:02:55 -0000

under the "Best books to read for investing and life?" line, did (M) mean Ben Graham or is it really Ben Franklin?
thanks

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Lee Ali — Fri, 03 Oct 2008 20:34:39 -0000

"(B) Chapters 8 and 20 in The Intelligent Investor. (M) Anything by Ben Franklin."

I am a bit confused. Did Tim mean "Ben Graham"?

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Toni Fer — Thu, 02 Oct 2008 10:06:10 -0000

Tim: I've met your blog thanks to this post found via [the link in my name]. Great blog.

Matt: in the 4th Spanish edition that I have, chapter 20 is the last and it is about "The safety margin as a core part of the investment"

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Mike — Wed, 17 Sep 2008 02:29:08 -0000

Excellent post, Tim. Thank you. Attending a Berkshire shareholder's meeting in the next few years is a life goal of mine.

I have a slightly unrelated question I would like to pose to the readers of this thread (if this is not an appropriate topic then I apologize). This popped in my mind while reading how Tim raced to be one of those at a microphone who could ask a question of the Oracle, and it relates to the general 4HWW tenant of living a life full of excitement:

How do you get in to the front row at a major rock concert?

My favorite band ever, AC/DC, is beginning their world tour next month, and I plan to see at least three of their shows. I would love to get in to the front row of at least one, (there will likely be general admission floor seats), but I don't want to pay 5x face value from a ticket broker. Aside from camping out and being one of the first in through the door, are there any other good guidelines to follow?

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Scott — Mon, 25 Aug 2008 14:53:55 -0000

In answer to your question, I think if I was 30 with no dependents, I would spend a few months studying a group of stocks and invest in a few (3-5) that projected large EPS gains over the next 5 years that also had low current P/E ratios. I think 30 is too early to be overly cautious if you have funds that you can be a bit risky with.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Lou — Wed, 13 Aug 2008 10:27:39 -0000

There is a great show from PBS called "Buffett & Gates Go Back to School"
http://www.shoppbs.org/prod...
In it they share their thoughts on a number of topics including wealth creation, standing out in the business world and what it means to be *truly* wealthy.
It's also interesting because it was recorded 3 years ago and much of what they said has played out (i.e. Gates is now more active in his philanthropy foundation and has stepped back in his role within Microsoft).
PBS actually has a number of great speials on Warren Buffet, maybe because he tends to be a big supporter of public television.
P.S. No, I do not work for PBS! :-)

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Matt — Thu, 07 Aug 2008 21:44:04 -0000

...but there is no Chapter 20 in the Intelligent Investor...?

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Matt Richards — Wed, 06 Aug 2008 18:51:15 -0000

Warren Buffet is a guru when it comes to money. Those who invested in his ideas early are now rich.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Shane — Sun, 13 Jul 2008 13:44:28 -0000

Great post. Always interesting to see the buzz that occurs around anything involving the name Warren Buffet.

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Josh — Fri, 11 Jul 2008 09:43:34 -0000

You are the one constantly preaching about not needing very much money to live the lifestyle that you do, with a million dollars all in bonds with a 7% annual ROI you are still making $70,000/yr playing it as safe as possible when it comes to monetary investments with all of your time (a much more precious commodity) free for investing how you see fit. You would need to adjust for inflation but it is still quite enough money to spend all of your time traveling, doing volunteer work, kickboxing, tango dancing, enjoying fine wines and chocolates, testing out cars, giving countless interviews, writing for your blog, finally coming up with some new hobbies, or heck maybe even writing another book. But if playing it safe isn't for you then you are more than welcome to give me the million dollars and I would be more than happy to party it up in the previously described manner!

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Emilie — Fri, 04 Jul 2008 10:57:38 -0000

@Jeff
"Each year the World Wealth Report is published showing that the world’s wealthiest people hold about around 50% of their wealth in real estate and/or alternative assets."

Your case is, boldy put: the rich have 50%+ in real estate, so it must be intelligent. I don't buy the idea but even if:

I checked the world wealth record 2007. On page 15 you can see your asumption crumble: They only hold 16-20% depending the year (2004-2008). Although you provided the reasons for your suggestion -- that distiguishes you from the rest --, I can not follow your argument we should hold 40% real estate assets instead of ETF etc. Can you clarify that?

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Dean Isaji — Thu, 26 Jun 2008 14:10:49 -0000

Tim,

The essence of your piece is education and I believe that will be Buffett's greatest legacy. But do not ignore the work of his business partner - Charlie Munger. I and quite a few others are great followers of his 'mental models' thinking approach. It's not for everyone, but I think anyone planning on investing has to be aware of the big ideas, at the very least.

I've included the link on this post and hope people will find it useful.

Best wishes - Dean

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Henry — Wed, 25 Jun 2008 08:55:56 -0000

Tim.. some badass is posting 'bad thing' about you

...

###

Hi Henry,

Not to worry and thanks for the heads up, but it's no problem. The book polarizes people and some like to attack others on their blogs to try and drive traffic. I just ignore them.

All the best,

Tim

Re: Picking Warren Buffett’s Brain: Notes from a Novice

Ben FrantzDale — Tue, 24 Jun 2008 21:53:24 -0000

A lot of similar Buffett wisdom can be had in The Warren Buffett Way.