Billionaire Ideas on Investing
What some of the most Powerful People in the world Revealed about their Investment Strategy
By: Camaran Azumara
Have you ever wondered how billionaires made their money? I sure have, and we will discuss in this article what strategies that billionaires like Warren Buffet have revealed. These secrets will provide a blueprint for reaching financial freedom.
Warren Buffet was born during the Great Depression in 1930. Today his net worth is in excess of $50 billion.
Carl Icahn was born in 1936. He was at one point so broke he had to sell his car to feed himself. Today, Forbes.com says he’s worth around $20 billion.
George Soros was born the same year as Warren Buffet. He also became a child of the Great Depression, the Holocaust and WWII. Today, Forbes.com says he’s worth around $19 billion.
Mark Cuban was born in 1958. He ventured into many diverse businesses. Today he is worth around $3 billion.
Mark Zuckerberg was born in 1984. He is an American computer programmer, Internet entrepreneur, and philanthropist. Today he is worth around $35.7 billion.
All started with nothing. All wound up billionaires. All did it by investing.
At first glance, they don’t seem to have much in common…
Buffet buys whole companies and stocks and says his favorite holding period for investments is “forever.” Soros became a billionaire by making huge leveraged trades in stocks and currencies. Icahn buys controlling stakes in public companies to sell assets, buy back shares and do anything to realize hidden value. Cuban is an entrepreneur and investor in the tech scene and also owns the Dallas Mavericks. Cuban prefers investments in startups rather than public companies. Mark Zuckerberg is the creator of Facebook, he invests in MasteryConnect, AltSchool, Vicarious, and Panorama Education.
But they do have traits that are similar, a few core investing ideas that helped make them billionaires. Like every great secret of life, this one is hiding in plain sight. These five self-made billionaire investors…
- Don’t diversify
- Avoid risk
- Don’t care what anyone else thinks
#1: CONCENTRATE. DON’T DIVERSIFY.
Consider what your greatest source of wealth generation is likely: your career. In this case you probably haven’t diversified at all in your career. And, even if you do more than one job, it’s highly likely you spend the great majority of your time at just one of them and that just one provides the great majority of your income.
Why should investing be any different?
For years, Buffett had most of Berkshire Hathaway’s money in just four stocks: Coca-Cola, American Express, Wells Fargo, and Gillette. Today, most of Berkshire Hathaway’s money is still in only four stocks: Coca-Cola, American Express, Wells Fargo, and IBM.
#2: AVOID RISK
Mark Cuban said, “If you’re prepared and you know what it takes, it’s not a risk. You just have to figure out how to get there. There is always a way to get there. “Avoid the risk if you don’t have enough information or aren’t prepared enough to move forward confidently.”
When Carl Icahn purchased Tappan shares, he was paying around $7.50 each. But he knew by looking at the balance sheet that the company was clearly worth $20.00 if it were broken up. That’s a 62% discount to fair value, a very safe bet.
Soros manages risk differently than Icahn and Buffett. He says the first and foremost thing he’s looking to do is survive, and he’s known to beat a hasty retreat when he’s wrong. Icahn keeps loss potential in mind before trading. When he shorted $10 billion of British pounds in 1992, he first calculated that his worst-case loss scenario was about 4%.
Mark Zuckerberg is known as a Big Risk Taker, although, he knows when to avoid a risk intelligently. Avoiding risks does not mean to be scared of losing it, by this you avoid taking risks altogether. Never completely rid yourself of taking risks. Zuckerberg once said, “Not taking risks is the biggest risk to take”.
#3: THINK FOR THEMSELVES
Wall Street wouldn’t buy shares of The Washington Post when Buffett started buying it in February 1973. This is true, even though most Wall Street analysts acknowledged that this was a $400 million company selling for $80 million. They were too scared because the overall market had been falling for some time.
Mark Zuckerberg knew that there would be competition, but he wasn’t afraid when he started Facebook. He had to think for himself and create the competition. In general, you can patent a product but not an idea. So when Mark Zuckerberg launched his first project, there were around 21 websites on the internet serving the same purpose. Not only were they serving the same purpose, but were in far better position than Facebook. Finally one day Zuckerberg and his team’s hard work and perseverance finally paid off and Facebook went viral.
Mark Cuban uses a different approach. He isn’t rich just in the literal sense. He’s rich with perspective and generosity when it comes to doling it out to other investors. Cuban has become a true icon of the business world. Through Shark Tank, his NBA team, and commercials he has created a truly unique style of thinking.
Soros talks to many people in order to get a feel for where a market is going. But he never talks about where he’s buying or selling. He just does it.
Carl Icahn doesn’t need Wall Street, because he has his own research team. Icahn’s people comb through thousands of companies to find the ones that are right for Icahn’s corporate raider style. If he bought research from Wall Street, the whole world would figure out what he was doing, and it would become difficult to buy shares cheaply.
Review:
- Think for yourself
- Avoid risk
- Don’t attempt to diversify into a bunch of investments you don’t understand
If you really want to create Financial Freedom in stocks, those three rules are your foundation.
Good Investing,
Camaran Azumara
Citations
Dan Ferris. “Secrets of Self-Made Billionaire Investors”, 2016
John Boitnott. “9 Tips on Investing from Mark Cuban”, Sep 2016
Forbes. “Billionaires net worth”, 2016
Ankit Saxena. “Behind The Success of Mark Zuckerberg”, Nov 2015