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Which master do you admire more, Buffett or Soros?
We need to have some new understanding and thinking about some ideas of investment masters. What did Buffett and Soros teach us? Share some new ideas with you today.

1, the similarity of investment masters: they all live long.

The following chart is classic, covering the long-term returns of some important investment masters. Covering Buffett's fundamental stock selection, macro hedging, quantification, trading and other different styles of investment masters. But we see that they all have one thing in common: longevity.

We see that the average traceability performance is basically about 30 years, and the lowest traceability performance exceeds 10 years. The longest traceable performance is our Buffett, more than 55 years. This has inspired me most recently. No matter what investment style, method, or even personality, you need to have one characteristic to become a truly influential investment master. Live long enough.

Buffett (male name)

Buffett really practiced the truth of "living long enough". On the one hand, his own life span and physical condition are also very good. Nearly 90 years old, he is still actively thinking and making his own investment. Buffett's personal wealth is also carried forward through the rose of time. Before the age of 30, his wealth was only $65,438+00,000. The later, the more amazing his wealth accumulation.

Living long enough is the most profound inspiration I have given to investment masters in the past six months. On the surface, this is nonsense, but behind it is the reason why all great investors are great. We won't remember those who did very well in a year or two, and even bill miller, Peter Lynch's successor, was gradually forgotten by everyone because of his waterloo in the financial crisis. No matter what your investment style and philosophy are, the same core as * * * is to live in the market long enough.

2. What do you need for longevity? Risk stripping

In the past, we have always stayed in comparing Soros and Buffett. The two investment masters are the same age, but their investment methods are completely different. There are indeed many places to compare: Buffett was born in a congressman's family, and Soros went to the United States to escape the war. Buffett's life is simple, even stingy. Soros likes to donate money and devote himself to the great goal of an open society. Buffett invests in stocks to make money, and Soros is good at foreign exchange futures. But in fact, we ignore their similarities: in fact, they are all "timid" in investment, and all they do are deterministic investments.

Let me give you a few examples, and you will understand.

Soros, who everyone talked about, stopped the Bank of England and the financial crisis in Southeast Asia. In fact, the logic behind it is based on the non-marketization of pricing mechanism. Soros believes in market economy. When he sees the conflict between the planned economy and the market economy, the market economy will eventually win with a high probability. Besides, he is familiar with history and philosophy. From the perspective of history, philosophy and humanity, he will eventually take the direction of market economy. In essence, Soros is a low-risk investment. Just like the devaluation of the pound and Thai baht, even its central bank members admit that their currencies will depreciate. What Soros admires is that he dares to strike hard when making low-risk investments.

Let's look at Buffett again. There are many cases about Buffett's investment, the essence of which is low-risk investment, or, as we said, to get the income after stripping the risk. During the financial crisis, Buffett said: Buy American goods, I am. Then let's see what Buffett bought. At that time, Buffett held a heavy position at Goldman Sachs. He once said that if there is only one investment bank in the United States, it must be Goldman Sachs. But we can see that Buffett actually bought preferred shares of Goldman Sachs, not shares. If you have seen Too Big to Fail, you can understand Buffett's investment strategy. Even when the financial crisis was a big deal, he made a low-risk investment. Do not pursue the maximization of income, but ensure that you can make a profit on the premise of holding the principal.

3. The development history of hedge funds is to look for "return after risk divestiture"

Let's go back to "Rich as an Enemy", from A.W.Jones, the founder of hedge fund in the first chapter, to James Simons in the back, and its evolution is to constantly look for the benefits after risk stripping. Jones is the founder of the hedge fund model. Although he didn't create short selling and leverage, he was the first person to operate this hedge fund model. These two tools have effectively stripped off some risks and gained profits in the market with pure bull thinking.

A good example is given in the book: suppose two investors start with $65,438+00,000. Use tools of shorting and leverage. Well, first of all, his leverage gave him an investment of $20,000. He bought more dollars and shorted 70,000 dollars. His risk in the market is only $60,000. The other invested more than 80,000 US dollars, leaving 20,000 cash, which also exposed the risk of 80,000 US dollars in the market. Suppose the market rises by 20%, because they are equally strong in stock selection. The bullish stock rises by 30%, outperforming the market, while the other short stock only falls by 10%. Then the profit of investors who use leverage is $32,000, and the market risk is still small. The average profit of investors is only $24,000, and there are more risks exposed in the market.

Leveraging is not gambling, and the core logic is to amplify the yield based on investments with less risk exposure.

