In this video we're talking about how you can get rich by holding cash! And answering the questions how much cash in portfolio makes the most sense?

Warren Buffett has written in various shareholder letters over the years that their hurdle rate that must be met for them to invest is 15%.

Meaning they’re not going to deploy cash unless they’re going to get at least a 15% annual return on the investment.

So that’s why cash starts to build up for them. They would love to invest it but sometimes there just isn’t anything that will give them the returns they want. And so they wait.

Here’s a good way to look at it:

If you invest $1000 today and it earns 10% annually.. After 30 years you’ll have $17,449.

If instead you waited to find a 15% investment and waited for a full 9 and a half years before you found one, and then invested the $1000… 20 and a half years later, you’d have $17,551.

What this means is that Buffett and Munger probably believe they are going to be able to find an opportunity they like at least once every 9 and a half years…. and so waiting and letting cash build up is acceptable to them.

And on top of that, there is always the slight chance that stocks will become extremely cheap and they’ll be able to get much more than 15%.

By the way, if we look forward another 10 years in both scenarios.. At the end of it - You’ll have $45,259 in the first scenario where you’re earning 10% annually.. And $71,004 in the second scenario where you’re earning 15% annually.

So the better question to ask really shouldn’t be “how much cash should I hold in my portfolio” but rather it should be: what is the minimum annual return I want from an investment before I’ll invest.

At one point when Berkshire was much smaller their hurdle rate was 20% annual returns before they would be willing to invest.. But eventually they had no choice but to lower their hurdle rate to 15%... because as they grew in size; the universe of stocks they could invest in became smaller and smaller.

Now my opinion is that if you’re going to be in the stock picking game your hurdle rate should be at least 15%.

But I also think that finding 15% annual returns investments isn’t going to be that difficult for anyone working with smaller sums of money. You definitely will NOT need to wait 9 and a half years to find one. So you may even want to bump that up to 20%.


➡️ JOIN OUR MASTERMIND FACEBOOK GROUP: [ Ссылка ]


BEST INVESTING BOOKS
📚 The Little Book That Still Beats the Market
➜ [ Ссылка ]
📚 The Outsiders
➜ [ Ссылка ]
📚 100 Baggers
➜ [ Ссылка ]
📚 The Complete Investor
➜ [ Ссылка ]
📚 Richer, Wiser, Happier
➜ [ Ссылка ]
📚 The Dhandho Investor
➜ [ Ссылка ]
📚 Tao of Charlie Munger
➜ [ Ссылка ]
📚 The Complete Financial History of Berkshire
➜ [ Ссылка ]


🙋‍♂️ Watch Next to Keep Learning (YouTube Playlist):
➜ [ Ссылка ]-
🛎 SUBSCRIBE (Click to subscribe):
➜ [ Ссылка ]

Special thanks to my incredibly beautiful, smart, and creative girlfriend, Stephanie, for her editing wizardry and creative insights and ideas. This isn't possible without you.

Disclaimer:
These youtube videos and content are for entertainment purposes only. If stocks or companies are mentioned, Richard may have an ownership interest in them -- DO NOT make buying or selling decisions based on Richard’s videos. All information contained herein should not be construed as anything other than an opinion for entertainment purposes only. Information being provided may be outdated or inaccurate; it is your responsibility to verify all information.
No financial advice is being given nor is any other advice of any kind. You should consult with a qualified professional where appropriate and before any action is taken on this video. No liability or damages shall take place because of this video and/or content.
There is no express or implied representations or warranty with respect to the accuracy or completeness of the content of the videos, including any content, description, links, or resources shared, including those by third parties. Furthermore, all parties specifically disclaim any and all express or implied warranties of merchantability or fitness for a particular purpose. By watching this and all related videos, you agree to be bound by this disclaimer.

#StockInvesting #StockMarketForBeginners #HowToInvest

свернуть