Why not do as Buffett?

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conservativeX2
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Why not do as Buffett?

Post by conservativeX2 »

Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
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arcticpineapplecorp.
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Re: Why not do as Buffett?

Post by arcticpineapplecorp. »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
welcome to the group.

where will the other 60% of "retirement funds" come from?

If the other 60% comes from SSA and you really have no need to withdraw any money from retirement assets you can actually be anywhere between 0% and 100% stock.

0% because if you get no growth but don't need to draw from that money, it won't matter.
100% because if the retirement assets decline in value, it won't matter (because you don't need to draw from that money).

Now if you're planning on withdrawing from retirement assets to fill any portion of that remaining 60% of retirement funds, then we don't have enough info to answer.

but the amount/percentage in stocks (your asset allocation) is not just based on your need and ability to take risk, but also your willingness to take risk. Read more here:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

Buffett's wife can probably live the rest of her life on just those 10% treasuries (and possibly even have money left over). Because she won't need to touch the 90% in stock, she can afford to take that amount of risk there, but she won't have the need, and hopefully she has the willingness.
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conservativeX2
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Re: Why not do as Buffett?

Post by conservativeX2 »

Thanks for the links...I'm a big Swedroe fan too.
delamer
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Re: Why not do as Buffett?

Post by delamer »

How many years of net expenses (total expenses minus pension minus Social Security) will you have in the short-term treasury fund?

Buffett’s advice is fine, but 5 years of net expenses in cash equivalents (minimum) is prudent when the rest of your portfolio is in stocks.
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Triple digit golfer
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Re: Why not do as Buffett?

Post by Triple digit golfer »

Because Buffett's heirs will have hundreds or perhaps thousands of times more money than I ever will and their asset allocation doesn't matter because they will never run out of money, can absorb enormous permanent losses and will still be living better than I will.
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Re: Why not do as Buffett?

Post by climber2020 »

Warren Buffett has 100 billion dollars.
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Re: Why not do as Buffett?

Post by Wiggums »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
One reason not to follow this advice is simply that your situation is vastly different than Buffets. 90/10 is very aggressive for most retirees.
"I started with nothing and I still have most of it left."
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Wiggums
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Re: Why not do as Buffett?

Post by Wiggums »

Triple digit golfer wrote: Tue Nov 15, 2022 2:38 pm Because Buffett's heirs will have hundreds or perhaps thousands of times more money than I ever will and their asset allocation doesn't matter because they will never run out of money, can absorb enormous permanent losses and will still be living better than I will.
+1
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conservativeX2
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Re: Why not do as Buffett?

Post by conservativeX2 »

On a 90/10 AA, my wife and I could easily live for 4 years solely on defined benefits and drawing down our treasury account (10% AA). I know this is not the same for everyone. A modification to the 90/10 would be 80/20. This AA extends our equity drought lifestyle a few years.
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Re: Why not do as Buffett?

Post by vineviz »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
Because Buffet's advice might very well be terrible advice for HIS heirs, and completely irrelevant to yours.
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Re: Why not do as Buffett?

Post by strummer6969 »

conservativeX2 wrote: Tue Nov 15, 2022 2:56 pm On a 90/10 AA, my wife and I could easily live for 4 years solely on defined benefits and drawing down our treasury account (10% AA). I know this is not the same for everyone. A modification to the 90/10 would be 80/20. This AA extends our equity drought lifestyle a few years.
If Mr. Buffet has a net worth of 100 billion as reported, we can assume 10% of that ($10B) is in safe assets. And he also lives frugally from media accounts. Probably neither he nor his heirs would ever be forced to sell stocks in any downturn, not just types we've experienced so far but even worse ones that we have yet to experience that others have (UK, Japan, etc).
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Re: Why not do as Buffett?

Post by KlangFool »

OP,

Because you are not a billionaire.

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arcticpineapplecorp.
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Re: Why not do as Buffett?