After that, we saw that every investment master innovated in research methods and investment tools in order to obtain the benefits after stripping risks. For example, michael steinhardt in the second chapter, the core method of making money is to continuously obtain discounted stocks through block trading. Because everyone doesn't know how to make it bigger and how much discount to give. Steinhardt made a huge risk-free profit from it! Another example is the Tiger Fund Robertson, whose initial success also comes from the excavation of the fundamentals of small-cap stocks. Because at that time, most brokers mainly covered stocks with large market value and good liquidity. Small-cap stocks are discounted at the original valuation, and the risk is very low. Once a good company is found, the rate of return will be high. Finally, james simons stripped off the risk through programmed trading and quantitative mode, and obtained the real Alpha.

The mathematical model of medal fund is mainly to find out the mathematical relationship between the changes of financial product prices, macroeconomics, market indicators, technical indicators and other indicators through the statistics of historical data, to find out the small profit opportunities existing in the current market, and to make profits through rapid and large-scale trading through leverage ratio.

4. The core element of snowballing: low-risk investment.

Before watching Buffett snowball, I only knew the superficial factors, and I had to walk very wet snow and a long slope. In fact, the most important part of Buffett's snowballing is low-risk investment.

If I buy a stock at random today, the probability of it going up or down may be 50%. Many times, high returns are accompanied by high risks. A stock may go up 100%, and often it may go down by 50%. When making investments, many people are constantly pursuing high-risk returns. For example, betting on short-term catalysts, betting on a track, or getting information that others don't know. These methods are accompanied by great uncertainty, and eventually will gradually return to the 50% coin toss probability. Even many times, because of the weakness of human nature, the probability is even less than 50%. So in the long run, the rate of return is mean regression. Buffett wants to find a sustainable, low-risk and sustainable investment model.

So for so many years, in fact, Buffett didn't really buy ten times the shares, and he never praised tenbegGEr. His core model is to continuously obtain the benefits after risk divestiture, even if it is only a little every year, but this model can last for many years. The longer it takes, the bigger Buffett's snowball will be.

A friend once said to me: I firmly believe in long-term power. I think this is also the idea behind it, looking for a long-term sustainable model and making time our friend. The longer the time, the greater the gap we see.

5. Sustainability is the most important of all investment methods.

After reading so many books and learning the thoughts of so many investment masters, I began to really realize:

This method may not be able to catch the best stocks in a short time, but it can bring long-term returns and is effective.

Recently, the bond market has fluctuated greatly, and someone said a meaningful sentence: it is not difficult to triple the investment in one year and double it in three years. This also reflects how difficult the sustainability of investment is. It is skill and luck that determine the return on short-term investment. If you are lucky enough, it is possible to double or even several times a year. Every year we can find such a person (coin toss champion). But in the long run, it is one factor that determines the return on investment: skills. This skill includes one's own ability, including the evolution of investment methods.

Buffett and Soros are essentially doing the same thing, making low-risk and sustainable investments. Buffett has always emphasized one point: "Keep your principal". Soros is based on the invariance of human nature. From prosperity to ruin, human greed and desire are the weaknesses of permanent sustainability. His trading in the foreign exchange market is also constantly grasping investment opportunities with high odds and low risks.

The world is unpredictable, and it is very low to believe that you can continuously predict the future. So many people's mistakes come from being too confident in themselves and thinking that they have a crystal ball that can continuously predict the future. This is also my own cognitive evolution in the past six months. I used to think that the core ability to tap bull stocks was to look to the future. But today, I find that the world is unpredictable more and more. We should get the profit after risk stripping on the basis of the unknown world.

Written at the end: some thoughts on the pilgrimage to Omaha

The annual Buffett Shareholders' Meeting is a pilgrimage to Omaha for global investors. Unfortunately, for various reasons, I have never been there once. Fortunately, Buffett is a very open-minded person, and every bit of his wisdom will be displayed in his letter to shareholders, and his speech at the Omaha annual meeting will also be publicly recorded. In recent years, I have learned about his investment philosophy through reading, and have a deeper understanding of Buffett and even many overseas investment masters' methods.

Finally, the more investment, the stronger the fear of risk. Those great investors will think about where the risks are every time they invest, and Buffett is the most risk-averse. He always hopes to get benefits after stripping risks. The aversion to risk doesn't mean that Buffett doesn't make a move, but patiently looks for the most certain and lowest risk, and then uses financial instruments to make low-risk deterministic investments. His partner Munger said that a person can't be rich twice in his life. What really snowballs is sustainable, the benefits after stripping risks. After these harvests accumulate over time, they become big snowballs. Time will be our friend.

Since time is so important for long-term investment, it is also the pursuit of long-term correct values that great investors are insisting on.

Source: Financial Reporter Circle Author: Zhu Ang, the content is for reference only.