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Anonymous Size of your Portfolio Poll


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yeah, I couldn't figure out the best way to do the spreads--I wish a had two more slots.

 

I think you can add as many slots as you want - just click on Add option.

Would be interesting to split the 250K-1M and 1-10M categories.

Just my 2 cents...

 

well shit.  I should have paid more attention.  At this point, I'm not sure if it is worth remaking since so many have already responded.

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Either you have earned that money by investing in which way my argument is you cannot do so investing in a manner that would have generated 50-100% on a $50-200k portfolio.. there will be pull-backs where the leverage kills you and you will be wrong too at least once in your career

 

Okay, but my personal 401k+IRA+RothIRA started out higher than $200k on the day I retired in January 2008 and today it is up to slightly more than 11x.

 

I'm not going to mention the price starting figure in 2008 because I don't want to be too specific on divulging net worth.  I've mentioned previously that roughly 50% of my net worth is in my RothIRA.  So by stating that it started at 200k and is up 11x, I'm already conceding that my net worth must be at least $4.4m today.

 

So supposing I hold a 100% notional position in BAC and the common stock price triples in 5 years.  Then at that point it's only yet another triple from $40mm.

 

And, of course, supposing I started out with more than $200k in my tax-advantaged accounts in early 2008...

 

Not sure I followed all the suppositions, but I will say that if you in fact turned $200k to $2.2mm+ in less than 4 years I am very impressed and you are truly an outlier. As for continuing to invest in this manner and/or achieving similar returns, I wish you the best of luck and hope you can follow on those fantastic results! I will only say that from a purely economic stand point if you can achieve those results you should lever up your personal returns by starting a fund and commanding an incentive fee. I am fully aware that not everybody cares about being a fiduciary and/or dealing with all the bs that comes with managing other peoples money but I just think that having such an audited track record would do you wonders and supercharge your already incredible compounding machine!

 

I don't want to be a professional money manager. 

 

I couldn't analyze most balance sheets to save my life.  My technique is to recognize the people who do know how to do that and watch their holdings.  Then if the holding fits my narrative I load up on it.

 

 

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Moore is right.  Managing other people's money is different.  There are both legal and size issues among others.  Heck, I've a hard time buying reasonable amounts of some stocks for my own portfolio.  They'd not really be options for a 1B AUM fund.

 

Oh absolutely, perhaps I've been misunderstanding him, but I thought he was also talking about individual's ports, from the context of the other thread.  I would not have done what I did with OPM, though it would be reproducible up to large sums.

 

I do not think investing other people's money should be any different than investing one's own. Legal and size issues with respect to OPM are manageable. If NormR is referring to legal issues with respect to maximum concentration limits, they do not pertain to "accredited" investors. And there is nothing stopping a manager from closing his/her fund/segregated account business if size becomes a performance issue. For a manager, with all his/her own savings in a fund he/she manages, it cannot be too great a hindrance to limit it to accredited investors and a performable size. 

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Hopefully you now realize the logic behind my comments as your poll confirms that the majority of the posters are managing $100k or less... I have been around the game long enough to know that nobody generates 50-100% returns consistently with significant aum.

 

The poll is currently showing less than 10% at 50k or less, which is within the bonds of my initial assertion.  Besides, most of the college students without much capital have already identified themselves, so we already knew who a few were.

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Was this survey intended to ask the question "What is your personal portfolio size?" or "What is your assets under management?"

 

It was mostly devoted to individuals, so I assumed those where the same.  I was reporting how much I was personally managing as opposed to net worth (e.g., 401k/home equity etc.).  I probably should have just said AUM.

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Yes I will explain what I meant. Portfolio construction that achieved an 11% return on $300k most probably could have been replicated on a larger amount of capital (maybe as much as $5mm) but for the guys saying they earned 50-200% this year it had to have been on much less capital. It would be rather unlikely to construct a portfolio that earned 50-100% this year on a $50-100k portfolio which could have been replicated on a decent sized portfolio.

 

Actually Moore, I think the circumstances change dramatically when you manage other people's money as well.  Probably far greater difficulties arise from that than actual portfolio size...especially if you have short lockups or no lockups.  Managing your own portfolio, you can easily take bigger swings at ideas, because you know only you will redeem the capital.  You suffer volatility for a couple of years, and some of your less-tempered partners will pull their capital because they get worried.  Just a whole different game managing other people's money.  Cheers!

