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Uh, hi. My name is Timothy Ferris. I am a guest lecturer at Princeton University twice a year and I'd like to touch on an earlier question about investing with small sums of money. I'd like to ask both of you, if you were 30 years old again and had your first million in the bank, how would you invest it?
Assuming you're not a full-time investor, you have another full-time job. You can cover your expenses with other savings for about 18 months. No dependence. And it'd be really helpful for my students, for myself and others here if you could be as specific as possible about asset classes, percentages, whatever you're willing to offer.
Well, I'll be very simple. I I with with under the conditions of your name, I' I'd probably have it all in a very lowcost index fund and it'd probably be, you know, might be Vanguard. uh somebody I knew was reliable, somebody where the cost was low. And because you postulated that you're not going to become a professional investor, I would recognize the fact that I'm an amateur investor.
And uh uh I would I would feel that a uh unless bought during a uh strong bull market, which this is hasn't been, I would feel that that was going to outperform to a degree uh bonds under current conditions over a long period of time and then I'd forget it and go back to work. Charlie. Yeah, it's in the it's in the nature of things that you aren't going to have a whole lot of screamingly successful professional investors.
You've got a great horde of professionals taking CRA's profits out of the system. Most of them by pretending to be professional investors and and that is in the nature of things too. And but if you don't have any rational prospects of being a very skilled professional investor, of course you should compromise on some simple thing like an index fund.
Yeah. And that you will not get that advice from anybody because nobody gets paid to give you that advice. And so you will have all kinds of people telling you how much better they can do for you than that and how if you just give them a wrap fee or give them commissions or whatever it may be that they will do better.
But they won't do bad. On average, you know, if a thousand other people like you do the same thing, that group of a thousand will do worse uh if they listen to the people that make pitches at them. And and in the end, why should you expect I mean, you'll get a very perfectly decent return over a 30 or 40 year period by doing what I suggest.
And and why should you expect more than that when you you don't bring anything to the party? The salesman will tell you that you'll get it, but you won't. I would give you another word of warning. Do not judge stock brokers generally by the ones you meet at this meeting. We attract some of the most honorable intelligent stock brokers in the world.
They are not representative of the class. The politician in them just came out Julie. Okay, we'll do one more and then we'll break for lunch. Number seven. Good morning. My name is Tim Fam. I'm from Austin, Texas. Uh for my children, um I would like to hear from both of you as far as the temptation to keeping up with the Joneses and can you give them advice that they can live by with respect to frugality, debt, and work ethic?
Yeah, just tell them to keep up with the buffers. Well, Charlie and I he have have always been been big fans of living within your income. And if you do that, you'll have a whole lot more income later on. And uh uh you know it it I think they will to a considerable extent, not a perfect extent, they will follow the example of their parents.
I mean, if their parents are coveting, you know, every possession of their neighbor, you know, or trying to figure out ways to increase their cost of living without necessarily their standard of living, the kids are likely to pick up on it. But, uh, you now you can get the reverse effect. If you get too tough with them, they go crazy later on.
But the it's people make that election. And incidentally, uh there are people uh there are plenty of people that I don't advise to save. I mean, the real if if if you're struggling along and making a reasonable income and you have a job with a 401k being put aside for you and and and you have social security, who's to say whether it's better to defer a dollar of expenditure on your family on a trip to Disneyland or something that they'll get enormous enjoyment out of so that when you're 75 you can have a, you know, a 30ft boat instead of a 20ft boat.
I mean there are there are choices and and there are advantages to spending money in various forms uh for your family when it's young and giving them various forms of enjoyment or education or whatever it may be. So I I don't I don't advocate I may practice but I don't advocate extreme frugality. uh the uh and I don't say that it's always better to be saving 10% of your income instead of 5% of your income.
I think it's crazy to be spending 105% of your income and I think that that leads to all kinds of problems and I get letters from people every day that have experienced those problems. Uh but I you know in the end you if you want to have an internal scorecard I mean you you are not a you are not a better person or a worse person because you live a different kind of life than your neighbor.
You live a life that you know is true to yourself. Charlie, yeah it it's it's obviously the best me best method to to uh train your children to to uh provide the proper example. I think we're hearing a child that didn't didn't get that advice. But of course, even if you do provide the proper example,
it it's likely not to work. Hey, how you doing? I'm uh Eric Schlan from Larchmont, New York. This is actually a follow-up question from a question that I asked last year at the meeting. I'd asked you guys, you know, what you would do with us small sums of money since, you know, I run a small portfolio under a million dollars and, you know, I asked you if you'd be doing things, you know, like the nets that Benjamin Graham used to talk about and, you know, liquidation arbitrage, you know, a lot of the things that you used to do with the Buffett partnership and you acknowledged that you wouldn't be just a buy and hold investor that you basically are today, but we'd be doing a lot of those transactions.
And uh, Mr. Buffett, you also talked about how a lot of the investments you would do with under a million dollars would have nothing to do with stocks and would be with other types of securities. And you really don't elaborate, neither of you really elaborated any more than that. So, I guess I was wondering if you could elaborate a little more a little bit more on how your investment strategy, you know, back then, you know, in reference to non-stock investments, uh, would be different than your buy and hold strategy today.
So, what what kind of stuff would you be doing? Maybe if you can give me a past example that you did in the 50s or the 60s, that'd be great. Thank you. Appreciate it. Well, if if I were working with small sums of money, and I would be happy doing that. Um the it would just open up thousands of possibilities to me and and you might very well certainly we've found very mispriced bonds which where we could come nowhere near buying a position of enough size in Bergkshire to make a difference but where it would have made a difference if you were working with a million dollars but it would be bonds it would be it would be stocks of both in the United States and elsewhere.
We found them in Korea a few years ago that were ridiculously cheap. You know, you basically had to make very significant returns, but you couldn't put big money out in it. So, it it could be in stocks, it could be in bonds, wouldn't be in currencies uh with small amounts. Um, but you know, I had a friend who used to buy tax leans.
You know, Tom Knap, he's got some relatives here. And an enterprising person can find a lot of different ways of making money. You'll find them. Most of them will be in small stocks. If you're working with small money, they'll be in small stocks or in some specialized bond situations. Wouldn't you say that, Charlie? Ashure.
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