Join the Billionaires Club
Donald Trump, Warren Buffet, George Soros, Carl Icahn, Bill Gates, Jeff Bezos, and even Vladimir Putin all have one thing in common: they’re multi-billionaires.
Well, no one’s completely sure about Trump’s real net worth. But if it seems to you that billionaires are running the world, you’re not wrong.
A recent study released by the charity Oxfam revealed that the 80 richest people in the world altogether own $1.9 trillion, nearly the same amount shared by the 3.5 billion people who occupy the bottom half of the world’s income scale. Put another way, the richest 1% control more than half of the globe’s total wealth.
The Billionaires Club appears impregnable. But as you build your net worth, you don’t have to feel locked out of the big leagues. As an individual investor, you can tap into the world’s riches by following the time-proven methods of the billionaire super-investors.
I’ve chosen two billionaires whose ingenious moneymaking methods are particularly worth emulating: Warren Buffett and George Soros. Let’s see how these investment wizards became rich and what they can teach you today.
Buffett was ranked this year as the third wealthiest person in the world, with a net worth of roughly $84.8 billion. How did Buffett amass his vast fortune?
Buffett didn’t inherit a real estate empire from his father, as did Donald Trump. Nor did Buffett line his pockets by creating a kleptocratic petro-state, as did Vladimir Putin. The Oracle of Omaha isn’t a technology brainiac like Bill Gates, and he isn’t a Gordon Gekko-type corporate raider like Carl Icahn.
Buffett simply buys stock.
As chairman, CEO and largest shareholder of Berkshire Hathaway (NYSE: BRK-A), Buffett follows the principles of “value investing” pioneered by Benjamin Graham, whereby he finds equities with prices that are unjustifiably low according to their intrinsic worth.
However, Buffett takes value investing to a deeper level. He once said: “In the short term the market is a popularity contest; in the long term it is a weighing machine.” He doesn’t necessarily wait for the market to eventually reward the merits of underappreciated stocks; he chooses stocks according to their potential as a company.
Buffett looks for strong balance sheets, good products, market domination, and high-quality management. He emphasizes long-term ownership of a company, not just the chance for capital appreciation based on market dynamics.
Investors have learned that it pays to follow the buy-and-sell decisions of the Warren Buffett.
With a net worth of $8 billion, Hungarian-born George Soros is one of the 30 richest people in the world. Through Soros Fund Management, which manages roughly $30 billion, Soros has executed contrarian plays of historic brilliance.
Notably, Soros is known as “The Man Who Broke the Bank of England” because of his short sale of US$10 billion worth of British pounds, reaping him a profit of $1 billion during the 1992 “Black Wednesday” currency crisis in the U.K. He also made almost $1 billion shorting Japanese yen in 2012 and 2013.
Soros once said: “I put forward a pretty general theory that financial markets are intrinsically unstable. That we really have a false picture when we think about markets tending towards equilibrium.”
Recent case in point: Soros made a huge killing from the market plunge caused by Britain’s referendum vote on June 23, 2016 to leave the European Union. Among his winning “Brexit” trades were a $100 million bet against Deutsche Bank (NYSE: DB); a put options bet against the S&P 500 Index; and large holdings in gold miner Barrick Gold (NYSE: ABX) and the SPDR Gold Trust ETF (NYSE: GLD).
Soros has earned huge returns by anticipating, understanding and exploiting the knee-jerk, reflexive response of investors to cyclical events. His success epitomizes the enormous gains available if you’re armed with the right information and trading tools.
Letters to the Editor
I received this letter from a reader:
“Years ago I got a ‘hot tip’ from my broker who got the tip from a cab driver. This cab driver picked up a couple of execs at DTW from Bally Manufacturing. The driver listened intently to their conversation. At the time Atlantic City was about to legalize casinos and Bally was the biggest player in slot manufacturing. I bought Bally calls off and on for about two years.
At the time I did not have much to invest but overall I made better then 1,000%. If I had more I would have retired then! Man Bally sure screwed things up after that. They bought MGM and went into direct competition with their best customers. In the meantime IGT came along with computerized slots. POOF! There goes Bally. I was long gone out of Bally by then.” — Freddie B.
Got an investing story to tell? Drop me a line at email@example.com. —John Persinos