An Optometrist Billionaire Investor
forbes.com
forbes.com
We learn later in the story that Wertheim did in fact demonstrate enterpreneurial brilliance and dogged devotion to his career and was an unimaginably successful buy-and-hold investor. The company he founded, BPI, threw off up to $10M / year in cash that funded his investment portfolio.
That he he was successful not just as an investor, but also as an inventor and entrepreneur, is what's truly amazing.
If his total investments at that time was $100 million, which seems somewhat reasonable given how much he lost in the margin call, investing that in the S&P500 would be worth $4 billion today, which is quite a bit more than the $2.3 billion he's actually worth.
That's also ignoring his currently $10 million a year income from BPI, so he could have spent 100% of that money.
Investing skill exists, is rare and often captures all of the gains accruing to it because wannabe investors bid for access to it and due to the winner’s curse often overpay.
George Soros is like Steve Jobs. Making a giant fortune once could be luck but if you can repeat it again and again the chances it was ever luck just go down and down.
https://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-a...
> The speech and article challenged the idea that equity markets are efficient through a study of nine successful investment funds generating long-term returns above the market index. All these funds were managed by Benjamin Graham's alumni, pursuing different investment tactics but following the same "Graham-and-Doddsville" value investing strategy.
All that said. The weak form of the EMH is true. You personally are very unlikely to beat the market over the long run.
Moreover, the returns of investors is not normally distributed (a lot of people flipping coins would result in a normal distribution). If you look at the actual distribution of returns, from not just the market, but from investors, you find there's a lot of kurtosis (fat tails) to the distribution. This implies that there are both more losers and winners than what a coin flip would imply.
Some of those winners are pretty clear: Berkshire Hathaway, Renaissance Technologies, 2 Sigma, Bridgewater, etc.
> So given that information why should most of us spend the effort trying to beat the market especially considering the low expense ratio on some really solid ETFs.
By managing your own money, you are inherently making asset allocations. Do I just invest 100% in SPY? That's a pretty bad idea, so even if you are just using low-cost index funds or ETFs, you are still actively managing your portfolio. You need to decide your asset type (equities, bonds, options, etc), your universe (S&P 500, Russel 2000, etc), your portfolio weights, and a host of other factors.
There is no such thing as just investing in the "market." Everyone is making an explicit or implicit choice, and that, of course, is the definition of active management.
The 'market' is simply the average of all participants, so someone that has failed to beat the market is below average.
I'm not sure we should be lauding an investor that is below average, just because they started off with a massive pile of cash.
There doesn't seem to be enough info here to decide either way though.
Quotes from the GP
> Actually, from the article it's unclear if he's beaten the S&P500 as an investor.
> If his total investments at that time was $100 million, which seems somewhat reasonable given how much he lost in the margin call, investing that in the S&P500 would be worth $4 billion today, which is quite a bit more than the $2.3 billion he's actually worth.
And the parent made a snarky comment about why internet commentators always bring up the s&p 500. And the simple answer is that for most of us ETFs are probably one of the best options for growing wealth. No one actually thinks they will be billionaires by retirement age with ETFs. So if you want to be a billionaire go get richer parents and if that doesn't work, invent Google. Good luck.
They make billion dollar companies, except for a very select few.
Fund managers do make money, lots of it, enough for their salaries and enough for their company profits. The problem is once you factor those in the index wins out for customers.
The funny thing is that it's the inefficiencies created by index investors that allow the funds to make their money.
It's only very recently that people have started to realize that it's a good bet.
Stocks will still beat cash in the long run but the main thing is to be ahead of the curve.
If you're willing to go way out on margin, you can substantially improve investment returns.
Interestingly it's a backward model when compared to people that use time as a resource towards money/success/<your_goal>...
I guess actual freedom indeed requires both free time and available resources (money/skills/knowledge/etc.).
I see many people always filling up their schedules months in advance while I always feel better without the constraint to follow past decisions. Maybe linked to control seeking & risk aversion vs. interest for unexpected opportunities...
How could this guy miss out on RED HAT?
He's done really well, but it's a bit disingenuous to say that he did all through investing. He started a business that gives him 10 million a year to invest with! Yes, he appears to have taken that and increased it many times over, but it helps to start at a high base level.
I'm almost 100% sure that they were talking about "The World" yacht [2]. I found out about this last year, and I'd be tempted to buy an apartment if I could ever afford it (you need at least $10 million.) The expeditions are amazing [3], as well as the regular lectures and workshops [4].
It's also pretentious, dystopian, and a bit embarrassing. I don't know if those are the sort of people I'd want to spend all my time with, but maybe many of them are just ordinary people who happen to have a lot of money. It would certainly be an interesting place to live.
[2] https://aboardtheworld.com
Therein lies one of the great secrets to wealth.
Buffett, Bogle, etc. all espouse it. For those who are looking for ways to level the economic field (at least personally), take note.
Obtaining vast wealth requires doing things which have a multiplier effect well beyond the scale of your labor. That usually requires doing something related to the aggregation or generation of capital. It can't be done solely with your own capital unless you're already wealthy.
It's much more likely that if you chose some stock in 1940s and never sold that you would have lost money than made money.
The reason why the S&P 500 looks so good overtime is because the S&P 500 is actively managed. It is effectively crowd-sourced from the very best invest ideas of mutual funds and hedge funds.
The “rebalancing” is just adding/removing stocks following the rules and turnover is pretty low.
No.
> dividends,
No.
> and change in market capitalization
No (at least for the changes related to price movements and not share count).
> or the float number (the amount of shares on the public markets).
The last one is the only valid concern. In the end turnover is quite low (a few percentage points per year, including additions/removals and adjustments, if I remember correctly).
I guess I was wrong about the splits, but everything else still holds.
An example of company that would be helped by future disruption would maybe be Amazon or Tesla. Examples of companies that might be hurt by the future would be Exxon or Phillip Morris or Safeway.