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Yes I will explain what I meant. Portfolio construction that achieved an 11% return on $300k most probably could have been replicated on a larger amount of capital (maybe as much as $5mm) but for the guys saying they earned 50-200% this year it had to have been on much less capital. It would be rather unlikely to construct a portfolio that earned 50-100% this year on a $50-100k portfolio which could have been replicated on a decent sized portfolio.

 

Actually Moore, I think the circumstances change dramatically when you manage other people's money as well.  Probably far greater difficulties arise from that than actual portfolio size...especially if you have short lockups or no lockups.  Managing your own portfolio, you can easily take bigger swings at ideas, because you know only you will redeem the capital.  You suffer volatility for a couple of years, and some of your less-tempered partners will pull their capital because they get worried.  Just a whole different game managing other people's money.  Cheers!

 

I would agree with Sanjeev here. 

 

It seems to me that the it is managing OPM (particularly, without lockups) that puts limits on performance in the case of a $100 MM hedge fund versus a $100 K individual portfolio, not the actual size of the capital pool.  Until you really have enough AUM to actually move the market, I don't see why you couldn't, in theory, have essentially the same portfolio as an individual investor replicated on a larger scale.

 

Even instruments like LEAPs, which helped me juice my YTD paper return, can be replicated using TRS, correct?  (This is an actual question -- I'm not sure of the answer.) 

 

Take a look at the Fairholme Allocation fund.  It's pretty much run with the same portfolio concentration as what one might have in an individual portfolio.  Of course, Berkowitz has to deal with investors putting in and withdrawing money.

 

Even Pabrai could probably still do a 50% year despite having close to, what, $500 million AUM?  Although his investors would probably go apeshit if he actually implemented a strategy that would allow that to happen.

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"My technique is to recognize the people who do know how"

 

Ericopoly, if you don't mind me asking, who would you include in this group?

 

In the past I've purchased companies that were HWIC, Berkshire, of Fairholme holdings.  There is of course no guarantee that they'll do well, but they've passed the balance sheet sniff test.  Those guys can catch any obvious balance sheet analysis red flag, so I figure why bother.  I just then have to focus on the narrative.  This protects me from making the basic entry level errors, which I'd surely suffer a lot of hurt from if I struck out solely on my own.

 

Buffett is looking at long run earnings power, he looks at the balance sheet no doubt and at management because there is no sense investing for the long run earnings power if the company won't be around in the long run.  That's one reason why I like his interest in BAC, even if it is via the preferreds -- he thinks in terms of not wanting to risk his opportunity cost, not just his capital invested..

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"My technique is to recognize the people who do know how"

 

Ericopoly, if you don't mind me asking, who would you include in this group?

 

In the past I've purchased companies that were HWIC, Berkshire, of Fairholme holdings.  There is of course no guarantee that they'll do well, but they've passed the balance sheet sniff test.  Those guys can catch any obvious balance sheet analysis red flag, so I figure why bother.  I just then have to focus on the narrative.  This protects me from making the basic entry level errors, which I'd surely suffer a lot of hurt from if I struck out solely on my own.

 

Buffett is looking at long run earnings power, he looks at the balance sheet no doubt and at management because there is no sense investing for the long run earnings power if the company won't be around in the long run.  That's one reason why I like his interest in BAC, even if it is via the preferreds -- he thinks in terms of not wanting to risk his opportunity cost, not just his capital invested..

 

Eric,...

 

your intellect seems to play this adaptive behavior process the most expressive way. You search for recognizable investing patterns, that you can understand the easiest way for yourself, and where you can compound money in quantum leaps. Some sort of artificial intelligence and/or adaptive emergence behavior like this little boy in Steven Spielberg's movie A.I.. A highly advanced robotic boy longs to become "real" so that he can regain the love of his human mother and searching for the tooth fairy. I might also refer to John Holland's masterpiece book "Emergence" from the Santa Fe Insitute or Richard Brodie's "Virus of the Mind" book. Brodie was also at MSFT, Bill Gates's personal technical assistant and he wrote Microsoft Word.

 

Someone can have a weakness by not understanding everything in every comer of a balance sheet, like Eric said, but through some collective adaptive learning, someone gains some wisdom advantage.