Post by arcticpineapplecorp. »

conservativeX2 wrote: Tue Nov 15, 2022 2:56 pm On a 90/10 AA, my wife and I could easily live for 4 years solely on defined benefits and drawing down our treasury account (10% AA). I know this is not the same for everyone. A modification to the 90/10 would be 80/20. This AA extends our equity drought lifestyle a few years.
right, like i said, we didn't have all the info.

now that we have the info you can't really afford to be 90% in stocks because after the 4 years runs out you'd then be 100% in stocks, right?

what happens then if stocks lose 50%?

you might still be ok, if you are taking 2.5% of the portfolio out a year (estimating due to the 10% in treasuries lasting 4 years).

But you'd only have 20 years left of withdrawals at that rate.

So if you only need your portfolio to last 24 years, go for it! (only joking. i don't think you should be 100% stocks starting in the 5th year of your retirement through the last year of your retirement).
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Re: Why not do as Buffett?

Post by chinchin »

He also recommended his wife use Vanguard. He also eats See's Candy and drinks Coke.
not financial advice
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Re: Why not do as Buffett?

Post by nisiprius »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
He was not "giving his heirs investing advice." I will return to this later, but for now I would like to quote exactly what he really said, from the 2013 Annual Report
My money, should add, is where my mouth is: What I devise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals who employ high-fee managers.
We will assume retirement spending of $60,000/year, to help with mental math. (Everything will scale so the answer is the same whatever we assume). A defined benefit fund is roughly like an annuity. It provides 40% of $60,000 = $24,000/year = $2,000/month. I will take the numbers from immediateannuities.com as reasonable. Warren Buffett is part of a couple, and the bequest and is providing for a female. Using immediateannuities.com and taking the results at face value, I find that it is possible to buy an annuity for a Nebraskan woman that will pay $2,000/month during the first year and increasing 3%, compounded, every year, at a cost of about $24,000/5.5% = $436,000. Call it $435,000.

12-18 months' expenses, split the difference and say 15 months, is 1.25 x $60,000 = $75,000.

So the prospective retiree has $75,000 in cash, and
a pension worth about $435,000 that behaves something like bonds.

She wants to make up the remaining 60% or $36,000/year by investing in 90% VOO + 10% VGSH. I will assume the traditional 4% rule of thumb withdrawal rate works for that combination. To supplying $36,000/year implies an portfolio size of $36,000 x 25 = $900,000, and thus

$810,000 in stocks,
$90,000 in cash ("short-term government bonds") are more like cash than like bonds

So we have an overall portfolio whose characteristics are roughly similar to:

$810,000 in stocks
$435,000 in bonds
$165,000 in cash

$1,410,000 total

which works out to 57% stocks, 31% bonds, 12% cash.

Very close to 60/40.

So what can be said is that this is an aggressive stock allocation for retirement, and it is more than I personally would be comfortable with, but it is no higher than the more aggressive target-date retirement funds use.

There are some details to be worked regarding whether the "defined benefit plan" has a cost-of-living allowance built into the payouts; whether the stock allocation ought to change during retirement.

But broadly I don't see anything crazy about the idea. It seems perfectly reasonable. Not to my personal taste.

But some comments.

First, this is a problem whenever this comes up, which is that Warren Buffett, unlike John C. Bogle, didn't write book-length investment guides for ordinary investors. He produces oracular sound bites, that leave much unexplained, and never explains them himself. Many of Buffett's fans feel comfortable explaining them for him. They insist that they know what he means and that anybody well-informed knows what he meant, but the fact is he didn't say it. He said what he said. Some things he did not say are:
  • is he actually giving this as a recommendation to anybody else but the trustees of his will?
  • By using only US stocks, is he recommending against international stocks?
  • By using the S&P 500, is he recommending against small-caps?
  • What does he mean by "essentially" identical? Are his real instructions slightly more refined? Did he simplify to make them punchier and more easily remembered?
  • Most seriously, he says "My money, should add, is where my mouth is." But... uh... it is going to be his wife's money. What does she think about the plan? It's unlikely that she would look a multimillion-dollar gift horse in the mouth, but... whose idea is this, hers or Buffett's?
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Re: Why not do as Buffett?

