Podcast Summary
Discussing 10-year investment performance and reasons for investing with Monish Pabrai: Stig Broderson's portfolio outperformed the MSCI All Country World Index with a 21.4% CAGR, achieved through Monish Pabrai's teachings and private investments. He cautions against blindly following his trades and emphasizes the importance of knowledge and tools.
Transparency in sharing investment performance comes with its own set of challenges. During this episode of The Investors Podcast, Stig Broderson discussed his portfolio's 10-year performance, which outperformed the MSCI All Country World Index with a 21.4% compounded annual growth rate. Stig shared his reasons for investing with Monish Pabrai, the role of private investments in his portfolio, and his biggest investment mistakes and wins. He also explained his hesitation in sharing his returns publicly, citing potential biases and the risk of followers cloning his trades. Stig emphasized that the goal of the podcast is to empower listeners with knowledge and tools, not to mimic the hosts' investments.
Beating a benchmark's returns is difficult, Kager's 21.4% CAGR outperforms MSCI All Countries World Index's 8.9%: Beating a benchmark's returns is tough, but Kager's impressive 21.4% CAGR from 2014-2024 outperforms the MSCI All Countries World Index. However, investment success isn't only about returns; the price paid and investment objectives matter too.
Achieving returns above a benchmark like the MSCI All Countries World Index over a long period is a challenging feat for investors. Kager's 21.4% compound annual growth rate from 2014 to 2024 outperforms the index's 8.9% Kager return significantly. However, it's important to note that investment success is not solely determined by portfolio returns. The price paid for positions and investment objectives are also crucial factors. For instance, holding onto a position and buying a position are two distinct actions. Furthermore, investors like Kager, who have learned alongside the audience, may have different investment objectives and time commitments than professional equity analysts or portfolio managers. High returns do not necessarily equate to good investing, as it can be influenced by both skill and luck. Over a 10-year period, it's essential to consider the long-term impact of both factors when evaluating an investor's performance.
Luck plays a role in investing success: Successful investing involves a mix of skill, intelligence, and luck. Recognize the role of luck and avoid attributing all success to our abilities and blaming bad outcomes on bad luck. Adjust investment strategies based on financial goals and market conditions.
Investing success is not solely based on skill or intelligence, but also on luck. The speaker acknowledges that he has been fortunate in his investment journey and attributes much of his success to luck. He also emphasizes the importance of recognizing this potential bias towards attributing success to our own abilities and blaming bad outcomes on bad luck. The speaker advises against living by this mindset and reminds us that the stock market is volatile and unpredictable, with many factors outside of our control. He encourages investors to remember that their track record is just one aspect of their investment journey and to remain humble and open-minded. The speaker also mentions the importance of adjusting investment strategies based on financial goals and market conditions. He concludes by sharing his experience with investing in gold and the Goose Fund as examples of how changing market conditions and risk profiles can impact investment strategies.
Considering investments: Diversification, understanding process, and track record: Research thoroughly, understand investment process, and look for a successful track record before investing. Prefer investors with significant net worth in their own fund and aligned fees.
When considering investments, it's important to consider diversification, understanding the investment process, and the track record of the investor. The speaker mentioned that they have a mix of public and private investments, and that they included a private investment with Manish in their portfolio due to Manish's long and successful track record and their understanding of his investment process. They also mentioned that they prefer investors who have a significant portion of their net worth in their own fund and a fee structure that aligns their interests. Diversification was also a key consideration, as the speaker's investment in Manish provided exposure to companies outside of the US. Overall, the speaker emphasized the importance of doing thorough research and understanding the investment process before making a decision.
Investing with a proven track record manager: Trust a manager's judgment, allow winners to run, diversify, and invest with conviction in a proven track record manager who can adapt to changing times.
