skanjete

I suppose most of these board members manage their own money, and I suppose most of these do better than the indexes or "expert" money managers. So a very pertinent question of my wife I sometimes wrestle with is : "what can I do, what do I have to do with the money or investments if you would suddenly die today. What can I do, or who can I trust, because I myself have no clue what to do with the money." Has somebody thought about this question before? I suppose Buffett has thought about it a lot and it's something that can be noticed in his investment style. Cfr. his stock selections over the last decade which are selected for eternity. A thing one has to consider, apart from the fact that the possible returns from the money probably would be lower, is that the risk profile of the widow would change dramatically. It's not that she would need the money so survive, but on the other hand, she couldn't afford to lose it either, because there would be no possiblity to rebuild it. I've got an investment style with focus on quality and long term horizon (more like Buffett in his later years than in his earlier years), so there would be no immediate problem. Maybe I could even advise her to keep the investments for at least 1 year. But then she would need something else, and more importantly, a trustworthy stewart of the investments since she wouldn't be able to do it herself. Low cost index funds would be a good starter. But maybe it could be advisable to add some long term value creating companies as Berkshire Hathaway or Markel, Coke maybe? But if I add a company, I have to take into account my widow wouldn't know the company and would never sell. So I think very few companies can fit into this selection. Now we're invested mainly in stocks and a good chunk of cash. Would it be better to keep it this way, or would it be better to balance somewhat to other categories (bonds, real estate, gold??,...)? Other categories which at this moment are clearly inferior, but could change at some point in the future? Or are there any money managers that could be trusted on a very long term basis? All money managers that more or less fit the profile are more or less Buffett clones, so why not just stay with the financial Rock of Gibraltar itself and skip the fees? Has anybody thought about this problem and does anybody has any specific suggestions?

Regarding Buffett : one can hardly expect someone to produce a track record as Buffett's and expect him to live a "balanced" live. Exceptional focused results only come from exceptionally talented and focused people, be it in sports, medicine, science or investing. When I read Snowball, I was mostly impressed by 2 things : his autistic-like focus and his extreme, almost unhuman rationality. I suppose it's hard to switch off emotions once in the office and to switch them back on when coming home.

If spending half of your net worth doesn't affect your standard of living, and vice versa, if doubling your money wouldn't affect your standard of living, why wouldn't you pay cash? Why risking something you have and need in order to obtain something you don't have or need? There's not only the risk of your investments, there are also uncommon risks. Suppose you die suddenly in a car accident on your way back from buying the house. Your house and investments go to your wife/husband, but are first taxed by the (progessive) inheritance tax. If the surviving wife/husband has no clue about investing, she/he will have to rely on "external experts" for the (taxed) investments to pay off the debts. It's clear that in certain circumstances, the risk profile could change drastically. Having said that, I'm in the case above, but I would have to borrow something anyhow because of tax reasons. But these reasons are beside the point of discussion of course.

I translate my total investment amount into virtual "units". f.e. you start with 100.000. That's 1000 units with value 100. Suppose the value of the portfolio rises 20%. Total value will be 120.000 or the same 1000 "units" will have value 120. If at that point I add 60000, I virtually buy 500 units with value 120. So then I have total investment of 180.000, or 1500 units with value 120. Another 10% rise would take us to 198.000, or 1500 units with value 132. etc. Based on the value of the units, you can calculate your total and annualised return. The system takes correctly into account the additions or extractions of capital. I suppose that's also the way funds calculate their returns.