July 3

Weekend reading: Buffett man Ted Weschler’s amazing returns


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Warren Buffett is a nifty picker of stocks. In hiring Ted Weschler to help select investments at Berkshire Hathaway, he’s turned out to be a nifty stockpicker-picker, too.

Buffett would hardly have hired a bozo – it was nailed-on that former hedge fund manager Weschler could pluck an Apple or an Amazon from the also-runs.

But new figures prove Ted Weschler has some truly serious investing smarts.

DIY tax haven

Ted Weschler’s returns have surfaced after a huge kerfuffle in the US about Roth IRAs – a kind of retirement tax shelter that’s closest to the UK’s ISA.

It turns out some savvy American moguls have managed to use these mainstream tax shelters to shelter vast fortunes from the taxman.

In particular, tech mogul/bogeyman Peter Thiel has amassed $5bn in his ‘retirement account for the middle class’, according to ProPublica.

Can you imagine if James Dyson, say, was revealed as having a billion pounds in his ISA?

Even million pound ISAs are mostly marketing pornography. A billion pound ISA would be the money shot to end them all.

Well more or less that’s what’s happened in the US.

Check out ProPublica for the details of how Thiel did it. The short version is he was able to stash a few thousand dollars in very cheap unlisted shares in a startup into his Roth IRA, and those multiplied into millions. His snowball supercharged into an avalanche. The rest is compound interest.

What Thiel did wouldn’t actually be possible in an ISA (sorry James!) due to restrictions on what you can hold in the UK vehicles.

If there’s a scandal, it would seem that – from my imperfect vantage point across the ocean – the Roth IRA rules weren’t sufficiently tight in the first place.

Weschler was here

So much, so Business As Usual for the taxes-are-optional uber-rich.

But the controversial $264m that Ted Weschler has similar been outed as having amassed in his Roth IRA is still notable for Monevator purposes.

You see, when ProPublica approached Weschler for comment about how he shoehorned all those millions into an account with tight contribution limits, he was (un)happy enough to tell them.

Weschler says that in the early years of his career he contributed to his employer’s IRA plan. He then converted it to a self-directed IRA, where he could make his own investments, claiming:

Over the ensuing 29 years (through the end date you quote of year-end 2018) I invested the account in only publicly-traded securities i.e., all investments in this account were investments that were available to the general public.

There follows some back and forth in the letter about US regulations and taxes that needn’t concern a humble investing blog in Blighty.

The key point is Weschler was picking from the same sort of stocks as a Reddit punter today. He wasn’t investing in unlisted microcap tech startups at the start of the Internet revolution.

And here’s the money shot:

…each $1 saved as a 22 year old in New York City grew over the ensuing 35 years to over $9,000 – certainly not an expected result, but the sort of example that can hopefully help motivate generations of future savers.

Well, quite. That is an extraordinary return!

In simple annualized terms it implies a near-30% return a year over 35 years.

Weschler smashed the market

I’m sure there were plenty of ups, downs, lucky breaks, and obscure – albeit still stock market-listed – investments in the mix for Weschler.

But to turn $1 into $9,000 in 35 years you have to be doing a lot very right.

The number of other famous investors who done as well over such a long period is not high.

  • Buffett clocks in at around 20% annualized, albeit he did much better in his early days with less money.
  • From memory George Soros comes in at around 20%, too.
  • Peter Lynch achieved about 30% in annual returns for his investors at Fidelity for a dozen years before hanging up his spurs.
  • Although… Joel Greenblatt, the professor and fund manager who wrote the wonderful You Can Be A Stock Market Genius has a private partnership Gotham Capital that boasts 40% returns.

You’re slacking, Ted!

Could you be the next Ted Weschler?

As this blog’s resident naughty active investor, am I inspired and motivated by Ted Weschler’s prowess, as he suggests we all could be in his letter?

Honestly, yes and no.

I’ve long known it’s possible for a small proportion of people to achieve market-beating returns. And I believe such outperformance is far likelier to be done by directly investing in shares – as opposed to by running or investing in funds, with their contradictory incentives and fee drags, respectively.

The trouble is it’s hard to get truly stonking rich without managing other people’s money, and taking and compounding that fee tithe for yourself.

That’s what makes Weschler’s returns so astounding.

In principle it shows what’s possible – at least if you started in 1985 and you’re either an investing savant or one of the luckiest people on the planet.

For context, if you could put the maximum £20,000 into an ISA every year for 35 years and achieve the same returns as Ted Weschler, you’d end up with…


Clearly that fails a few sanity checks as an aspirational stretch goal.

