Warren Buffett Without mentioning this, he was one of the first hedge fund managers to unlock the secrets of successful stock market investing. He launched his hedge fund in 1956 with his $105,100 seed capital. Back then, they weren’t called hedge funds, they were called “partnerships.” Warren his Buffett received his 25% of all returns above 6%.
For example, the S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge funds didn’t produce outperformance (i.e., he invested as secretly as an index fund in the closet), Warren Buffett said he’d earn 37.4% of his quarter of the excess return. I would have put one in my pocket. That would have been 9.35% in hedge fund ‘commissions’.
In fact, Warren Buffett failed to beat the S&P 500 Index in 1958, returning just 40.9%, pocketing 8.7% of that in “commissions.” His investors didn’t care that he underperformed the market in 1958, as he was well above the market in his 1957. Buffett’s hedge fund returned his 10.4% that year, of which Buffett only received his 1.1% in “commissions.” Buffett’s investors were thrilled that he outperformed the market by 20.1 points in 1957, as the S&P 500 Index fell 10.8% in his 1957 year.
From 1957 to 1966, Warren Buffett’s hedge funds returned 23.5% annually after deducting Warren Buffett’s 5.5% annual fee. The S&P 500 Index, the same he produced only an average annual compound return of 9.2% over the 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund early in 1957 had his capital at $103,000 before fees and $64,100 after fees (this is because Warren Buffett has (meaning you earned more than $36,000 in commissions).
As you can imagine, Warren Buffett’s wealth building strategy It produces high returns in the range of 20% to 30%.
Some investors risk their entire savings to get rich in the options market. You can get rich by returning 20% annual interest and compounding it for several years. Warren Buffett has been investing and compounding for at least 65 years.
So how did Warren Buffett generate high returns and beat the market?
In a free sample issue of our monthly newsletter, we analyzed Warren Buffett’s stock selection covering the period 1999-2017 and identified the best performing stocks in Warren Buffett’s portfolio. It’s basically a recipe for generating higher returns than Warren Buffett himself has achieved.
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