Understanding a fund manager's approach and track record, as well as their ability to adapt to changing times, are crucial factors when making an investment decision. The speaker shares his experience with investing in Manish, a value investor with a proven track record dating back to around the year 2000. He emphasizes the importance of trusting the manager's judgment and allowing winners to run, even if their approach evolves over time. The speaker also highlights the importance of diversification and not putting all eggs in one basket. He also mentions that he appreciates Manish's limited availability to shareholders, allowing him to focus more on creating value for his portfolio. Overall, the speaker's investment philosophy is centered around investing with the highest conviction in a manager who has a proven track record and the ability to adapt to changing times.
Micro bottom-up investing principles remain constant: Success in investing comes from staying informed, being patient, and making well-informed decisions, whether through public investments or private deals.
While investment philosophies may evolve over time, the core principles of micro bottom-up investing remain constant. For example, the interview with a successful investor revealed that despite changes in approach, his fundamental investing strategy has stayed the same. Meanwhile, in personal finance, the importance of tracking expenses and investments remains crucial, with Monarch Money emerging as a popular alternative to Mint. In the world of investing, private deals offer unique opportunities for high returns, but they come with their own set of challenges and risks. For instance, a private investment made by the interviewee yielded a 10X return due to promotional reasons and favorable conditions. However, not all private deals are the same, and it's essential to approach them with caution and a clear understanding of the risks involved. Overall, whether it's through public investments or private deals, the key to success lies in staying informed, being patient, and making well-informed decisions.
Measuring investment returns can be complex: Define mistakes, learn from them, and have a clear understanding of all investments to effectively measure returns
While measuring returns on investments may seem straightforward, it can become complex when dealing with various accounts, trades, and private investments. The speaker shared his experience with using different tools to track his returns and highlighted the importance of considering all investments, not just those held in a single brokerage account. He also mentioned the value of reflecting on past mistakes and learning from them. The speaker emphasized that mistakes can come in various forms, including percentage losses or dollar losses, and that it's important to define what constitutes a mistake. For instance, he shared an example of investing in Philips 66, which resulted in a significant loss. Despite the mistake, the speaker saw it as an opportunity to learn and grow as an investor. Overall, the discussion underscores the importance of having a clear and comprehensive understanding of one's investment portfolio and being willing to learn from past experiences.
Mimicking Buffett's investments can lead to mistakes: Avoid making investment decisions solely based on others' actions, do thorough research, and have conviction in your own ideas.
Making investment decisions based on the actions of successful investors, without thorough due diligence, can lead to mistakes. The speaker shares his experience of investing in Alibaba based on Buffett's position, which resulted in a significant loss. He acknowledges that he did make a profit, but it was more due to Buffett's smart decisions rather than his own. The speaker also mentions that following a mechanical approach to investing based on Buffett's moves can lead to good returns, but it's not a good long-term strategy. He emphasizes the importance of doing proper research and having conviction in your investment ideas. The speaker also shares his regret of not investing enough in Spotify due to a previous loss, and the importance of not letting fear of loss influence future investment decisions. Overall, the takeaway is to avoid making investment decisions solely based on the actions of others, and to always do thorough research and have conviction in your own investment ideas.
Long-term investing: Letting winners grow and avoiding the need to hold hundreds of stocks: Maintain a long-term perspective, let winning investments grow, and focus on a few core holdings rather than holding hundreds of stocks.
Investing is a long-term game, and it's important to let your winning investments continue to grow rather than selling too early. The speaker mentioned his own experience of owning 45 investments since 2014 and currently holding only five stocks and two ETFs. He was reminded of the conversation with Ian Cassell about Nick and Sank, who only held Berkshire Hathaway, Costco, and Amazon, but needed to hold hundreds of stocks to realize their value. The speaker also emphasized the importance of having a 10-year view and not getting too caught up in short-term market fluctuations. He used the example of Alibaba, which may have been considered a mistake due to its price decline, but its underlying value could still be strong. The speaker also warned against the illusion of certainty in investing and the importance of considering all factors before making a decision.
Learning from missed opportunities and understanding risks: Experienced investors like Buffett and Munger make mistakes, but learning from them and understanding the nature of investments is crucial. Bitcoin is an asymmetric bet with high potential returns but significant risks. A long-term perspective and letting winners run can help outweigh mistakes.