(Although I don’t doubt that – assuming no rule or contribution changes – we will eventually hear about £100m ISAs in my lifetime).

Many happy returns

I’ve been doing this for long enough to know that I’m not clocking up 30% returns annualized, and I’m never likely to, either.

So Weschler’s returns can only motivate me so far.

Don’t get me wrong, I’m pleased with my own record. And I’ve mostly enjoyed nearly 20 years of investing in individual shares. No regrets.

But am I set to turn £1 into £9,000 in 35 years? Reader – I’ll probably need a few more years than that!

People will want to draw lessons from Weschler’s achievement. Without seeing his trades in detail, the lessons are likely to be platitudes.

And of course most people will have a happier life and end up richer if they passively invest through index funds. Even Warren Buffett says that.

But at least I now know why Buffett called up Ted Weschler for the role at Berkshire Hathaway, rather than me!

p.s. We’ve finally transitioned to a new email system. As best I can tell it’s all working great, but I did delete some email addresses that were bouncing. If you have any problems, I’d suggest re-subscribing. Have a great weekend!

From Monevator

How to future proof your kids’ financial future – Monevator

Three months into post-FIRE life – Monevator

From the archive-ator: Returns from alternative asset classes – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Happy 50th birthday to the index fund – CFA Institute

Google tightens rules to stamp out scam ads – Which

Britons resume borrowing as the economy reopens – Guardian

US house prices rise fastest in 30 years. Is there a global bubble? – ThisIsMoney

Restaurants and bars forced to shut due to staff self-isolating – BBC

Slough goes bankrupt after discovery of ‘£100m black hole’ in budget – Guardian

Monevator named No. 1 personal finance blog in a UK top 10 – Vuelio

Two and 20 is long dead. Hedge fund fees continue to fall – CNBC

Products, services, and spending

More on the upcoming Green Savings bonds from NS&I – Which

Visiting the factory that turns out two prefab houses a day – ThisIsMoney

Special offer: Open a SIPP with Interactive Investor and pay no SIPP fee for six months – Interactive Investor

Festivals 2021: which ones are still going ahead? – BBC

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Three rural properties on sale with businesses attached – ThisIsMoney

Homes for sale near a football stadium, in pictures – Guardian

Comment and opinion

How a little Bitcoin can change your 60/40 portfolio a lot – Morningstar

Magic number – Humble Dollar

How to protect your portfolio against inflation [Search result]FT

Why annuities act like a ‘licence to spend’ in retirement – Think Advisor

Planning for life after full-time work [Podcast]Rational Reminder

We shouldn’t be too worried about the pension time bomb – The Evidence-based Investor

The hidden assumptions of financial calculators – Morningstar

Follow your passion is good financial advice – Incognito Money Scribe

16 unbelievable facts about the markets – A Wealth of Common Sense

EIS and VCTs: higher risks with big potential rewards [Search result]FT

Naughty corner: Active antics

In search of 100-baggers in the start-up space – Meb Faber

Five lessons from owning five shares for ten years – Maynard Paton

15 years of income and growth from UK-listed investment trusts – Getting Minted

Bitcoin is anti-fragile, as China’s mining crackdown is about to prove – AVC

Everything is looking very rosy in the US right now – Investing Caffeine

How ‘evergreen’ private equity funds change things up – Institutional Investor

Covid corner

Indian-made AstraZeneca vaccine batches could cause travel issues – BBC

How a misleading stat claims more vaccinated people die – BBC

Britain thinks it can out-vaccinate the Delta variant – CNN

Don’t rush to get your second jab too soon – BBC

UK teens using lemon juice to fake positive Covid tests and skip school – iNews

Life after the 1918 flu has lessons for our post-pandemic world – CNN

Where’s my Lyme vaccine? – Slate

Kindle book bargains

The $100 Startup by Chris Guillbeau – £0.99 on Kindle

A Colossal Failure of Common Sense: The Collapse of Lehman Brothers£0.99 on Kindle

SAS: Leadship Secrets from the Special Forces by various authors – £0.99 on Kindle

Ultralearning: Accelerate Your Career, Master Hard Skills, and Outsmart the Competition by Scott Young – £0.99 on Kindle

Environmental factors

Californian agriculture has run out of water – New York Times

Red squirrels and pine martens could lose protection in planning rules review – Guardian

Off our beat

How to remember you’re alive – Raptitude

Past, present, and future time perspectives – Darius Foroux

The distraction-free benefits of five-hour work days – Reasons to be Cheerful

And finally…

“It isn’t what you have or who you are or where you are or what you are doing that makes you happy or unhappy. It is what you think about it.”
– Dale Carnegie, How to Win Friends and Influence People

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