Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Warren Buffet Winning 10-year $1M Bet
Old 06-28-2016, 07:32 AM   #1
Full time employment: Posting here.
dixonge's Avatar
 
Join Date: Mar 2008
Posts: 956
Warren Buffet Winning 10-year $1M Bet

S&P Index (Vanguard) fund vs. hedge funds

Why Warren Buffett Is Winning His $1 Million Bet Against Hedge Funds - Fortune
__________________

dixonge is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-28-2016, 07:46 AM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 43,371
Warren bet the Vanguard S&P 500 Index fund (fees of 0.05%) would outperform a group of "funds of funds" with fees of just over 3.0% per year. Even someone as number challenged as me can guess who will win this one...
__________________

__________________
Numbers is hard

Although rare, it is possible to read something on this forum you don't agree with and simply move on with your life

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-28-2016, 10:12 AM   #3
Full time employment: Posting here.
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 610
Quote:
Originally Posted by REWahoo View Post
Warren bet the Vanguard S&P 500 Index fund (fees of 0.05%) would outperform a group of "funds of funds" with fees of just over 3.0% per year. Even someone as number challenged as me can guess who will win this one...
Post of the day!
ownyourfuture is offline   Reply With Quote
Old 06-28-2016, 10:12 AM   #4
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,419
Quote:
Originally Posted by REWahoo View Post

Even someone as number challenged as me I can guess who will win this one...
FIFY
__________________
"Expanded polystyrene (made with a blowing agent) releases the blowing agent (gas) when you put it in the toaster. So what you end up with is non-expanded polystyrene!" -- philosopher aja8888
redduck is offline   Reply With Quote
Old 06-28-2016, 10:19 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 10,272
Well sure, but Buffet is an investing guru.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 06-28-2016, 10:24 AM   #6
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 43,371
Quote:
Originally Posted by redduck View Post
FIFY
So you're some sort of grammando, declaring war? I'll be watching...
__________________
Numbers is hard

Although rare, it is possible to read something on this forum you don't agree with and simply move on with your life

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-28-2016, 10:31 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,766
The bet was not a million dollars, the total winning pool was a million dollars. Actual bet was a $320,000 each put into a zero coupon bond that would mature into a million dollars at the end of ten years for the charity. Through agreement, the betting participants then market timed the proceeds selling the zero coupon bond at a peak in bond prices and put all the money into a single stock BRK, resulting in the funds invested outperformed the hedge fund pools, the S&P 500 and BRK during this entire period. They did not invest the proceeds in an index fund, they were in 100% single zero coupon bond and then a single stock. Watching what people actually do with money rather than what they say you should do is much more profitable.
You will note with Warren that he always advocates index funds and never uses them.

I like what I read about Charlie Munger once when he was asked what he was stripped of all his money. I would work to get some money and invest in the best individual stocks I could find and get rich again, I don’t think it would be much of a problem for me.
Running_Man is offline   Reply With Quote
Old 06-28-2016, 10:47 AM   #8
Recycles dryer sheets
Cassius King's Avatar
 
Join Date: May 2010
Location: Cincinnati
Posts: 194
Warren advocates index funds for the majority of investors who don't have the time or acumen to research their own stocks. That's quite different than him needing them himself.
He said they would be better off owning a mix of 90% S&P500 Index Fund and 10% ST Govt Bonds.
Cassius King is offline   Reply With Quote
Old 06-28-2016, 10:57 AM   #9
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
There's an NPR interview with the hedge fund guy

Episode 688: Brilliant vs. Boring : Planet Money : NPR

Quote:
KESTENBAUM: Are you bummed about probably having lost this bet?

SEIDES: A little bit. Sure.

KESTENBAUM: Yeah, you had a chance to beat Warren Buffett.

SEIDES: Yeah - with the odds in my favor. And it didn't play out the way I thought it would.

KESTENBAUM: You thought the odds were in your favor.
When I first heard the interview I thought the guy sounded reasonably smart but over confident. Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
photoguy is offline   Reply With Quote
Old 06-28-2016, 10:58 AM   #10
Full time employment: Posting here.
CaliKid's Avatar
 
Join Date: Apr 2016
Location: Cali
Posts: 655
There is two years left so I wouldn't write off the hedge funds yet. That's the "beauty" of such an investment. If you can stomach the ride a true hedge fund can have incredible growth (or the opposite) in a very short period of time. That's why some smart people invest in them.
__________________
______________________
Hoping to get out around September 1, 2022... I hope, I hope, I hope. Until then off to work I go....
CaliKid is offline   Reply With Quote
Old 06-28-2016, 12:25 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,766
Quote:
Originally Posted by photoguy View Post
There's an NPR interview with the hedge fund guy

