J.C.’s Money Blog

Up till now, I have mostly accumulated mutual funds through my retirement account, and an index fund in my taxable trading account. I have dabbled in individual stocks with moderate success, but always thought I should focus on my career until I have enough net worth to make actively managing my portfolio worth my time.

How big should the portfolio be?

“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”

Warren Buffet claims he could make 50% returns on a small enough portfolio. I tend to believe him, I’m not that good though. Lets assume I could make 30% returns from investing a small portfolio, or $100,000 / year concentrating on a career.

By passively investing (index funds, etc.), I would make 10%, so the difference in actively managing and passively managing would be 20%. My portfolio would have to be $500,000 to make it worth it to persue full time portfolio management.

That’s going to take a while.