 

Well,... actually I view most regular posters and board members as some bunch of collective adaptive brain. I would call us all some sort of artificial swarm,... or sort of swarm intelligence. Our board/ we members here are like a flying swarm of birds in the sky. But also swarms, part, build new branches or merge together. Thus we have our personal individual portfolio weightings, build by our knowledge how to fly and navigate with our wings.

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Eric, how long have you been investing?  Is a tripling every 5 years what you've come to expect?

 

Given that during my investing experience I've had these returns I therefore expect it to be like this forever.

 

I remember you came out of nowhere with a condescending post about the "BAC cheering post".  Is this another sucker punch?

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I couldn't analyze most balance sheets to save my life.  My technique is to recognize the people who do know how to do that and watch their holdings.  Then if the holding fits my narrative I load up on it.

 

Eric Roshtein

 

I love Boardwalk Empire. Rothstein's speech got me due to the poker and investing relevance. It's starting up again this weekend!

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I couldn't analyze most balance sheets to save my life.  My technique is to recognize the people who do know how to do that and watch their holdings.  Then if the holding fits my narrative I load up on it.

 

Eric Roshtein

 

I was amazed that they give away the KEY to investing just like that.

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Well,... actually I view most regular posters and board members as some bunch of collective adaptive brain. I would call us all some sort of artificial swarm,... or sort of swarm intelligence.

 

Yes, this board has served as a tremendous asset.  I learned about the integrity of Prem and his team from this swarm and the swarm alerted me of the options play in 2006 at nearly just the right time.  Then the swarm continued to throw gold bones my way, with the constant updates on when the CDS portfolio was gaining in value while the market price of FFH burned -- my RothIRA doubled in the two days following the short selling ban in Sept 2008.  Then I have to thank Cardboard immensely for clearly laying out how the FFH team had telegraphed their intentions to buy out ORH, after which I stacked ORH calls into my RothIRA -- my RothIRA jumped 50% on the first trading day of the buyout announcement.

 

In a way the CDS gains and the ORH buyout were practically like trading on insider information, only this was perfectly legal.

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Yes I will explain what I meant. Portfolio construction that achieved an 11% return on $300k most probably could have been replicated on a larger amount of capital (maybe as much as $5mm) but for the guys saying they earned 50-200% this year it had to have been on much less capital. It would be rather unlikely to construct a portfolio that earned 50-100% this year on a $50-100k portfolio which could have been replicated on a decent sized portfolio.

 

Actually Moore, I think the circumstances change dramatically when you manage other people's money as well.  Probably far greater difficulties arise from that than actual portfolio size...especially if you have short lockups or no lockups.  Managing your own portfolio, you can easily take bigger swings at ideas, because you know only you will redeem the capital.  You suffer volatility for a couple of years, and some of your less-tempered partners will pull their capital because they get worried.  Just a whole different game managing other people's money.  Cheers!

 

 

How does that pertain to segregated accounts? If managing a fund, wouldn't having a closed-end fund, with subsequent capital raises, deal with the non-lock-up problem?

 

I think most managers would prefer to suffer inferior performance than sacrifice AUM. Subconsciously or otherwise. AUM doesn't matter to investors. Investors care about results. And so does posterity.

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Ericopoly, one thing I don't understand -  you say you are not good at analyzing balance sheets, but  you compensate for this weakness by investing alongside great investors who are.  So you read Berkowitz' investment thesis for BAC, decide that you agree with him and buy the stock- only problem is, if I remember right Berkowitz only had about 5% or so of his fund in it, but you went all in.  I would think that if you weren't personally able to analyze it you wouldn't want to bet too much bigger than the person you are coattailing (no offense, I only use the term because you have used it before to describe yourself).

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Ericopoly, one thing I don't understand -  you say you are not good at analyzing balance sheets, but  you compensate for this weakness by investing alongside great investors who are.  So you read Berkowitz' investment thesis for BAC, decide that you agree with him and buy the stock- only problem is, if I remember right Berkowitz only had about 5% or so of his fund in it, but you went all in.  I would think that if you weren't personally able to analyze it you wouldn't want to bet too much bigger than the person you are coattailing (no offense, I only use the term because you have used it before to describe yourself).

 

I don't think Eric's strategy is to mimic Berkowitz. He obviously has a different risk tolerance/ strategy.  I think it's more like a screen...  BAC passes the "balance sheet sniff test" and from there it's his own strategy going forward based on what he thinks of the stock.

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