Post by toddthebod »

nisiprius wrote: Tue Nov 15, 2022 3:51 pm
My money, should add, is where my mouth is: What I devise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals who employ high-fee managers.
I never noticed this before, but he specifies "one bequest." He presumably has many bequests, some others of which may also go to his wife, like maybe a fully-paid for house. Maybe even a large sum of cash that is not part of the trust he is describing. She may also hold a substantial life insurance policy on him.
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Re: Why not do as Buffett?

Post by junior »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
You apparently aren't allowed to have an emergency fund. You are only allowed to own 90% VOO and 10% VGSH. Because Warren Buffet said so.

If that sounds "stupid" to you, well, why are you listening to Warren Buffet in the first place?
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Re: Why not do as Buffett?

Post by Doctor Rhythm »

Nothing against Buffett, but why are his ideas about asset allocation any more appropriate than yours or mine? I think you or the average Boglehead has a better intuitive sense of the average American’s need, ability, and willingness to take financial risk, as well as their experience and knowledge of investing.
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Re: Why not do as Buffett?

Post by sunsetting101 »

toddthebod wrote: Tue Nov 15, 2022 4:12 pm
nisiprius wrote: Tue Nov 15, 2022 3:51 pm
My money, should add, is where my mouth is: What I devise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals who employ high-fee managers.
I never noticed this before, but he specifies "one bequest." He presumably has many bequests, some others of which may also go to his wife, like maybe a fully-paid for house. Maybe even a large sum of cash that is not part of the trust he is describing. She may also hold a substantial life insurance policy on him.
I wonder how many Brinks cash trucks will be driving to his wife upon his decease? I am guessing 3. :mrgreen:
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Re: Why not do as Buffett?

Post by JoeRetire »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?
Because you aren't one of Buffet's heirs and he didn't design his plan for you?

Instead of just blindly following your favorite financial celebrity, find a plan that works for you.
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Re: Why not do as Buffett?

Post by invest2bfree »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
yes you can. if you start very early, then you have enough nest egg to withstand shocks.

Problem is people take risk later on in life when you dont have much earnings left.
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Re: Why not do as Buffett?

Post by tibbitts »

When I read the subject I thought this was going to be a thread asking why not use Netjets.
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Re: Why not do as Buffett?

Post by JoeRetire »

tibbitts wrote: Tue Nov 15, 2022 4:47 pm When I read the subject I thought this was going to be a thread asking why not use Netjets.
Or a thread asking why not live in Omaha.
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Re: Why not do as Buffett?

Post by Northern Flicker »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
I believe the plural "heirs" is incorrect. The 90/10 comment was how estate or trust documents instruct a trustee to invest his wife's assets after he is gone.

My guess is that she will have enough money to be successful regardless of the ratio of stocks and bonds. That is not true for most people.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Why not do as Buffett?

Post by Triple digit golfer »

JoeRetire wrote: Tue Nov 15, 2022 4:39 pm
conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?
Because you aren't one of Buffet's heirs and he didn't design his plan for you?

Instead of just blindly following your favorite financial celebrity, find a plan that works for you.
This is the best reply so far.
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Re: Why not do as Buffett?

Post by Northern Flicker »

Doctor Rhythm wrote: Tue Nov 15, 2022 4:20 pm Nothing against Buffett, but why are his ideas about asset allocation any more appropriate than yours or mine? I think you or the average Boglehead has a better intuitive sense of the average American’s need, ability, and willingness to take financial risk, as well as their experience and knowledge of investing.
Does he even believe in the concept of an asset allocation?

from: https://warrenbuffettoninvestment.com/b ... llocation/
Question: What do you think of setting an asset allocation?

Warren Buffett: We don’t hold any committee meetings. The business of saying you should have 50% in stocks, 30% in bonds…it’s nonsense.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Why not do as Buffett?