Episode 688: Brilliant vs. Boring : Planet Money : NPR



When I first heard the interview I thought the guy sounded reasonably smart but over confident. Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
The million dollar “bet” was a tax deductible charitable donation of $360,000 for the hedge fund who were using the donation as an advertising ploy to obtain more customers for their hedge fund business. As you will note the bet is not Warren Buffet against an individual but Warren Buffet against an LLC.
Running_Man is offline   Reply With Quote
Old 06-28-2016, 12:34 PM   #12
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 43,371
Quote:
Originally Posted by CaliKid View Post
There is two years left so I wouldn't write off the hedge funds yet.
And I thought I was an optimist.
__________________
Numbers is hard

Although rare, it is possible to read something on this forum you don't agree with and simply move on with your life

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-28-2016, 12:50 PM   #13
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,330
Quote:
Originally Posted by photoguy View Post
Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
The odds aren't good. The goods are odd.

By how much is the fund lagging?

I'd guess about 20%?
Totoro is online now   Reply With Quote
Old 06-28-2016, 01:42 PM   #14
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,419
Quote:
Originally Posted by REWahoo View Post
So you're some sort of grammando, declaring war? I'll be watching...
Yet more proof that no good deed goes unpunished.

Quote:
Originally Posted by REWahoo View Post
And I thought I was an optimist.
OK, you can join the advanced grammar group.
__________________
"Expanded polystyrene (made with a blowing agent) releases the blowing agent (gas) when you put it in the toaster. So what you end up with is non-expanded polystyrene!" -- philosopher aja8888
redduck is offline   Reply With Quote
Old 06-29-2016, 09:14 AM   #15
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by Running_Man View Post
The million dollar “bet” was a tax deductible charitable donation of $360,000 for the hedge fund who were using the donation as an advertising ploy to obtain more customers for their hedge fund business. As you will note the bet is not Warren Buffet against an individual but Warren Buffet against an LLC.
I have no issue with how the bet was funded or recorded as business transaction. My main issue is with specific strategy taken on the hedge fund side.

Quote:
Originally Posted by Totoro View Post
The odds aren't good. The goods are odd.

By how much is the fund lagging?

I'd guess about 20%?
The last numbers I saw were +65% for Buffet and +22% for the hedge fund. So a lot of the difference is the 3% fee.

Warren Buffett slips but still winning epic hedge fund bet
photoguy is offline   Reply With Quote
Old 06-29-2016, 03:55 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 20,730
Quote:
Originally Posted by REWahoo View Post
So you're some sort of grammando, declaring war? I'll be watching...
Uh Oh, redduck! You will have to be more careful (with your writing) than you normally are.

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-29-2016, 04:14 PM   #17
Full time employment: Posting here.
CaliKid's Avatar
 
Join Date: Apr 2016
Location: Cali
Posts: 655
Quote:
Originally Posted by redduck View Post
Yet more proof that no good deed goes unpunished.



OK, you can join the advanced grammar group.

I had a typo but at least I didn't start a sentence with "and."

However, I still don't belong in the advanced grammar group. Maybe one day, if I work really hard, I can join the smart kids there!?
__________________
______________________
Hoping to get out around September 1, 2022... I hope, I hope, I hope. Until then off to work I go....
CaliKid is offline   Reply With Quote
Old 06-29-2016, 04:17 PM   #18
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 43,371
Quote:
Originally Posted by CaliKid View Post
I had a typo but at least I didn't start a sentence with "and."
You grammar cops are relentless.

Quote:
Originally Posted by CaliKid View Post
There is two years left...
__________________
Numbers is hard

Although rare, it is possible to read something on this forum you don't agree with and simply move on with your life

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-30-2016, 05:21 AM   #19
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,330
Quote:
Originally Posted by photoguy View Post
The last numbers I saw were +65% for Buffet and +22% for the hedge fund. So a lot of the difference is the 3% fee.
Thanks for that link.

1.03^(10) = 34%. So exactly on target for the 3% fee

Pray tell, where are the customers yachts ..
__________________

Totoro is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
(very) Early Warren Buffet RonBoyd FIRE and Money 14 06-04-2015 06:59 PM
A Warren Buffet-like investor's view on globalization wildcat Other topics 2 06-19-2007 02:46 AM
Warren Buffet the Billionaire Next Door crazy connie Other topics 26 11-29-2006 10:01 AM
Death Tax and the DarK Side of Warren Buffet Hydroman Other topics 29 09-09-2006 05:08 PM
I'd still be willing to risk winning farmerEd Other topics 0 02-28-2006 09:02 AM

 

 
All times are GMT -6. The time now is 05:19 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.