ragups;99035smariner,
Berkshire's reported GAAP compliant earnings are essentially meaningless for analysis. The first quarter's earnings for Berkshire include a charge for ~1.6 billion from a marking to market of various European style equity index put options that are set to expire 15-20 years from today. The charge does not reflect the economic reality behind the value of these options to Berkshire.
Best,
Ragu
Buying into Buffett\'s portfolio
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rtoiaspirant
- Posts: 7
- Joined: Sat Oct 06, 2012 7:10 am
Buying into Buffett's portfolio
Do you generally account for these things when looking at an investment? In general do you or others as value investors have invested significant amount of time understanding accounting principles like GAAP?
Buying into Buffett's portfolio
All my investment worries and efforts are gone after reading the "Millionaire Teacher" book. In this book author has a very simple argument that if stock market average gain/loss for any year is x%, that means some stocks would have made more than x% and some less than x%. Picking the stocks that always made more than the average is not possible at least not for a long term. Author gave examples how almost all the fund managers have a lucky strike for few years but if you see long term everybody's average is less than the total stock market average.
In this book author says that for most diversification (and security) one should invest in index funds, which represent the total/a sector of the stock market. Following is the simple strategy that author proposes:
Invest in the Bonds index a percentage equal to your age (as you grow older you want more stability and less risk), split rest of the money in US Index and International Index:
Basically, Open an account with Vanguard and split your investment in following index funds:
Vanguard US Bond Index (VBMFX - 35% or whatever your age is), - This represents total US bond market
Vanguard Total Stock Market Index Fund(VTSMX - 35%), - This represents total US stock market
Vanguard Total International Stock Index Fund (VGTSX - 30%); - This represents total International Stock market
After that every year just rebalance, and you are all set.
I highly encourage everyone to read this book (no affiliation with author/publisher), and invest sensibly.
In this book author says that for most diversification (and security) one should invest in index funds, which represent the total/a sector of the stock market. Following is the simple strategy that author proposes:
Invest in the Bonds index a percentage equal to your age (as you grow older you want more stability and less risk), split rest of the money in US Index and International Index:
Basically, Open an account with Vanguard and split your investment in following index funds:
Vanguard US Bond Index (VBMFX - 35% or whatever your age is), - This represents total US bond market
Vanguard Total Stock Market Index Fund(VTSMX - 35%), - This represents total US stock market
Vanguard Total International Stock Index Fund (VGTSX - 30%); - This represents total International Stock market
After that every year just rebalance, and you are all set.
I highly encourage everyone to read this book (no affiliation with author/publisher), and invest sensibly.
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rtoiaspirant
- Posts: 7
- Joined: Sat Oct 06, 2012 7:10 am
Buying into Buffett's portfolio
Buffet for one has generally managed to beat S&P. Am pretty sure there are others too. I haven't read this book so cannot comment on its accuracy or the sample set it looks at.
If you are looking for average returns, the strategy looks like a good one. My interest in investing is for a few reasons of my own - (1) Manage/grow investments (2) Alternative career (3) Gives me a good view of the world outside of my tech bubble that I am living in.
My feeling is that if you want to start something of your own (or understand some decisions taken by CEO types), then there are quiet a few things that go into making good calls. One of them being how the economy is, how the current sector is doing (in which you are working), the financial view of things to name a few.
If followed correctly and if you are willing to dig a little deeper (by looking at balance sheets, income statements, cash flow statements, annual reports and other SEC filings) you can get a good reading on how different markets and are doing, demand from different countries, interesting sectors, cyclic pattern and a lot of others. It is this wealth of information I am drawn to that makes me invest time in it. Guess an MBA would probably know about these but my ignorance about it makes me excited and want to know more.
If you are looking for average returns, the strategy looks like a good one. My interest in investing is for a few reasons of my own - (1) Manage/grow investments (2) Alternative career (3) Gives me a good view of the world outside of my tech bubble that I am living in.
My feeling is that if you want to start something of your own (or understand some decisions taken by CEO types), then there are quiet a few things that go into making good calls. One of them being how the economy is, how the current sector is doing (in which you are working), the financial view of things to name a few.
If followed correctly and if you are willing to dig a little deeper (by looking at balance sheets, income statements, cash flow statements, annual reports and other SEC filings) you can get a good reading on how different markets and are doing, demand from different countries, interesting sectors, cyclic pattern and a lot of others. It is this wealth of information I am drawn to that makes me invest time in it. Guess an MBA would probably know about these but my ignorance about it makes me excited and want to know more.
agarwalmk;477325All my investment worries and efforts are gone after reading the "Millionaire Teacher" book. In this book author has a very simple argument that if stock market average gain/loss for any year is x%, that means some stocks would have made more than x% and some less than x%. Picking the stocks that always made more than the average is not possible at least not for a long term. Author gave examples how almost all the fund managers have a lucky strike for few years but if you see long term everybody's average is less than the total stock market average.
In this book author says that for most diversification (and security) one should invest in index funds, which represent the total/a sector of the stock market. Following is the simple strategy that author proposes:
Invest in the Bonds index a percentage equal to your age (as you grow older you want more stability and less risk), split rest of the money in US Index and International Index:
Basically, Open an account with Vanguard and split your investment in following index funds:
Vanguard US Bond Index (VBMFX - 35% or whatever your age is), - This represents total US bond market
Vanguard Total Stock Market Index Fund(VTSMX - 35%), - This represents total US stock market
Vanguard Total International Stock Index Fund (VGTSX - 30%); - This represents total International Stock market
After that every year just rebalance, and you are all set.
I highly encourage everyone to read this book (no affiliation with author/publisher), and invest sensibly.