Post by David Jay »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

Please offer critiques...
Asset Allocation is intensely personal, different psychological makeups react very differently to stress. I would not recommend appropriating anyone else's AA as one's own just because they are famous/smart/successful.

I can speak from experience that once one has used up all of their human capital and "what they have" must support them for the rest of their lives, one's perspective can change dramatically:

My retirement assets were 100% stocks into my late 50s and I was essentially immune to volatility. As I approached retirement I moved to a much more conservative 45/55 (45% stocks) allocation and I am spending down my cash as I delay claiming SS, targeting a destination AA of 60/40 when I file in just over 3 years.
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Re: Why not do as Buffett?

Post by mr_brightside »

I'm fairly close to it -- at around 85% equities / 15% cash / ST

but to answer your question : two words. Risk Tolerance.

Buffets '10%' likely amounts to hundreds of millions. The market could crash to nothing and he'd still be mega-rich basically.

most people aren't that wealthy so capital preservation is a big influence especially towards retirement. everyone has to find their own comfort level in terms of equity exposure.
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Re: Why not do as Buffett?

Post by sixtyforty »

It would be difficult for most to withstand a bear market on a 90/10 allocation, especially during retirement. If a 50% market decline and a prolonged bear market of maybe 3+ years would not effect your way of life.. then it might be doable.
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Re: Why not do as Buffett?

Post by BrooklynInvest »

I'm fairly certain his asset allocation advice was for his heirs who'll receive massive amounts of money and, I'm guessing, don't live extravagant lifestyles. They could be 99% equities and the stock market could decline 99% and they'd still have more money than they'd ever need.

Me, on the other hand, not so much. I need the ballast of bonds, even in this market.
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Re: Why not do as Buffett?

Post by nisiprius »

toddthebod wrote: Tue Nov 15, 2022 4:12 pm...I never noticed this before, but he specifies "one bequest." He presumably has many bequests, some others of which may also go to his wife, like maybe a fully-paid for house. Maybe even a large sum of cash that is not part of the trust he is describing. She may also hold a substantial life insurance policy on him...
Interesting, I never noticed that before, either. We don't really have a full picture of what her financial holdings will be.
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Re: Why not do as Buffett?

Post by minesweep »

climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
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Re: Why not do as Buffett?

Post by carminered2019 »

You don’t have to be a billionaire to have AA of 90/10. Many retirees on this forum are actually 100% in stocks. It’s all about withdrawal rate.
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Re: Why not do as Buffett?

Post by FIRWYW »

Trying to be constructive and actionable in this. Others have pointed out that buffet is different. That is true. Plus based on how he spends now, that 10% is still a huge buffer. Feel free to correct my thoughts here but the traditional 60/40 recommendation is based on someone who has 25x and 4% SWR. That gives 10 years of expenses in cash and bonds that in a down market they could live on until “the market recovers.” If someone had 33x expenses, to have 10 years in cash bonds, they could invest 70/30. At 50x, 80/20 gives the same buffer. 100x would make 90/10 just as reasonable. Based on knowledge of buffet and his yearly spend, I think that is probably about right. It is one of these paradoxes where the more you have, the more aggressive you CAN be IF you want. Depends on your goals - Ie to leave behind more or give to charity more vs safety. I am not “near retirement” now and have only been truly making a good wage for 13 years so thoughts might change, but IF investments run better than expected, for this reason I could see being up to 75/25 in retirement. Lowest I would see is 60/40. One of the studies listed in the wiki indicates anything between 30% stocks and 75% stocks has the same 30 year failure rate and above or below is counterproductive. Buffets wife is not going to have a failure in her sage withdrawal so is “an exception”
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Re: Why not do as Buffett?

Post by climber2020 »

minesweep wrote: Wed Nov 16, 2022 10:03 am
climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
That's great of him, but in theory he could lose 99% of his net worth and still live out the rest of his life in more comfort than almost anyone else in the history of the earth. Most of us do not have that luxury; thus our situations are not comparable to that of his.
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Re: Why not do as Buffett?

