Current B-School Student -Project-Write Investment Strategy--Need Feedback ASAP!!!
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So you're basically proposing a value investing firm. As someone who has little exposure to trading, it seems to me that if you are taking that sort of approach, you would have much less of an interest in holding cash and bonds because your returns would normalize over longer periods, so 30-50% seems a bit high to me.
Also, Buffet himself said in 1999
"Let me summarize what I've been saying about the stock market: I think it's very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they've performed in the past 17. If I had to pick the most probable return, from appreciation and dividends combined, that investors in aggregate—repeat, aggregate—would earn in a world of constant interest rates, 2% inflation, and those ever hurtful frictional costs, it would be 6%!"
I'm not convinced that taking his approach would really be best.
he also said in his 2001 or 2002 letter that the equity markets would be dead and not go up and the next year would be desolate and then they killed it :) its good to be cognizant of troubles the markets are facing but doesnt mean you turn your back to an opportunity
Ok, but Berkshire Hathaway had average gains of 8.5% from 1999-2010, and the DJIA has gone from about 9000 in 1999 to ~11500 today, for about 2.5% gains YOY. So while value investing seems to have done better, it doesn't seem to really get the gains that are really better than putting your money in PE or a quant fund.
sure if you want to point out some very specific survivorship top notch returns for PE and quant funds -- assuming you are big enough of an investor to get some wiggle room into a shop like that -- but equities are made for everyone. what about all the funds that give dismal returns and or blow up as well? besides you cant employ same amt of capital in PE that you can in equities, and equities are definitely much more liquid.. so there are trade offs between the asset classes
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