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Warren Buffett never mentions it, but he’s one of the first hedge fund managers to unlock the secrets of successful stock investing. He started his hedge fund in 1956 with $ 105,100 in seed capital. Back then, they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns over 6%.
For example, the S&P 500 index returned 43.4% in 1958. While Warren Buffett’s hedge fund had not generated any outperformance (ie secretly invested as a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. This would have been 9.35% in hedge fund “fees”.
In fact, Warren Buffett failed to beat the S&P 500 in 1958, only returned 40.9% and pocketed 8.7% as a “fee”. His investors weren’t concerned that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year, Buffett’s hedge fund returned 10.4% and Buffett only took 1.1 percentage point as “fresh”. The S&P 500 Index lost 10.8% in 1957, so investors at Buffett 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 annum after deducting Warren Buffett’s annual fee of 5.5 percentage points. The S&P 500 Index generated an average annual compound 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 turn into $ 103,000 before fees and $ 64,100 after fees (this means Warren Buffett made over $ 36,000 in fees from that investor ).
As you can guess, Warren Buffett’s # 1 Wealth Creation Strategy is to generate high returns of around 20% to 30%.
We see many investors trying to make it rich in the options market by risking all of their savings. You can get rich by returning 20% per year and accumulating it for several years. Warren Buffett has been investing and composing for at least 65 years.
So how did Warren Buffett manage to generate high returns and beat the market?
In a free example from our monthly newsletter, we analyzed Warren Buffett’s stock picks spanning 1999-2017 and identified the top performing stocks in Warren Buffett’s portfolio. This is basically a recipe for generating better returns than what Warren Buffett achieves himself.
You can enter your email below to get our FREE report. In the same report, you can also find a selection of detailed bonus biotech stocks that we expect to earn over 50% within 12-24 months. We initially share this idea in October 2018 and the stock has already returned over 150%. We still love this investment.