Yeah, yeah - I understand it is all subjective. I guess its all about risk management and risk tolerance. I try my best to ensure I have as large a margin of safety going into the deal (buying below market value) and also a good margin of safety throughout the investment life (only investing in areas which have a great chance of growth due to infrastructure, population growth etc...) I can only dream about the day of stopping - but when that day comes I will hopefully start to pay off all debts and hold unencumbered assets.
$1,000,000
- Thread starter mackenam
- Start date
The most basic rule that is just plain wrong?
Warren Buffett also said diversification increases risk.
Diversification is just an excuse to be ignorant. Such tripe spoken by people who don't even know how to make money.
Agreed - if you're on to something good you wouldn't diversify.
Or, put them in the basket you understand most and can control best and watch it vigilantly, like a hawk.
The bulk of my portfolio is like this. Property is the asset class I do best. I understand it.
A smaller portion of the portfolio value is in ca$h right now, waiting for the right opportunities (be they property, shares, A-REIT's, and so forth). It is also a type of hedge in these volatile periods. I don't see cash in the bank as a long term play unless one is advanced in years and risk aversion (mitigating losses) is a high priority, however right now, it hurts not to have folding stuff should lending markets take a short term dive and distressed assets feature more and more.
Sometimes diversification is diworsification
Buffett would typically only hold 6 stocks if he had a lower capital base (like in the early days).
Agreed that diversification is normally diworsification - but you need some of it to prevent yourself from a catastrophe.
i.e. doubling your money 10 times because you put all your money into 10 great stocks and then sold - and then putting all the money into a stock that goes bankrupt (ABC Learning or Babcock and Brown or Centro - not that we would have invested there as the writing was on the wall well before they went bust but just as an example).
Years of hard work would be all gone in a flash.
So there is some merit in diversification - for the sake of not losing your shirt - but not too much.
If there was a truly great deal I would only put 50% of my money there - just to be safe. Won't become a billionaire out of it but won't be broke either - and $100M is enough for me anyway
Agreed that diversification is normally diworsification - but you need some of it to prevent yourself from a catastrophe.
i.e. doubling your money 10 times because you put all your money into 10 great stocks and then sold - and then putting all the money into a stock that goes bankrupt (ABC Learning or Babcock and Brown or Centro - not that we would have invested there as the writing was on the wall well before they went bust but just as an example).
Years of hard work would be all gone in a flash.
So there is some merit in diversification - for the sake of not losing your shirt - but not too much.
If there was a truly great deal I would only put 50% of my money there - just to be safe. Won't become a billionaire out of it but won't be broke either - and $100M is enough for me anyway
Buffett would typically only hold 6 stocks if he had a lower capital base (like in the early days).
Agreed that diversification is normally diworsification - but you need some of it to prevent yourself from a catastrophe.
i.e. doubling your money 10 times because you put all your money into 10 great stocks and then sold - and then putting all the money into a stock that goes bankrupt (ABC Learning or Babcock and Brown or Centro - not that we would have invested there as the writing was on the wall well before they went bust but just as an example).
Years of hard work would be all gone in a flash.
So there is some merit in diversification - for the sake of not losing your shirt - but not too much.
If there was a truly great deal I would only put 50% of my money there - just to be safe. Won't become a billionaire out of it but won't be broke either - and $100M is enough for me anyway
Yeah
But it obviously sounds like you're better & bigger & tougher & smarter if you take the **** instead of taking it seriously.....
Who has ever ever heard of a succesful person with more than 1 asset ? never happens, they all die of poverty,every single one crying about taking the wrong turn at the diversification/specialisation crossoads....
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Well the billionaires may have one 'asset' in the company they own.
But remember - they are diversified within that business (i.e. Buffett owns 100's of businesses - unique example) - Woolies owns supermarkets, hotels, liquor, hardware etc...
And only 1/1M of these people make it - the rest all have nothing.
I would rather have $100M safely (or $10M) than a one in a million (or even 1/100) chance of making $1B - because when you have 100 or 1000M it really makes no difference.
But remember - they are diversified within that business (i.e. Buffett owns 100's of businesses - unique example) - Woolies owns supermarkets, hotels, liquor, hardware etc...
And only 1/1M of these people make it - the rest all have nothing.
I would rather have $100M safely (or $10M) than a one in a million (or even 1/100) chance of making $1B - because when you have 100 or 1000M it really makes no difference.
did once but felt better to do it on my own.
i have a finance degree and i do trades in shares and deriatives on and off. i also do renovations, currency trades, invest in property, hailstorm car refurbs, ran a cafe overseas, online shop and anything that can make a dollar. Although i don't have a super capacity - but i reckon i'm done a better job then putting it in super or insurance.
I think you've missed my point. I'm not talking about getting advice on investments, I'm talking about structuring and risk management.
