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Wednesday, December 22, 2010

Best Investment & Retirement Portfolios for the Long-term

Charles Munger, Warren Buffett, Berkshire Hathaway and Kirk Lindstrom's Explore portfolio

What do Charles T. Munger and Warren E. Buffett`s Berkshire Hathaway (BRKA) have in common with Kirk Lindstrom's Explore Portfolio?

  • All invest for the long-term where first priority is getting good value for the investment dollar in companies we like for above average long-term growth.
  • Both Berkshire Hathaway and "Kirk Lindstrom's Explore Portfolio" take profits when investments are successful so we can maintain a cash reserve of roughly 20% to 40% for future opportunities.
  • Both have performed far better than buy and hold the S&P500 the past decade. 
  • Both believe we can beat the market by buying good stocks for the long term when they are priced correctly.
  • Berkshire Hathaway has a significant premium in the price for its aging managers. 
  • Charley Munger was born January 1, 1924 (in Omaha, Nebraska) and Warren Buffet was bone on August 30, 1930. Both men are older than my now deceased parents.   I was born April 5, 1957.
  • Through my understanding of technology from working as a research and development (R&D) engineer AND scientist at Hewlett Packard from 1978 to 1998, I've been able to invest in quality technology stocks so my portfolio has more than doubled the annual return for BRKA since I started my newsletter.
The stupid sees difficulty in every opportunity; the intelligent sees opportunity in every difficulty. --Nahsti 
From Interview with Charlie Munger :
Q: What do you think of the efficient market theory, which holds that at any one time all knowledge by everyone about a stock is reflected in the price?

A: “I think it is roughly right that the market is efficient, which makes it very hard to beat merely by being an intelligent investor. But I don't think it's totally efficient at all. And the difference between being totally efficient and somewhat efficient leaves an enormous opportunity for people like us to get these unusual records. It's efficient enough, so it's hard to have a great investment record. But it's by no means impossible. Nor is it something that only a very few people can do. The top three or four percent of the investment management world will do fine.”
From Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
Returns for last 12 years
Click for Full Size Table

I recommend a "core" portfolio for about 80 to 95% of your funds and an "explore" portfolio made of stocks from my newsletter "explore portfolio" for the remainder. My newsletter stocks are volatile by design to add to overall returns, but you need a good core portfolio to sleep well at night. I offer several different core portfolios for both aggressive & conservative (retired) investors.
Since starting this newsletter in 1998, I have grown my "Explore Portfolio" 388% from $100,000 to $487,644. Over the same period (September 30, 1998 through December 21, 2010) the S&P 500 (with dividends reinvested) is only up 50.5%).

For 2010 through December 21, my “explore portfolio” is up 20.0% YTD vs. S&P500 up 14.6% & DJIA up 10.6% YTD. The explore portfolio was roughly 70% equities for the year so the stocks in the portfolio had a banner year!

In 2009, my "Explore Portfolio" gained 33.5% while the S&P500 and DJIA gained 26.5% and 18.8%, respectively.

More from Charlie Munger:
Q: What about people who want to pick stocks?

A: You're back to basic Ben Graham, with a few modifications. You really have to know a lot about business. You have to know a lot about competitive advantage. You have to know a lot about the maintainability of competitive advantage. You have to have a mind that quantifies things in terms of value. And you have to be able to compare those values with other values available in the stock market. So, you're talking about a pretty complex body of knowledge.
Charlie Munger, From Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
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