Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the World's Most Famous Investor

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Tax rules can change and benefits depend on individual circumstances. Please remember loyalty bonuses received on funds held in the Vantage ISA or Vantage SIPP are exempt from tax.

It is not difficult to see why, because retained earnings is the money that a company can reinvest into the company for future growth, and the return on equity determines to a large extend the extra income that will be generated from these investments. So the higher the retained earnings and the higher the return on equity, the faster the intrinsic value of a company will grow over time.If loyalty bonuses are taxable then the value of our ongoing saving to you could be reduced, depending on the rate of tax you pay. The below table gives an indication of how this may affect you. Keith Ashworth-Lord, fund manager of the CFP SDL UK Buffettology fund: Thanks for inviting me, Kyle. So what is the main characteristic of a wonderful business? The book says they are like toll bridges: you have to cross them and it costs you a fee each time. Some examples are credit card companies, Google AdWords, and brand name consumer products shops have to carry, like Coca-Cola. Keith Ashworth-Lord: Yes, it's a very disciplined process. We start off looking for businesses with an economic moat, which effectively means they've got barriers to entry and they've got pricing power. And the way we go about it is we analyse the growth potential of the companies in their markets, the growth potential of the markets themselves.

And the one that we've got a good opportunity with, at long last, was Fevertree Drinks (LSE:FEVR). And that, you would have thought, should have gone into Buffettology, given the size of it. The reason we put it into Free Spirit and not Buffettology, was that Buffettology already owns Diageo (LSE:DGE), which is its sort of premium-brand business, and it also owns Barr (A G) (LSE:BAG), in a more sort-of general area so, we thought, well, Fever-Tree will go more naturally into Free Spirit. It doesn't have that exposure. So that's why it went in there. But in terms of Buffettology, as I say, the only thing that we've really done is and it's been very limited, is just top up one or two. We haven't put any new names, as they call it, into the portfolio. Any administrative or dealing enquiries about the Fund should be directed to the ACD’s appointed registrar on 0330 123 3739 (UK) or +44 (0)20 3975 1021 (international). Don't believe it? Ask people you know why they chose to invest in a particular mutual fund and they will more than likely tell you it was because the fund was ranked as a top performer. The nature of the mutual fund beast influences a lot of very smart people into playing a short-term game with enormous amounts of capital. No matter what fund managers' personal convictions may be, producing the best short-term results possible is the way to keep their job. The intrinsic value of an investment is the projected annual compounding rate of the return the investment will produce. We believe all loyalty bonuses are tax-free and we are challenging HMRC's interpretation. However, while we make this challenge we are paying loyalty bonuses within the Vantage Fund & Share Account net of an amount equivalent to the basic rate tax. If we are successful in our challenge we will return this money to clients. If we are unsuccessful we will use the money to pay over any amounts due to HMRC.

10 Important Lessons

T or F Mutual fund managers are short-term motivated because they market their products to an investment public that is extremely short-sighted. In the world of investing, the name Warren Buffett is synonymous with success and prosperity—now you can learn how Warren Buffett did it and how you can, too.

Learn how to approach investing the way Buffett does, based on the authors' firsthand knowledge of the secrets that have made Buffett the world's second wealthiest man To figure this out, you'll need to estimate how much a company should realistically be worth five years from now, and such an estimate is only possible if a company has consistent earnings.

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Please note that our article on this investment should not be considered to be a regular publication. Short-sightedness and the bad news phenomenon. What are these things and what do they have to do with Warren Buffett? The answer is everything.

Oh, about those qualifications… It helps to start off with about 15 years worth of the average persons gross pay in the bank to start investing. You also have to be quite obsessed with making money. You also have to be able to live off of a fraction of your earnings until you start to really roll in the dosh – that means patience and a willingness to forego instant gratification. But once you do these things, you can be well on your way to becoming quite wealthy – in 30 or so years. Actually, if you follow the guidelines laid out in this book, I’d wager you’d be quite well off in just 10 or 15 years. We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here. Where Graham, but also the famous Graham-and-Doddsvilleinvestor Walter Schloss, bought cheap companies and lots of them to spread the risk, Buffett prefers a focused portfolio with only a handful of excellent businesses with a competitive advantage and growing value. Owning only great businesses means less diversificationis necessary.I had also read by then a couple of other books from Mary Buffett (The Oracle’s ex-daughter in law, his son’s Peter ex-wife). She wrote several. This one will remind you, that when buying great businesses, it’s all about having a durable competitive advantage, a long product life ahead, with little change, little disruption probability, little capex requirement, so in other words tons of free cash flow. If you can buy this business when the price is fair or even better, when it’s cheap, then you never need to sell. In this case, the ongoing saving is 0.00%, of which 0.00% is paid by loyalty bonus. The tax that could be payable on this loyalty bonus, and therefore the value of this saving to you, is shown below. If you are a beginner that’s a great book but if you have read quite a bit already on value investing like I did, then that’s the usual stuff that you already know. Nevertheless, this book had some impact on me. Since it was written in 1999, already 18 years ago, it made me realize that on the topic of value investing, everything has already been written many times over and since many years already. In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.