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The Leading Gurus of Investment Strategy Essay Example

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The Leading Gurus of Investment Strategy

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The Leading Gurus of Investment Strategy. Volatility is a measure that regards upside movement as equally bad as the movement to the downside. What about inflation and the terrible toll it extracts on non-growth assets? Finally, speculative stocks which are extremely volatile do not fit into this mould as they certainly do not give superior returns, as a diversified group or otherwise. Right from the start, this definition of risk seemed unrealistic. There are many problems with the whole concept. For starters, there actually isn't any permanent correlation between risk (when defined as volatility) and return. High volatility does not give better results, nor does lower volatility give lesser results”. (Schroeder, 2009)
Hence Warren Buffett’

s criticism and scepticism over MPT and CAPM are based on sound reasoning. Another principle that Buffett strongly believed in is ‘less diversification’. Buffett believed that diversification is an insurance against ignorance, for which he got criticized by other leading investment gurus. But there is sound logic and rationale behind Buffett’s assertion. For example, as long as one studies the company, industry and the prevailing economic conditions one will be able to assess the future earnings prospects for the company. And since these parameters will vary between stocks and industries, the opportunity presents itself to pick the most under-priced of the securities. While modern portfolio managers would recommend a spread of 30 individual stocks, the portfolios of Berkshire Hathaway would show decidedly less diversification. Yet, Berkshire Hathaway has consistently outperformed competing for investment management firms on a year-on-year basis. Hence there is indeed merit behind many of Buffett’s investment strategies, although they might at first seem counter-intuitive and risky (Sullivan, 1997).
At the beginning of the twenty-first century, both Warren Buffett and Bill Gates were identified to be the richest individuals in the world. Yet, the two individuals could not be more different from each other.   . The Leading Gurus of Investment Strategy.

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References

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Buffett, Warren; Cunningham, Lawrence. The Essays of Warren Buffett: Lessons for Corporate America, Second Edition. The Cunningham Group. ISBN 978-0-9664461-2-8.

Schroeder, Alice (2009). The Snowball: Warren Buffett and the Business of Life. Random House. pp. 656–657. ISBN 978-0553384611.  Excerpt available at Google Books.

Ted Nace, "The Education of Warren Buffett: Why did the guru cancel six coal plants?", Gristmill, April 15, 2008

Warren Buffetts Letters to Shareholders". Berkshire Hathaway. Archived from the original on 2007-03-22. http://web.archive.org/web/20070322071600/http://www.berkshirehathaway.com/letters. Retrieved 2008-05-20.

Sullivan, Aline (1997-12-20). "Buffett, the Sage of Omaha, Makes Value Strategy Seem Simple: Secrets of a High Plains Investor". International Herald Tribune. http://www.iht.com/articles/1997/12/20/mbuff.t.php.

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