According to the Google search engines for this site, one of the most queried subject topics is something to the effect of “How did Warren Buffett get rich?” That’s an unsurprising curiosity, considering that Warren Buffett is without a doubt the most famous man in American history in the realm of investing. Some people are simply curious about any man who can compound wealth at nearly 20% for the entirety of his life, others are drawn to his personal style of maintaining a witty sense of humor and basic tastes despite amassing one of the largest fortunes in all of recorded human history.
In answering this question, there is one thing I’d like to point out to begin with: the investing bug had been in Buffett’s DNA right from the start, and his life is a story of what happens when you combine advantage upon advantage with advantage upon advantage: … Read the rest of this article!
One of the perks of dollar-cost averaging is that it comes reasonably close to ensuring that your investment will generate returns that correspond to the actual growth of the company that you choose to invest in. The protection of a dollar-cost averaging strategy is that it protects you from the consequences of accidentally investing at a market high.
Take something like Coca-Cola. From 1997 to 1999, the company traded at obscene, impossible to justify valuations. It peaked in 1998 when Coca-Cola regularly traded at over 50x earnings. Someone who purchased $54,000 worth of the stock in 1998 wouldn’t have done all that well, turning his money $78,000 today for a return of 2.40% annually. However, you would be lucky that you made money at all, because you would have been paying $35 or so for a share of stock that was only pumping out $0.71 in annual profit. Those shares … Read the rest of this article!
Vanguard Total World Stock Index Fund (VTWSX). This fund, split up into over 5,300 stocks, is one of the best all-weather beast funds that exists. The fund’s imperative is to basically say, “Hey, we are going to take the most dominant American firms, and combine them with the most dominant companies that run the world outside the United States. We’ll tilt towards the biggest and baddest, and own everything else, too.”
Imagine a baseball team that pepetually consisted of a prime Stan Musial, Ty Cobb, and Willie Mays in the outfield, Lou Gehrig at first, Rogers Hornsby at second, Honus Wagner at short, Brooks Robinson at third, Hank Aaron at DH, and Bob Gibson at the mound.
You’re getting that kind of All-Star with the top holdings in Vanguard’s Total World Stock Index Fund: Apple. Exxon. Google. General Electric. Microsoft. Johnson & Johnson. Chevron. Wells Fargo. Nestle. Procter & Gamble.… Read the rest of this article!
Bill Agee, from the Harvard Business School Class of ’63, gets money. Hell, he gets life:
It may seem too easy for someone who has achieved relative financial success and a significant degree of material comfort to say in retrospect that this no longer really matters. It does matter, in that this form of success provides for safety and security, comfort and freedom.
However, I believe that each person must define an optimal amount of financial success. This is the point at which money is no longer a great motivator.
Once our economic needs have been fulfilled, it is time to give back — to seek out those whose basic needs have not been met, whose human rights to shelter, food, and safety have not been satisfied.
Originally posted 2014-01-22 22:09:44.
… Read the rest of this article!
The longest economic expansion in the entire history of the United States lasted from March 1991 through March 2001, a period of 120 months. Right now, the United States has not experienced a recession for 118 months, with economic expansion characterizing the period from June 2009 through the present. If there is no recession prior to summertime, this will be the longest uninterrupted period of growth in the history of the United States.
When we are amidst such a period of economic growth, I believe the question of “What to do next?” involves re-focusing on the very things that we ought to be doing all along.
Primarily, this means focusing on cash and fair valuation for any investments that you make.
Regarding cash, the appeal of keeping 10% to 20% of one’s assets available as dry powder is nearly self-evidence. To paraphrase Warren Buffett’s citation of his grandfather, “Cash is … Read the rest of this article!