“I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
Above are the exact words Warren Buffett said in an interview. He made this extraordinary statement about managing large amounts of money in the context of how difficult it is for institutional money managers with even larger funds to outperform stock markets.
Buffett himself compounded money at more than 30% in the early years of his Buffett partnerships. At Berkshire, he would continue to achieve returns of 20% for long periods of time. Only in recent years has his performance suffered due to the enormous asset size he commands with Berkshire Hathaway. Today, he sits on more than $80 billion in cash! He has too much money and hence he will never achieve the same stellar returns again!
Do you have hundreds of millions to manage?
Even though you might be well-off and have plenty of cash lying around, you most certainly wouldn’t come close to the size of money Buffett manages today.
Nor would you have to deal with the large amounts of money giant institutional asset managers like Fidelity or BlackRock juggle (that includes the largest hedge funds).
You are most likely an individual with money to invest and you are looking for ways to let your money work for you at high returns. I have good news for you!
Very high returns on moderate amounts of capital are realistic!
The Secret of Superinvestors
Here is a man, the world’s best investor in the history of mankind, confirming that high returns of 50% or even more are doable for any individual investor. He is not alone. There is a group of investors known for consistent high returns. They are known as Superinvestors and their secret to success is rather simple!
Quality investment ideas and a high concentration of these ideas (also known as Focus Portfolio Management) generates high returns. All Superinvestors understand that their ideas are the beginning of great investment performance!
If you read about any Superinvestor in history, you will quickly find out their enormous drive to find and analyze new investment ideas. They would go as far as to change asset classes, countries and investment styles in their quest for extraordinary performance. They understood that if you want extraordinary returns you need to do something extraordinary – very much different from the investing majority.
Their hard work and inclination to take calculated risks paid off. They were the Superinvestors of their time!
Achieving high returns requires hard work and an analytical skill set. This combination is rare among individual investors and even professionals. The real barrier for individuals is that they have neither the time nor inclination to give their capital the attention it would require to achieve these returns.
And who can blame them? Their wealth comes from the day to day activities that made them wealthy in the first place. These are usually your successful entrepreneurs or top-income professionals, such as lawyers, doctors, or consultants.
Indeed, to split the limited time between their professions and their life-savings would be too much. And so they settle, as most of us do, for perceived “safety,” such as giant mutual funds or index funds.
In reality, these conventional options result in poor performance and limited safety, as they have so many times in the past. Today, I can see the same mind-boggling trends continue among retail investors, as each generation repeats the mistakes of their predecessors. They seem to forget:
Conventional investment methods and products are meant for the masses. Thus they produce returns worthy of masses (aka ‘The Sheep’).
You don’t need to get into a fund valued in the billions. In fact, doing so slows down your potential gains and exposes you to recurring financial disasters and consequential panic selling. But how do you avoid the masses and still find outstanding investment opportunities? How do you achieve the returns of Superinvestors and still be one step ahead, avoid panic selling and have plenty of cash reserves?