The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy Book

It's no secret that most mutual funds fail to beat the performance of the S&P 500. And if the pros can't beat the averages, it's not unreasonable to assume that most individual investors can't either. Why? According to Robert Hagstrom, author of The Warren Buffett Portfolio, a big reason is the industry's emphasis on diversification. In the interest of minimising risk, many investors have "become intellectually numb to its inevitable consequence: mediocre results." As a result, they wind up owning too many stocks and churn their portfolios unnecessarily (for example, the average mutual fund holds 100 stocks and turns over 80% of its portfolio annually). In The Warren Buffett Portfolio, Hagstrom shows how Buffett and others use the idea of focus investing to organise a winning portfolio. Unlike Hagstorm's first book, The Warren Buffett Way, which dealt with how the world's greatest investor selects individual companies, this book looks at the mathematics, the psychology, and the mental models necessary to build a successful portfolio. The basic ideas: pick no more than 10 to 15 companies with a good track record and high probability of future success, plan to hang on to them for at least five years and ignore predictions and the sometimes terrifying swings in market behaviour. It's hard to argue with Hagstrom's approach, especially when he practices what he preaches. His fund, the Legg Mason Focus Trust, has 15 stocks, an annual turnover rate of 9%, and percentage annual returns in the mid 30's. For thoughtful investors and devotees of Warren Buffett, The Warren Buffett Portfolio is well-written guide aimed at those who are looking for more than the next hot stock tip. Recommended. --Harry C. Edwards, Amazon.comRead More