Post by minesweep »

climber2020 wrote: Wed Nov 16, 2022 10:24 am
minesweep wrote: Wed Nov 16, 2022 10:03 am
climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
That's great of him, but in theory he could lose 99% of his net worth and still live out the rest of his life in more comfort than almost anyone else in the history of the earth. Most of us do not have that luxury; thus our situations are not comparable to that of his.
I don't doubt that. My post was not to meant to imply that it would be otherwise.
Time is your friend; impulse is your enemy - John Bogle | Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
Serie1926
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Re: Why not do as Buffett?

Post by Serie1926 »

I will share from our own personal experience.

We have worked with 3 different FA's since staring serious investing in 2006 to obtain FIRE. Looking back I wished we would have only bought an S&P 500 index. It always goes up and to the right. When I look at our portfolio, our US core equity positions are at 100%+ returns, in a 20% +/- down market currently.

All of the other fixed income, emerging markets, and other recommended diversification are all down 10%+. This is our 3-4 years of cash flow if we need it, now that we're both retired.

With our grandchildren, we buy them SWPPX for their birthdays every year. Both have earned 30%+, in a 20% +/- down market. One is 12 and the other is 9.

We're now sitting at an 80/20 AA and once the fixed income etc turns positive, we'll begin moving towards 90-100% US core equities. We have a CC with an available balance of $55k and this is our if "uncle Murphy" moves in.

Now that the flywheel is large enough, our plan, now that we're retired, is to take profits once per month from the equity positions to cover our monthly nut. If this works, as it has on paper, we should never have to touch any other positions.

Hope this helps, good luck!
iamblessed
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Re: Why not do as Buffett?

Post by iamblessed »

climber2020 wrote: Wed Nov 16, 2022 10:24 am
minesweep wrote: Wed Nov 16, 2022 10:03 am
climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
That's great of him, but in theory he could lose 99% of his net worth and still live out the rest of his life in more comfort than almost anyone else in the history of the earth. Most of us do not have that luxury; thus our situations are not comparable to that of his.
His spending is super low to for his net worth. 10 years ago I saw a video where he said he spent around 100k a year not including his jet travel. He would be classified as super frugal compared to many on this forum going by percent of spending to net worth.
minesweep
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Re: Why not do as Buffett?

Post by minesweep »

iamblessed wrote: Wed Nov 16, 2022 10:56 am
climber2020 wrote: Wed Nov 16, 2022 10:24 am
minesweep wrote: Wed Nov 16, 2022 10:03 am
climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
That's great of him, but in theory he could lose 99% of his net worth and still live out the rest of his life in more comfort than almost anyone else in the history of the earth. Most of us do not have that luxury; thus our situations are not comparable to that of his.
His spending is super low to for his net worth. 10 years ago I saw a video where he said he spent around 100k a year not including his jet travel. He would be classified as super frugal compared to many on this forum going by percent of spending to net worth.
Buffet lived in the same home he bought back in 1958 for $31,500. Until he sold it this year for $850K ($51,000 above the asking price).

“When asked why he doesn’t spend even a small percentage of his wealth on a millionaire’s mansion, Buffet says, “If I could spend $100 million on a house that would make me a lot happier, I would do it. But, for me, that’s the happiest house in the world. And it’s because it’s got memories, and people come back, and all that sort of thing.” He goes on to say that this house did just fine, saying: “I’m warm in the winter, I’m cool in the summer, it’s convenient for me. I couldn’t imagine having a better house.”

Warren Buffett House: Inside His Modest Home Worth Less Than $1 Million
Time is your friend; impulse is your enemy - John Bogle | Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
DesertDiva
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Re: Why not do as Buffett?

Post by DesertDiva »

JoeRetire wrote: Tue Nov 15, 2022 4:50 pm
tibbitts wrote: Tue Nov 15, 2022 4:47 pm When I read the subject I thought this was going to be a thread asking why not use Netjets.
Or a thread asking why not live in Omaha.
LOL 😂
dbr
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Re: Why not do as Buffett?

