Best investor of the world - Warren Buffet has made a CAGR of 20.3% for 45 years with his company Berkshire Hathaway. What is your target CAGR? For how long?
Example of CAGR
-Peter Lynch - 29% CAGR for 13 years
-Siegel 6.7% CAGR (adjusted for inflation) over 204 years
-Nestle (1999 to 2009) CAGR of 13.46% for 10 years [Invest in Bursa Malaysia]
-BAT (1999 to 2009) CAGR of 14.76% for 10 years [Invest in Bursa Malaysia]
A simple table as below illustrates that if your return pattern is up and down, for RM100 of investment, your effective CAGR for 5 years will be only about 5.7%
Year | ROI | $100.00 |
1 | 10% | $110.00 |
2 | 12% | $123.20 |
3 | 15% | $141.68 |
4 | -5% | $134.60 |
5 | -2% | $131.90 |
Therefore, Warren Buffet's general rules:-
Rule # 1 is never lose money.
Rule # 2 is never forget Rule # 1.
Click here for article on 10 investing basics from Buffett.
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