Investing involves making decisions based on available information, but unforeseen events and market volatility can lead to mistakes. The speaker reflects on missed opportunities with Alibaba and Bitcoin, acknowledging that even experienced investors like Buffett and Munger make mistakes. He emphasizes the importance of learning from these mistakes and the role of luck in investing. The speaker also highlights the importance of understanding the nature of investments and the potential risks and rewards. For instance, Bitcoin is seen as an asymmetric bet due to its potential for high returns, but it also comes with significant risks. Ultimately, the speaker encourages a long-term perspective and the importance of letting winners run to outweigh the mistakes.
Understanding probabilities and focusing on quality: Focus on quality businesses, learn quantitative aspects, balance portfolio size and understanding, and find an approach that aligns with personal values and risk tolerance.
Successful investing involves understanding probabilities and focusing on quality, whether it's through buying undervalued stocks or growing businesses. The speaker shared his personal journey from buying discounted stocks to recognizing the value of good businesses and paying up for quality. He emphasized the importance of learning the quantitative aspects of investing and finding a balance between the number of stocks in your portfolio and your level of understanding of each one. While there's no one right way to invest, focusing on quality and understanding the businesses you invest in can lead to long-term success. The speaker also shared his experiences with investing in specific companies like Alphabet, Berkshire, and Bixia, highlighting the importance of patience and staying invested for the long term. Ultimately, the key is to find an investing approach that aligns with your personal values and risk tolerance, and to continuously learn and adapt as the market evolves.
Evaluate individual stocks in a diversified portfolio: Continually evaluate your portfolio, consider individual stocks with better potential returns, but remember even great companies can change and may need to be sold.
While diversification is important in investing, especially for beginners, it's also essential to continually evaluate your portfolio and consider individual stock investments that may outperform your current holdings. This can be done gradually and cautiously by first owning a diversified portfolio, such as a world ETF, and then adding individual stocks that you believe offer better potential returns. However, it's important to remember that even great companies can change and may need to be sold if the thesis no longer holds. A notable example given was the investment in Process, which held a large stake in Tencent but was also trading at a discount due to unlisted equities. While the investment in Tencent was believed to be a good value, the overall position in Process was eventually sold. Additionally, the discussion highlighted the importance of companies like Shopify, which provide essential tools for starting and growing businesses, and services like Vacasa, which make owning a vacation home easier and more profitable.
Making informed decisions based on personal framework and long-term vision: Despite short-term profits, selling Alphabet six months after purchase was the right decision based on long-term vision. Stick to personal investing principles and consider opportunity cost and time required for full understanding.
Investing is about making informed decisions based on your personal framework and long-term vision, even if it means letting go of profitable investments. The speaker shares an example of selling Alphabet (GOOGL) six months after purchasing it, despite its profitability, due to his belief that Alphabet was a better long-term opportunity. He also mentions his shift towards investing in high-quality companies and his discomfort with investing based on discounts to intrinsic value. Since then, Alphabet has seen significant growth, but the speaker emphasizes the importance of considering opportunity cost and the time required to fully understand an investment before making a decision. Ultimately, it's about finding a balance between short-term gains and long-term value, and sticking to your personal investing principles.
Comparing portfolio to benchmark not always necessary for private investors: Private investors should focus on meeting their financial goals instead of trying to outperform a benchmark
Comparing a private investor's portfolio to a benchmark may not be necessary or useful. While it can be important for asset managers to outperform a benchmark, private investors should focus on meeting their financial goals instead. The conversation touched on the case of Alphabet, where the narrative around its potential disruption was challenged, and the role of AI in the tech industry. The interview with Bill Ackman also highlighted the potential of Alphabet in the AI race. The investor also emphasized the importance of considering both the potential upside and the consequences of being wrong in investment decisions. Overall, the conversation underscored the importance of having a clear financial goal and not getting too caught up in benchmarks or external comparisons.
Managing Money for Others: Purpose and Pressure: Considering managing money for others? Weigh the benefits of purpose and potential fees against the risks of unlimited losses and pressure to perform consistently.
