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"Most billionaires are into preservation of capital in a big way." Depending on how you define "are into", this could be argued as empirically wrong. A study d

"Most billionaires are into preservation of capital in a big way." Depending on how you define "are into", this could be argued as empirically wrong. A study done by the editor of the updated edition of Graham's "The Intelligent Investor" shows that the Forbes 400 (400 Richest Americans) only had 68 members who stayed on the list from some time in the 1980 to the early 2000s. The author calculated the return required to stay on the list and it was approximately 4.8% annually, which is very reasonable with their level of resources. Due to these results (only 68 out of 400 richest people staying in that position), you could say that billionaires are NOT into preservation of capital, when making 4% annually is not even accomplished. The hypothesized reason for these results is that most billionaire's fortunes are tied to one or two major companies/investments. Fluctuations in business over time eventually devalue their investment in the single entity. If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. Apologies for the vague dates. I am at work and do not have the book handy, but just read that passage 48 hours ago. If someone replies that they want more specific numbers and references, I can update this post in 10 hours. Reference: http://www.amazon.com/Intelligent-Investor-Book-Practical-Counsel/dp/B0002X1JKU http://www.amazon.com/Intelligent-Investor-Book-Practical-Co...

jessriedel 14y ago
Hey this is really interesting. Thanks very much for posting this.
TheCoelacanth 14y ago
> If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. That might not always be possible. If the shares they own are a substantial portion of the total company, selling a lot of them at once would cause the share price to plummet and a lot of their wealth would disappear. Most of them do sell off stock in the companies that made them rich, they just do it gradually, so that they don't cause the price to drop. For instance, Bill Gates has been dumping Microsoft stock for several years. The stock he sold in the past few years amounts to about 3% of all of Microsoft.

jessriedel 14y ago

Hey this is really interesting. Thanks very much for posting this.

TheCoelacanth 14y ago

> If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. That might not always be possible. If the shares they own are a substantial portion of the total company, selling a lot of them at once would cause the share price to plummet and a lot of their wealth would disappear. Most of them do sell off stock in the companies that made them rich, they just do it gradually, so that they don't cause the price to drop. For instance, Bill Gates has been dumping Microsoft stock for several years. The stock he sold in the past few years amounts to about 3% of all of Microsoft.