If you're employed, your employer is making super contributions. Advice in your 20s could mean you've got a very different outcome later in life.
Getting some insurance on level premiums in your 20s will be saving you money by the time you're in your 30s. You'll be laughing about it in your 40s and 50s.
Of course you don't need insurance because nothing ever happens to you (it tends to happen when you get older), but since 1 in 3 people get some form of cancer or suffer a trauma at some point in their life, it may be prudent to put some measures in place so in the worst case scenario you can still afford to keep investing.
People diversify after they make a lot of money. Can't diversify when you have $200k, for example, as it doesn't go very far. The same could be said about $1m. You could buy a $1m building using $300k equity, leave $300k in cash and $200k in stocks and $200k in bonds. Win some, lose some. Come out hopefully marginally ahead.
Someone like Forrest, on the other hand, is not particularly diversified. Nor is Tinkler. Sure they have houses and boats and stuff, but that makes up 0.01% of their holdings? Not to mention they've probably leveraged those things to their eyeballs to punt their mines/rail/port.
Someone like Forrest, on the other hand, is not particularly diversified. Nor is Tinkler. Sure they have houses and boats and stuff, but that makes up 0.01% of their holdings? Not to mention they've probably leveraged those things to their eyeballs to punt their mines/rail/port.
Those guys are exceptions though. For every mining company that's turned into FMG there are thousands that have failed.
Too risky in my opinion - and you know Tinkler is going to lose it all very soon - he's someone that should realise that leverage has worked for him in the past and now should stop punting and start diversifying without huge risk/debt. He doesn't need anymore money so there is no point to keep going.
Too risky in my opinion - and you know Tinkler is going to lose it all very soon - he's someone that should realise that leverage has worked for him in the past and now should stop punting and start diversifying without huge risk/debt. He doesn't need anymore money so there is no point to keep going.
Easy to say. But once you have built a sizeable business up it is very, very difficult to just 'walk away' or diversify. The concept of retirement/diversification is very foreign to entrepreneurs because their business is everything. To them, It is madness to suggest that they invest in anything other than their business or their industry.
Exceptions? I thought we were talking about billionaires after all.
But ok. For every FMG out there, there's also an Aquila/Atlas Iron/Mineral Deposits/Macarthur Coal etc. Fancy $200-500m? And for every one of these out there, there's also a bunch of Iron Ore Holdings/Western Plains Group/Pluton Resources. Fancy $10-50m?
Don't get me wrong - I take your point that thousands if not tens of thousands have failed and lost a lot of money. Is that reason to not punt hard, real hard, if the stars align?
Before we forget, Rupert Murdoch nearly lost it all when the banks closed in on him. And Richard Branson mortgaged his mum's one and only house to save his music van. Again, I take your point that some do that and fail. Even within Australia the likes of Fairfax, Skase, Elliott still resonate in legends. And even more recently the likes of Groves. But I didn't think that was reason to diversify or to shy away from leverage. Different mindset perhaps.
Hi DB,
My uncle is a Fund Manager and had lunch with Eddy Groves about 2 or 3 years before ABC Learning went bust - and he told me afterwards that he could tell something wasn't right with this guy and that he'd be surprised if the guy lasted on the rich list for more than 5 years.
I just believe that getting rich is tough - so when you get there you shouldn't jeopardise it just for the sake of getting richer (especially when you don't need the extra money.)
Those miners are a tad too risky for my liking - I'd go with the safer option and choose the ones that service these miners - the picks and shovels - safer so won't be a billionaire but won't go broke either.
My uncle is a Fund Manager and had lunch with Eddy Groves about 2 or 3 years before ABC Learning went bust - and he told me afterwards that he could tell something wasn't right with this guy and that he'd be surprised if the guy lasted on the rich list for more than 5 years.
I just believe that getting rich is tough - so when you get there you shouldn't jeopardise it just for the sake of getting richer (especially when you don't need the extra money.)
Those miners are a tad too risky for my liking - I'd go with the safer option and choose the ones that service these miners - the picks and shovels - safer so won't be a billionaire but won't go broke either.
of course some of the billionaires in oz are from families, dynasties if you like, old money.
love reading about their histories and stories. some make the money and keep it, even make more, others spend or lose the lot.
fascinating how it happens. perhaps luck plays apart, certainly human nature does, good and bad.
watched bill gates being interviewed he seemed such an unassuming man.
no arrogance, nothing more to prove.
some flaunt their wealth others keep a low profile.
i enjoy reading the tales/experiences on this forum, so interesting.
love reading about their histories and stories. some make the money and keep it, even make more, others spend or lose the lot.
fascinating how it happens. perhaps luck plays apart, certainly human nature does, good and bad.
watched bill gates being interviewed he seemed such an unassuming man.
no arrogance, nothing more to prove.
some flaunt their wealth others keep a low profile.
i enjoy reading the tales/experiences on this forum, so interesting.