Investing involves not only considering the probabilities of success but also the potential consequences if you're wrong. This is particularly important when it comes to achieving financial goals. The idea of managing money for others, as some have suggested for TIP, can provide a sense of purpose and the ability to help others make better investment decisions. However, there are also downsides, such as the potential for unlimited losses and the pressure to perform consistently. Bill Ackman, a successful investor, finds purpose in managing money for others, but it's important to consider the alignment of interests and the potential fees involved. Ultimately, the decision to manage money for others should be based on a careful consideration of the potential upsides and downsides, as well as personal happiness and temperament.
Managing other people's money: stress and responsibilities: Handling other's money comes with stress and responsibilities, not everyone enjoys or is cut out for it. Belief in long-term potential vs investor pressure, volatility and uncertainty are challenges.
Managing other people's money comes with significant stress and responsibilities that some individuals may not find enjoyable, despite the potential rewards. The speaker shared their personal experience of desiring autonomy and avoiding the scrutiny and red tape associated with managing funds. They mentioned the example of Bill Miller, a successful fund manager who faced immense pressure from investors to sell his large stake in Amazon, despite his belief in its long-term potential. The speaker also highlighted the volatility and uncertainty inherent in managing a fund, and the potential for investors to react differently to market movements than the fund manager might. Ultimately, the speaker concluded that managing a fund is not for everyone, and it requires a strong desire and commitment to handle the stress and responsibilities involved.
Investing comes with unpredictability and potential for significant losses: Even successful investors face losses and uncertainty, emphasizing the importance of staying humble and adaptable during good times, and building a supportive community for added resilience.
Even the most successful investors, like Bill Miller who beat the market for 15 years in a row, can experience significant losses and public shame. The unpredictability of the market and the potential for investors to pull their funds at any time can be frightening, especially for those whose income and reputation depend on it. This can lead to difficult periods in life, reminding us that life is inherently hard and asset management is no exception. It's important to stay humble during the good times and remember that they won't last forever. Bill Miller, after facing significant losses, changed his setup to better align with his lifestyle and continue managing money, but with more control and flexibility. For those looking to live a life of subtraction, managing money may not be the best fit, as it often comes with many opportunities and temptations. Ultimately, things are always changing, and it's important to be open to new opportunities and adapt to them as they come. Building a community of like-minded individuals, like through a mastermind group, can also provide valuable networking opportunities and support during these challenging times.
Building a community for personal and professional growth: Creating an online mastermind community fosters deeper connections and valuable learning opportunities through regular video calls, ensuring a good fit for members, and investing time and effort into mutual knowledge sharing
Building and nurturing a community of like-minded individuals is crucial for personal and professional growth. The speaker, who started a community focused on investing and learning from Warren Buffett, emphasizes the importance of getting to know each member and ensuring a good fit for both parties. They've faced challenges with one-on-one interaction through email and the toxicity of social media platforms like Twitter. Instead, they've created an online mastermind community where members can interact regularly through weekly video calls. This format allows for deeper connections and more meaningful conversations, ultimately leading to valuable learning opportunities for all involved. The speaker also emphasizes the importance of investing time and effort into learning from others in the community and sharing knowledge to mutual benefit.
The Investors Podcast mastermind community brings serious investors together to share and discuss potential stock ideas.: Members of The Investors Podcast mastermind community learn from each other, contribute to discussions, and gain access to industry experts, providing valuable insights for serious investors.
The mastermind community created by The Investors Podcast provides a unique platform for serious investors to share and discuss potential stock ideas. The community offers various formats for sharing ideas, from one-pager summaries to full-length presentations. Members find it valuable to learn from each other and contribute to discussions, attracting a diverse range of knowledgeable individuals. Additionally, the community hosts events and interviews with industry experts, such as Brett Kelly of Kelly Partners Group, to provide further learning opportunities. Despite the challenges of coordinating across different time zones, the community continues to thrive and offer valuable insights to its members. For those interested in attending higher-ticket events, such as the Berkshire Summit in Omaha, limited seats are available by emailing Clay at theinvestorspodcast.com.
