Warren Buffett never mentions this, but he is one of the first hedge fund managers to discover the secrets of a successful stock market investment. He started his hedge fund in 1956 with seed capital of $ 105,100. At that time they were not called hedge funds, but “partnerships”. Warren Buffett achieved 25% of all returns greater than 6%.
For example, the S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund hadn’t outperformed (investing clandestinely like a Closet Index Fund), Warren Buffett would have bagged a quarter of the 37.4% excess return. That would have been 9.35% of the hedge fund fees.
In fact, Warren Buffett couldn’t beat the S&P 500 Index in 1958, returning only 40.9% and pocketing 8.7 percent of that as “fees”. Its investors did not mind that it underperformed the market in 1958, as it outperformed the market significantly in 1957. That year, Buffett’s hedge funds returned 10.4%, and Buffett took only 1.1 percentage points of that as “fees.” The S&P 500 index lost 10.8% in 1957, so Buffett’s investors were actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966, Warren Buffett’s hedge fund had an annual return of 23.5% after deducting Warren Buffett’s 5.5 percentage points annual fees. The S&P 500 Index achieved an average annual return of only 9.2% over the same 10-year period. An investor who invested $ 10,000 in Warren Buffett’s hedge fund in early 1957 sees his capital as $ 103,000 before fees and $ 64,100 after fees (meaning Warren Buffett got more than $ 36,000 from that investor earned in fees).
As you can imagine, Warren Buffett’s # 1 strategy for wealth creation is to achieve high returns in the range of 20% to 30%.
We see several investors trying to make the options market rich by risking all of their savings. You can get rich by returning 20% per year and piecing that together for several years. Warren Buffett has been investing and strengthening for at least 65 years.
So how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter, we analyzed Warren Buffett’s stock picks for the period 1999-2017 and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe for getting better returns than Warren Buffett himself makes.
You can enter your email address below to receive our FREE report. In the same report, you can also find a detailed selection of Bonus Biotech stocks that we expect to generate more than 50% return within 12 to 24 months. We initially shared this idea in October 2018 and the stock has already achieved a return of more than 150%. We still like this investment.