How to Build Your Own Berkshire? (SoGv3-6)

How to Build Your Own Berkshire (SoGv3-6)?


This one comes from one of the emails that Prof. Bakshi sends to his students. In this email, he talks about how to create your own BRK. My interpretation is, how do you get to financial freedom. I am replicating that email (with his permission). In fact, the subject line is almost the same. Just that I expanded BRK to Berkshire. You know what Berkshire is, right? It is Buffett's investment vehicle and that is the company that has made Warren among the richest men in the world!

So, in the email, Prof Bakshi talks about lessons (I call them "principles") that he has learned from Buffett and Munger. Highlights are mine. Not fixing the typos.

  • Underspend your income, do not go into debt, do not buy a home with borrowed money until you have financial freedom. Then buy it cash down or buy it with most of it cash down and some of it with debt which you will pay off very quickly. Learn to appreciate the benefits of a debt-free life.

  • Default place to park your income is very high quality fixed income investments which can be converted into cash in a very short time

  • Do not chase yields in fixed income (unless you are buying distressed debt which is a separate skill) with money which is kept aside to buy equities when they are really cheap or to buy into a specific business which is really cheap even if the market is not.

  • “Temporary” in temporary parking place could last as much as 5 years. Do no fret over poor nominal returns you get from fixed income investments and negative real returns after counting inflation during those long years. The purpose of this money is not to make money. The purpose of this money is to be available when a fantastic opportunity arises.

  • Fantastic opportunities will arise and when they do, act. The role of money parked in fixed income investments is now over. Withdraw it and invest it in the compelling opportunities you find. When they become too expensive, sell them and the money goes back into fixed income investments.

  • Over time, build a portfolio of wonderful businesses with diverse, high-quality earning streams which either pay out large dividends or re-invest the earnings to create even more earnings in a manner that ensures high incremental return on incremental capital.

  • As the portfolio grows, your ability to take smart, calculated bets will also increase. This will allow your portfolio to rise rapidly. Remember, money begets money.

  • Continue to underspend your income. Once you have financial freedom, you ar entitled to indulge a bit, but never forget the importance of growing your nest-egg.

  • Enjoy your financial freedom.

And that's about it.

Honestly, managing money is not something that I am great at. And I know that I am already behind in terms of all three - the ability to earn, the ability to compound and the ability to learn. I am merely catching up. But that's ok, der aaye, durust aaye. As you read this, please do share whatever you may know about personal finance. I am aa dud when it comes to that!

Oh, and today's visual piece is from Visualize Value. Do check the page out. They are one of the MOST brilliant pieces of work to have come out of the Internet. The kinds that made me go, why dint I think of this!

Here's a gem...

So, can you? Or can you not be financially free? I believe I can!

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TAGS: Warren Buffett, BRK, Debt, Investing, Financial Freedom, Money, Prof. Sanjay Bakshi, Berkshire,

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