Warren Buffett he never mentions this, but he is one of the first hedge fund managers to unlock the secrets of successful investment in the stock market. He launched his hedge fund in 1956 with $ 105,100 in starting capital. At that time, they were not called hedge funds, they were called “partnerships”. Warren Buffett obtained 25% of all returns above 6%.
For example, the S&P 500 index returned 43.4% in 1958. If Warren Buffett’s hedge fund had not yielded any superior performance (ie secretly invested as a closed index fund), Warren Buffett would have pocketed a quarter of the return surplus of 37.4%. This would have been 9.35% in hedge fund “fees”.
In fact, Warren Buffett failed to beat the S&P 500 index in 1958, returned only 40.9% and pocketed 8.7% of it as “fees”. His investors did not care that he underperformed the market in 1958, because he beat him by a large margin in 1957. That year, Buffett’s hedge fund returned 10.4% and Buffett received only 1.1 percentage point of that as “fees”. The S&P 500 index lost 10.8% in 1957, so Buffett’s investors were really excited to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966, Warren Buffett’s hedge fund returned 23.5% per year after deducting Warren Buffett’s 5.5 percentage point annual fees. The S&P 500 index generated an average annual compound return of just 9.2% over the same 10-year period. An investor who invested $ 10,000 in Warren Buffett’s hedge fund in early 1957 saw his capital turn over $ 103,000 before fees and $ 64,100 after fees (this means that Warren Buffett earned more than $ 36,000 in fees from that investor ).
As you can imagine, Warren Buffett’s No. 1 wealth creation strategy is to generate high returns in the range of 20% to 30%.
We see several investors trying to get rich in the options market by risking all of their savings. You can get rich by returning 20% a year and accumulating it for several years. Warren Buffett has been investing and capitalizing for at least 65 years.
So how did Warren Buffett manage to generate high returns and beat the market?
In a free sample edition of our monthly newsletter, we analyzed Warren Buffett’s stock choices covering the period 1999-2017 and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe for generating better returns than Warren Buffett is achieving.
You can enter your email below to get our FREE report. In the same report, you can also find a detailed selection of biotech stocks with bonuses that we expect to return over 50% within 12-24 months. We initially shared this idea in October 2018 and the stock has already yielded more than 150%. We still like this investment.