Post by dbr »

Warren Buffett and his heirs exists in a different universe from the one occupied by you and me. It makes no sense for us to do what he does based on his reasons for doing it. That doesn't mean that asset allocation could not work for us, but it would be a good idea for us to do it for our own reasons as we understand them. I could be 90/10 but choose something more conservative as a matter of preference. You should decide what asset allocation is a best fit for you no matter what Buffett does.
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Lawrence of Suburbia
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Re: Why not do as Buffett?

Post by Lawrence of Suburbia »

I think 90/10 is a pretty scary allocation, if you're a 25x-ish retiree (as I am). If you're a multimillionaire, then that's ok -- you'll never run out of money!
minesweep wrote: Wed Nov 16, 2022 12:09 pm
iamblessed wrote: Wed Nov 16, 2022 10:56 am
climber2020 wrote: Wed Nov 16, 2022 10:24 am
minesweep wrote: Wed Nov 16, 2022 10:03 am
climber2020 wrote: Tue Nov 15, 2022 2:40 pm Warren Buffett has 100 billion dollars.
Of which he has promised to donate over 99% of his stock to charities upon his passing. In fact, as of June of this year he has donated 48 billion of his stock to charities.

Warren Buffett Has Now Given Record $48 Billion To Charity
That's great of him, but in theory he could lose 99% of his net worth and still live out the rest of his life in more comfort than almost anyone else in the history of the earth. Most of us do not have that luxury; thus our situations are not comparable to that of his.
His spending is super low to for his net worth. 10 years ago I saw a video where he said he spent around 100k a year not including his jet travel. He would be classified as super frugal compared to many on this forum going by percent of spending to net worth.
Buffet lived in the same home he bought back in 1958 for $31,500. Until he sold it this year for $850K ($51,000 above the asking price).

“When asked why he doesn’t spend even a small percentage of his wealth on a millionaire’s mansion, Buffet says, “If I could spend $100 million on a house that would make me a lot happier, I would do it. But, for me, that’s the happiest house in the world. And it’s because it’s got memories, and people come back, and all that sort of thing.” He goes on to say that this house did just fine, saying: “I’m warm in the winter, I’m cool in the summer, it’s convenient for me. I couldn’t imagine having a better house.”

Warren Buffett House: Inside His Modest Home Worth Less Than $1 Million
There's a man who understands the meaning of "enough", just as Jack Bogle did; and gives back to the world that made his opportunities possible.

I admire both of them so much.
I know that you believe you understand what you think I said; but I am not sure you realise that what you heard is not what I meant.
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conservativeX2
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Re: Why not do as Buffett?

Post by conservativeX2 »

The 25X one's annual spending as an asset approximation must also take into account defined benefits. An annual pension draw of $12,000 equates to a principal balance of approximately $300,000 if adhering to a 4% draw. Add in SS and you might not need such a big pile from which to draw.
GibsonL6s
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Re: Why not do as Buffett?

Post by GibsonL6s »

The advice also at its core is to keep things simple no matter the AA. I have an account where I have one equity index fund and individual treasuries only. This makes life simple and I always know my equity allocation because Schwab tells me the % of the account the one ETF is. :D
AdrianC
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Re: Why not do as Buffett?

Post by AdrianC »

nisiprius wrote: Tue Nov 15, 2022 3:51 pm First, this is a problem whenever this comes up, which is that Warren Buffett, unlike John C. Bogle, didn't write book-length investment guides for ordinary investors. He produces oracular sound bites, that leave much unexplained, and never explains them himself. Many of Buffett's fans feel comfortable explaining them for him. They insist that they know what he means and that anybody well-informed knows what he meant, but the fact is he didn't say it. He said what he said. Some things he did not say are:
  • is he actually giving this as a recommendation to anybody else but the trustees of his will?
  • By using only US stocks, is he recommending against international stocks?
  • By using the S&P 500, is he recommending against small-caps?
  • What does he mean by "essentially" identical? Are his real instructions slightly more refined? Did he simplify to make them punchier and more easily remembered?
  • Most seriously, he says "My money, should add, is where my mouth is." But... uh... it is going to be his wife's money. What does she think about the plan? It's unlikely that she would look a multimillion-dollar gift horse in the mouth, but... whose idea is this, hers or Buffett's?
Interview from 2014:

