And The Winner Is....

The best performing developed market of the past 20 years will come as a surprise to most.  The fact that an investment in this country nearly doubled the return of the US during this time will be even more surprising.  But the most interesting aspect about this country's performance is how it became the best performing developed country over the last two decades.

Successful Investing: Warren Buffett Wisdom

Every year tens of thousands of people make the pilgrimage to Omaha, Nebraska to listen to arguably the most successful investment manager of all time, Warren Buffett. The extremely popular event starts this Monday. Undoubtedly, some are hoping to glean some investment secret or word of wisdom that they can turn into investment gold. And who can blame them? In a world where we are constantly bombarded with hot investments, market forecasts, and pundit predictions it seems nearly impossible to ever be sure what to do with our money. Thankfully, Warren Buffett does dispense some great advice and it is actually much different than what you might expect.

What Investment Returns Can $200 Billion Buy?

The last siren call of investment managers is an appeal to your ego.  This is how it goes:

“Yes, we know most managers fail miserably to outperform the market after they pay themselves hefty fees, but those guys are for the small accounts. You have a million dollars! This will get you access to the next level of managers.  The really good ones.”

Or: “Oh, of course, accounts below a million dollars are better off investing in asset classes, but you have 5 million dollars! We have proprietary research just for you.  Our investments trounce the market.”

Or: “Well sure, if you only had $5 million it might make sense to keep expenses low. But you have 10 million dollars! You can pay for our quantitative algorithm that picks the best stocks based on how loud Jim Cramer yells the ticker symbol.”

Joking aside.  The trend is clear and you can see the allure.  At every wealth level it seems you have just enough to get you access to the real managers.  So how do you know how much you really need to get the best managers?  Maybe there is a way to find out.  Maybe there is an investor out there so large that they trump every other investor and truly have access to the very best managers.  And maybe this investor makes their returns public so you can see exactly how well their access to the “best” managers turned out for them.

“I Am Not a Great Fool” – Investing Lessons from The Princess Bride

The Princess Bride can teach us a valuable lesson about investing.

I never imagined I would make such a statement until recently when I was pondering the futility of market participants trying to predict the next market downturn or pick the next big stock. 

For me it brings to mind the movie The Princess Bride.  One of my favorite scenes is the Battle of Wits between the characters Wesley and Vizzini.  For anyone who has not seen the movie the Battle of Wits is structured as follows: There are two wine glasses on the table.  One of which has been poisoned by Wesley.  Vizzini does not know which glass has been poisoned and must deduce which glass is deadly. Once Vizzini selects a glass they both must drink their wine and the loser will die.  Part of Vizzini’s thought process is as follows:

“Now, a clever man would put the poison into his own goblet, because he would know that only a great fool would reach for what he was given. I am not a great fool, so I can clearly not choose the wine in front of you. But you must have known I was not a great fool, you would have counted on it, so I can clearly not choose the wine in front of me.”