https://fm.cnbc.com/applications/cnbc.c ... script.pdf

Page 4:
BECKY: You also-- revealed something in the annual letter this year, where you said--
you laid out the terms of your will, what you've set aside for your wife. Which, I didn't
know any of this.

BUFFETT: Yeah.

BECKY: And--

BUFFETT: Well, I didn't lay out my whole will. There's hope for some of you who
haven't been mentioned yet. The-- but I did explain, because I laid out what I thought
the average person who is not an expert on stocks should do.

And my widow will not be an expert on stocks. And- I wanna be sure she gets a decent
result. She isn't gonna get a sensational result, you know? And since all my Berkshire
shares are going-- to philanthropy-- the question becomes what does she do with the
cash that's left to her?

And I've been-- part of it goes outright, part of it goes to a trustee. But I've told the
trustee to put 90% of it in an S&P 500 index fund and 10% in short-term governments.
And the reason for the 10% in short-term governments is that if there's a terrible period
in the market and she's withdrawing 3% or 4% a year you take it out of that instead of
selling stocks at the wrong time. She'll do fine with that. And anybody will do fine with
that.
It's low-cost, it's in a bunch of wonderful businesses and it takes care of itself.


Bolding mine.
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squirrel1963
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Re: Why not do as Buffett?

Post by squirrel1963 »

It all depends on the size of the assets. Think a worst case scenario of 90% drop in equity values.
Would you panic sell?
Would you have enough to live with such as devalued portfolio?

If you have $100 million assets and don't panic sell, then you could do it (assuming that your retirement expenses are not higher than $20 million).
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
passive101
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Re: Why not do as Buffett?

Post by passive101 »

I think the world and the world markets were different then they are today. Back then the US market was a LOT more of the world market. Today it is only roughly 50-60%. Less if you include all the tiny countries and the emerging markets. (as far as I understand it).
Dave55
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Re: Why not do as Buffett?

Post by Dave55 »

conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
Warren Buffet is not in the business of advising individuals/couples/families on how to invest or manage their money. It is not his expertise. He does not invest in the way he suggests others to invest. His "advice" for his heirs is advice for them, not for anyone else.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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abuss368
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Re: Why not do as Buffett?

Post by abuss368 »

Dave55 wrote: Wed Nov 16, 2022 7:07 pm
conservativeX2 wrote: Tue Nov 15, 2022 1:16 pm Warren Buffett famously gave his heirs investing advice upon his passing...90% in a low cost S&P index fund and 10% in a short term treasury index fund.

90% in VOO
10% in VGSH

If a person has defined benefits providing 40% of retirement funds while maintaining a 12-18 month emergency fund, why not follow this plan?

Please offer critiques and potential modifications.
Warren Buffet is not in the business of advising individuals/couples/families on how to invest or manage their money. It is not his expertise. He does not invest in the way he suggests others to invest. His "advice" for his heirs is advice for them, not for anyone else.

Dave
When Dave talks, I listen. I would follow Dave’s hedge fund picks before anything else as he has consistently gained alpha.😂

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
rockstar
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Re: Why not do as Buffett?

Post by rockstar »

Let's face it. He's learned a lot over the decades.

When he did the hedge fund bet, he initial bought TIPS that perfectly matched the end of the bet. This sounds a lot like matching expenses to duration. My take away is that TIPS make sense when you can match it.

He stays short on the bond side with the intention of deploying the cash. This makes sense.

Buying an equity index fund. This makes sense.

Really, he's doing what we're talking about here.
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